Newsletter: Where Service Meets Reader Approval.
TMI Tax Updates - e-Newsletter
October 27, 2023
Case Laws in this Newsletter:
GST
Income Tax
Customs
Corporate Laws
Insolvency & Bankruptcy
FEMA
Service Tax
Central Excise
CST, VAT & Sales Tax
Indian Laws
Articles
News
Notifications
Circulars / Instructions / Orders
Highlights / Catch Notes
GST
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Seeking grant of Anticipatory Bail - Misuse of PAN number of the Chartered Accountant (CA) for fraudulent transaction and evasion of GST - The investigation from the GST Department has revealed that the aforesaid Registered Form made business transactions worth crores of rupees with three entities of which the present applicants were director and despite that said fact, the applicants have been evading from giving details of the said transaction. - Custodial interrogation of the applicants is necessary to unearth entire chain of transactions withe accused and firm. - HC
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Claim of interest on Refund of accumulated Input Tax Credit due to inverted tax - amount of refund already sanctioned - The respondent is directed to disburse interest, if any, payable to the petitioner in accordance with law - HC
Income Tax
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Additions towards Undisclosed profit made on the basis of the seized documents - ITAT deleted the additions - Now, look at the reasons given by the tribunal. It cast a duty on the Revenue to prove the handwriting of the assessee. It accepted the contention of the assessee that the documents did not belong to him instead of requiring him to prove it. It allowed the assessee to retract the admission made by him during the course of the proceedings - The tribunal ought not to have disregarded the admission merely on the ground that later on the assessee had withdrawn the admission - HC
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Levy of fee u/s 234E - TDS statement was filed u/s 200A belatedly - The respondent had had imposed the late fee only u/s 234E of the Act for the assessment years 2012-2013, 2013-2014, 2014-2015. However, Section 200A(1)(c) of the Act was not introduced during the said assessment years. In the absence of any provisions under Section 200A of the Act, when they have processed the application for TDS under Section 200A, no late fee can be imposed u/s 234E. - HC
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Validity of Reopening of assessment - order passed u/s 148A(d) - Period of limitation - The Taxation and Other Laws Act, 2020 was rightly viewed to be a secondary legislation. It was therefore held that secondary legislation would not override the principal legislation-the Finance Act, 2021. Also negatived by the Division Bench - it was not permissible in law for the Revenue to travel back in time. - HC
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Royalty - Payment received by the taxpayer from British Airways in relation to alleged use of 'Altea system' cannot be characterized as 'royalty' either under the Act or under the Indo- Spain Treaty because Altea system was installed at the airport and was accessed only by the airlines and not by the Amadeus's agents viz. Resbird, Amadeus India and that during the year, the said system was available to British Airways for the aforesaid purpose and that too only at the airport counter and the said software was not available outside the Indian airport or to any of the agents of the taxpayer since the agents were booking the tickets only through the CRS of the taxpayer. - AT
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TP Adjustment on notional interest on advances - The assessee being unable to demonstrate that the advances were not in the nature of loan/advance but were quasi capital in nature and for commercially expedient purposes of the assessee and hence the LIBOR rate could not be applied to them for the purposes of making ALP adjustment on the interest to be charged, the decision of the Ahmedabad Bench in the case of Micro Inks Ltd. is not applicable to the assessee - AT
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LTCG invoking the provisions of Section 50C - property transferred through Sale Deed claim as gift - The transaction has been held to be gift in the hands of the daughter, the transferee, and therefore it should be held so in the case of the assessee also is not tenable because in case of the daughter the consideration as per stamp duty valuation is not taxable as per proviso to section 56(2)(vii). However, the provisions of capital gains taxation and the income from other sources are independent of each other. The income in the hands of the daughter having been held to be exempt, does not absolve the assessee from the capital gain liability. - AT
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TPA - sale of fuel stock and purchase of fuel stock - MAM selection - It is not the case that TIPS database is not reliable. No evidence was produced before us that there is any infirmity in the database used by the TPO. Many coordinate bench decisions have held that TIPS database is the appropriate database in determining comparable uncontrolled prices of products. - AT
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Revision u/s 263 - addition u/s 40A(3) - when the entire materials were placed before the Ld. AO during the course of assessment proceeding and only upon verification of the same, the return of income was accepted, which is also reflecting from the order passed by the Ld. AO mentioned therein, assessment cannot be reopened by exercising power conferred u/s 263 of the Act by the Ld. PCIT in the manner it has been done. - AT
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Weighted deduction u/s. 35(2AB) - Any application for patent foreign country has to be filed in India as per section 7 of The Patent Act, 1970, according to patent cooperation treaty. - The Commissioner (Appeals) has rightly held that the said expenditure incurred by the assessee towards patent filing charges is eligible for weighted deduction u/s 35(2AB). - AT
Customs
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Rejection of declared value - Confiscation - Since it is apparent that the Department has not followed the statutory procedure nor there was any mis-declaration of quantity as alleged, the mere acceptance of the re-assessed value and payment thereof will not be sufficient to confirm the allegations of under valuation. The burden was still on the Department to prove the allegations levelled. The said burden has not been discharged. - AT
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Levy of Anti-dumping duty - imported goods (live consignment) cleared by the appellant are mill edged or slit edged - live consignment of 31 coils is mill edged and anti-dumping duty is liable to be paid on the same. - However, demand for the past consignments dropped - AT
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Valuation of imported goods - old and used Digital Multi Function Printer - restricted goods or not - The enhancement of value on the basis of Chartered Engineer’s certificate cannot be a ground for treating declared value as mis-declared unless there is other corroborative evidence. - AT
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Import of Brass Scrap Pallu - mis-declaration of Country of Origin - The justification or non-justification of procuring the goods i. e., Brass scrap "Pallu" from Pakistan was on the importer company which they failed to substantiate by any valid supporting evidence. The burden was exclusively on the importer company and not on the revenue to place on record positive evidence in support of their submissions. - AT
Corporate Law
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Professional Misconduct - Chartered Accountant (CA) - Lapses in evaluation of writing-back of liabilities - Failure in evaluation and attendance at physical verification of Inventory - The contention that they are a small audit firm, cannot be accepted as auditors are duty bound to comply with the requirements of the statutes to safeguard the interest of public. Therefore, in addition to the EP, we hold the Audit Firm also responsible for the lapses discussed. - NFRA
Indian Laws
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Dishonour of Cheque - Non service of notice on the accused - Even otherwise, for the sake of argument, if this notice was not received by him, no efforts have been made by the accused to make the payment of the cheque on the first available opportunity, when, he had appeared before the learned trial Court. In such situation, the said argument is not liable to be accepted - the learned trial Court has rightly held that the presumption under Section 118 of the N.I. Act has rightly been drawn in favour of the complainant. - HC
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Professional Misconduct on the part of Chartered Accountant (CA) - allegation of assisting various companies in availing credit facilities of huge amounts from various banks by issuing false documents certifying valuation of work undertaken and completed by the accused companies - Punishment of reprimand as recommended by the ICAI accepted. - HC
IBC
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CIRP - Seeking approval of resolution plan - Considering the facts of the present case, the highest Resolution Plan having now received the majority of votes, the Resolution Professional may file an application before the Adjudicating Authority for approval of the plan which may be done within three weeks from today. - AT
Central Excise
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Invocation of extended period of limitation - chewing tobacco - the tribunal by cryptic order has negatived the contentions of the Revenue and held that the invocation of the extended period of limitation was not warranted. This finding, not being in consonance with the facts obtained on the hand, we are unable to subscribe our views to the judgment of the tribunal. - SC
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CENVAT Credit - machineries used in the co-generation/captive power plant - electricity - The issue of producing a User Test Certificate not having been demanded in the impugned Show Cause Notices and the order dated 28.06.2023 having been passed on the joint submissions of the counsel where once again there was no reference to the User Test Certificate, the Review petitions have to be allowed and since the question of CENVAT Credit having reached finality, and the impugned Show Cause Notices are issued on a new ground with reference to the subsequent periods of the writ petitions have to be allowed - HC
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Method of valuation - Applicability of most appropriate rule for valuation - it is not the method of valuation that determines the applicability but that the method flows from the identification of the rule most apt for each transaction - ‘Job work’ existed before April 2007 and incorporation effected thereafter was not intended to cover every ‘job-worker’ as per common parlance but of specific situations contemplated in rule 10A of Central Excise Valuation (Determination of Price of Excisable Goods) Rules, 2000. That has not been demonstrated in the orders of the lower authorities. - AT
Case Laws:
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GST
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2023 (10) TMI 1153
Seeking grant of Anticipatory Bail - Misuse of PAN number of the Chartered Accountant (CA) for fraudulent transaction and evasion of GST - correctness of contents of the status report filed by the Investigating Officer - HELD THAT:- It is stated that in the objections filed to the aforesaid status reports, it has been stated that the requisite documents have been provided. However, it is pertinent to note that in the application for bail as well as in the objections filed to the status report, the stand of the applicants are contradictory with regard to the dealings with M/s Madhu Enterprises. They have also further denied any involvement with Sanjay Kumar, whose statement was recorded by the Investigating Officer. It is pertinent to note that as per investigation, the mobile number with which the said M/s Madhu Enterprises was registered with the GST Department belonged to the aforesaid Sanjay Kumar, who is stated to be a security guard of the applicants. The investigation from the GST Department has also revealed that the aforesaid M/s Madhu Enterprises made business transactions worth crores of rupees with three entities of which the present applicants were director and despite that said fact, the applicants have been evading from giving details of the said transaction. The ratio of the judgment of Hon ble Supreme Court in Pankaj Bansal [ 2023 (10) TMI 175 - SUPREME COURT] relied upon by the learned Senior Counsel for the applicants has no application to the facts of the present case as the answers being given during investigation of the case, are on the face of it, totally evasive. This Court is of the considered opinion that custodial interrogation of the applicants is necessary to unearth entire chain of transactions linked with M/s Madhu Enterprise at the behest of the present applicants and the entities in their control - Application dismissed.
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2023 (10) TMI 1152
Levy of GST - works contract executed and completed after 1st July, 2017 wherein the contracts were awarded in the pre-GST regime or post-GST regime - HELD THAT:- It appears the respondent authorities concerned have to bear the additional tax liability for execution of subsisting Government contract either awarded to the petitioner during pre-GST regime or in post-GST regime without updating the Schedule of Rates (SOR) incorporating the applicable GST while preparing Bill for payment. Considering the submissions of the parties, this writ petition is disposed of by giving liberty to the petitioner to file appropriate representations stating all the facts and provision as referred in preceding paragraph of this judgment, before the Additional Chief Secretary, Finance Department, Government of West Bengal within four weeks from date. On receipt of such representations the Additional Chief Secretary, Finance Department shall take a final decision within four months from the date of receipt of such representations after consulting with all other relevant departments concerned. Petition disposed off.
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2023 (10) TMI 1151
Levy of GST - works contract executed and completed after 1st July, 2017 wherein the contracts were awarded in the pre-GST regime or post-GST regime - HELD THAT:- It appears the respondent authorities concerned have to bear the additional tax liability for execution of subsisting Government contract either awarded to the petitioner during pre-GST regime or in post-GST regime without updating the Schedule of Rates (SOR) incorporating the applicable GST while preparing Bill for payment. Considering the submissions of the parties, this writ petition is disposed of by giving liberty to the petitioner to file appropriate representations stating all the facts and provision as referred in preceding paragraph of this judgment, before the Additional Chief Secretary, Finance Department, Government of West Bengal within four weeks from date. On receipt of such representations the Additional Chief Secretary, Finance Department shall take a final decision within four months from the date of receipt of such representations after consulting with all other relevant departments concerned. Petition disposed off.
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2023 (10) TMI 1150
Claim of interest on Refund of accumulated Input Tax Credit due to inverted tax - amount of refund already sanctioned - HELD THAT:- The learned counsel appearing for the petitioner has handed over a photocopy of the order dated 09.10.2023 whereby the refund of ₹8,76,636/- has been sanctioned, however, with a caveat that the same is subject to the review order and to the outcome of any appeal that may be preferred by the Revenue before the Appellate Tribunal as and when the same is constituted. Since the petitioner has prevailed before the Appellate Authority, the Order-in-Appeal dated 06.06.2023 is required to be implemented. It is seen that although the Revenue has processed the petitioner s claim for refund of ₹8,76,636/-, no interest has been provided. The respondent is directed to disburse interest, if any, payable to the petitioner in accordance with law within a period of two weeks from today - Petition disposed off.
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2023 (10) TMI 1149
Recovery of arrears of the tax, interest and the penalty thereon - HELD THAT:- Considering the fact that the petitioner has already paid the disputed tax as confirmed vide impugned orders dated 24.04.2023 and 08.09.2023, the Court is inclined to dispose this writ petition by giving liberty to the petitioner to file a statutory appeal before the Appellate Commissioner under Section 107 of the GST Act, 2017 within a period of 15 days from the date of receipt of a copy of this order. Petition disposed off.
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2023 (10) TMI 1148
Condonation of delay of 7 months and 11 days in filing appeal - HELD THAT:- The appeal was filed by the petitioner with a delay of 7 months and 11 days i.e., on 12.04.2023. The impugned order passed by the first respondent dismissing the appeal of the petitioner cannot be faulted. As an officer acting under the provisions of the GST, the first respondent has to strictly apply the provisions of the Act. Although, the petitioner has taken a stand that the order passed by the second respondent was without jurisdiction and that the petitioner came to know about the order dated 02.04.2023, the fact remains that the petitioner has pre-deposited 10% of the disputed tax along with the appeal that was filed belated before the first respondent on 12.04.2023. The petitioner came to know about the impugned order passed by the second respondent on 02.04.2022 only on 23.01.2023. After the third respondent dropped the proceedings initiated for the period between April 2018-March 2019. The Court is inclined to dispose the writ petition by directing the first respondent to dispose of the petitioner's appeal on merits and in accordance with law without reference to the limitation, subject to the petitioner depositing another 10% of the disputed tax within a period of 30 days from the dated of receipt of a copy of this order - petition disposed off.
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2023 (10) TMI 1146
Seeking grant of bail - fraudulent availment of input tax credit - HELD THAT:- Vide order dated 19-1-2023, this Court had extended the interim bail subject to compliance of conditions mentioned therein. The petitioner s Counsel stated that such order has been complied with. Thus, there would be no justification to keep this bail pending waiting for the proper investigation. The petitioner was granted interim protection, and during the interregnum, there is no allegation that he had intimidated the victim or victim s family or the witnesses or that he had hampered the investigation, or despite being called to join the investigation, he did not appear before the investigator. There would be no justification to discontinue the interim protection, and the same is made absolute subject to the petitioner complying with the terms of all the interim bail orders - Petition allowed.
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Income Tax
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2023 (10) TMI 1145
Additions towards Undisclosed profit made on the basis of the seized documents - search and seizure operation - During the course of search books of account, loose papers and documents were also seized - ITAT deleted the addition - Presumption as to assets, books of account, etc u/s 292C - Decision by two bench judges - HELD THAT:- I. P. MUKERJI, J - As presumption may be rebuttable or irrebuttable. If it is irrebuttable, it is conclusive proof of the fact. The court will not admit any evidence to disprove the presumption. The question is who has the onus of disproving the presumed fact. One who challenges the presumption has the onus to disprove the fact. Adjudicating authority has two options, either not to presume that the papers and other documents seized during search and seizure belonged to the assessee, the contents are true and that the signatures appearing thereon are that of the assessee or not to presume so. In this case, AO has made the presumption and proceeded accordingly. Now, the drawing of a presumption by the assessing officer in terms of Section 292C, in our opinion, is based on assessment of facts and discretionary and should not ordinarily be interfered with by an appellate authority. Once this presumption had been made, the onus squarely shifted to the respondent assessee to disprove those facts. The tribunal was enjoined with a duty to appreciate this law and to examine whether the assessee had been able to discharge the burden. Now, look at the reasons given by the tribunal. It cast a duty on the Revenue to prove the handwriting of the assessee. It accepted the contention of the assessee that the documents did not belong to him instead of requiring him to prove it. It allowed the assessee to retract the admission made by him during the course of the proceedings, by a statement dated 9th March, 1999 that the trial balance for the period 1st April, 1997 to 31st March, 1998 summarizes my entire business operation for 1997-1998 . Since Income Tax officers are not police officials, the view of the Supreme Court in Surjeet Singh Chhabra vs. Union of India and Ors. [ 1996 (10) TMI 106 - SUPREME COURT] at even if a confession was retracted it was to be taken as an admission and binding on the maker is very relevant in this case. The tribunal ought not to have disregarded the admission merely on the ground that later on the assessee had withdrawn the admission, without scrupulously examining whether there were any substantial grounds enabling the assessee to resile from such admission. The order of the tribunal with regard to the above issues is set aside. We remand the matter back to the tribunal with a direction upon it to reexamine the same on the basis of evidence on record by a detailed order within six months of communication of this order. BISWAROOP CHOWDHURY, J. - Whether the Income Tax Authority acted correctly in putting question to assessee with regard to Trial balance and other accounts papers seized from the establishment of assessee? - It is a common practice that in a business establishment of a businessman business accounts are prepared by accountant or chartered accountant and the same are audited. The preparation of accounts requires special knowledge and skill. Thus it is the accountant or charactered accountant having special knowledge are entrusted with the preparation of accounts which are audited. Hence it is the accountant or chartered accountant who are in a position to give statement regarding statement of accounts or Trial balance. The business man who has engaged accountant or chartered accountant cannot be said to have knowledge and cannot be expected to make statement on the preparation of accounts, which are prepared by Accountant or Chartered Accountant. A business man can admit his signature if it appears on any accounts or other documents and anything prepared in his own handwriting. Apart from his own handwriting he cannot admit any document prepared by others. Thus the Income Tax Authority ought to have interrogated the Accountant of the establishment regarding documents seized. Thus there was an error on the part of the Assessing Officer. This issue was not considered by the Learned Tribunal. Thus, this matter should be remitted to the Tribunal for reconsideration.
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2023 (10) TMI 1144
Assessment u/s 158BC - addition in respect of ICS and TT on the ground that payments made to the two concerns were inflated and in the nature of accommodation bill - CIT(A) deleting the additions/disallowance, observed that there were several documents, letters and correspondences filed by assessee, which clearly showed that ICS and TT were carrying out Container Freight Services ( CFS ) operations for assessee - HELD THAT:- CIT(A) has recorded a finding that factually the work was being carried out by ICS and TT and just because books of accounts of ICS and TT was not produced, would not give the AO a reason to believe that the payments made to the two concerns were inflated. CIT(A) has rightly observed that assessee is only expected to produce its own books of accounts and records and not to ensure production of books of account of every party, who has supplied goods or rendered services to assessee. That would amount to impossible burden being placed on assessee. ITAT has accepted this finding and has made pertinent observation that findings of CIT(A) based on material on record has not been controverted by the Revenue by bringing any positive material on record. Amounts paid to parties who did not appear before the AO and the bills were not supported by delivery challans - CIT(A) deleted the addition on the basis that delivery challans and test certificates were infact available. It is also recorded that the employee and director of Blue Ocean Marketing Private Limited had confirmed the transactions and the actual supply of material. So also the case of M/s. Sai Om Labour, assessee was accepted to have proved that the engagement of the labour contractor was essential considering the nature of the business carried on by it. This finding of CIT(A) was also acceptable to ITAT, who on facts have come to conclusions arrived at by CIT(A) were correct. Since on facts two appellate Authorities have expressed satisfaction based on the material and documents produced before them, we see no reason to interfere. No question of law arises.
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2023 (10) TMI 1143
Unaccounted sales - 4000.806 MTs of finished goods were the product of excess scrap - For the purpose of calculating the percentage (%) of scrap generated during the year, the assessment worked out to 7.2% and not 6.8% as had been worked out by the assessee - HELD THAT:- The assessee has been selling semi-finished goods to its subsidiary entity since the assessment year 2009-2010 till 2014-2015. The additionwas made by the AO for the assessment year 2009-2010 and this was set aside by the CIT (Appeals). For the assessment years 2010-2011, 2011-2012, 2012-2013, 2013-2014 and 2014-2015, no addition was made qua the semi finished goods manufactured and sold outside the books of accounts. As per the stated chart, in all the subsequent years, assessment orders have been passed u/s 143 (3) - A perusal of the assessment orders shows that consistently the sales of semi finished goods made by the appellant to M/s Jai Suspension Systems as a sister concern have been accepted and account books to this extent have also been accepted by the Assessing Officer. Revenue has not been able to dispute the correctness of the aforesaid orders passed u/s 143 (3). After 2009- 2010, no addition has been made in the income of the appellant towards the sales of semi-finished goods to M/s Jai Suspension Systems. No substantial question of law arises
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2023 (10) TMI 1142
Revision u/s 264 - delay in filing the application as alleged - Computation of long term capital gain arising from sale of flat in Mumbai - deduction of renovation expenses after indexing not claimed - petitioner consulted another Chartered Accountant, who advised petitioner that the other co-owner of the property had claimed a deduction of entire renovation expenses incurred in September 1990 in respect of the flat after indexing the same and petitioner should have also done the same while computing his share of capital gains - Petitioner advised to file an application u/s 154 which was rejected on the ground that such claim was made first time in the application under Section 154 of the Act and it was never brought to the notice of respondent no. 3 earlier or CIT(A) - HELD THAT:- As agreeable there was no delay in filing the application u/s 264 because the application u/s 264 of the Act was against the order passed u/s 154 of the Act and not Section 143(3) - The order under Section 154 of the Act was passed on 8th December 2015 and the application under Section 264 of the Act was filed on 18th January 2016, within one year. The proceedings under Section 264 of the Act are intended to meet a situation faced by an aggrieved assessee, who is unable to approach the Appellate Authorities for relief and has no other alternate remedy available under the Act. The Commissioner is bound to apply his mind to the question whether petitioner was taxable on that income and his powers are not limited to correct the error committed by the subordinate authorities but could even be exercised where errors are committed by assessee. It would even cover situation where assessee because of an error has not put forth legitimate claim at the time of filing the return and the error is subsequently discovered and is raised for the first time in an application under Section 264. In Asmita Damle [ 2014 (5) TMI 1230 - BOMBAY HIGH COURT] also held that the Commissioner while exercising revisionary powers u/s 264 has to ensure that there is relief provided to assessee where the law permits the same. As submitted that assessee should produce documents to prove his share of the indexed renovation expenses. In our view, it is not required because in the assessment order dated 30th December 2010 passed under Section 143(3) of the Act in the case of Ravi R Agarwal, the other co-owner of the flat, the assessing officer has accepted the amount of Rs. 2,95,859/- as the cost of renovation of indexation. Therefore, this figure has to be accepted as correct and suitable allowance should be made while arriving at the long term capital gain. We hereby quash and set aside the impugned order and remand the matter to PCIT for denovo consideration. Order to be passed shall be a reasoned order dealing with all submissions of assessee. The application under Section 264 of the Act shall be disposed within 8 weeks from today.
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2023 (10) TMI 1141
Levy of fee u/s 234E - TDS statement was filed under Section 200A - whether the late fee can be imposed u/s 234E while processing the statement of TDS under Section 200A of the Act for the subject assessment years? - HELD THAT:- Since, there was no provision for imposing the late fee under Section 234E of the Act while filing and processing the TDS returns under Section 200A of the Act, clause (c) to Sub-Section (1) to Section 200A was introduced with effect from 01.07.2012. The respondent had had imposed the late fee only under Section 234E of the Act for the assessment years 2012-2013, 2013-2014, 2014-2015. However, Section 200A(1)(c) of the Act was not introduced during the said assessment years. In the absence of any provisions under Section 200A of the Act, when they have processed the application for TDS under Section 200A, no late fee can be imposed under Section 234E. Hence, in such view of the matter, this Court feels that the impugned orders are liable to be set aside - Decided in favour of assessee.
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2023 (10) TMI 1140
Validity of Reopening of assessment - order passed u/s 148A(d) - Period of limitation - Time limit for notice - scope of new regime as per section 148A - prescribed permissible timeline of six years - notices having been issued after passage of six years from the end of the relevant assessment year - HELD THAT:- As per the aforesaid amended section 149, notice under section 148 of the Act could be issued within three years from the end of the relevant assessment year. What is contemplated is that the assessing officer could reopen the case of the assessee beyond three years, but within 10 years from the end of the relevant assessment year. This could be done by the assessing officer within 10 years provided he is in possession of the books of accounts or documents or evidence revealing that income escaped assessment represented in form of asset was likely to exceed Rs. 50 lakhs. Further condition needed to be satisfied is the approval of the competent authority of the Income Tax under section 151 of the Act, which enable the assessing officer to assume the jurisdiction. What is to be noticed with relevance is that the First Proviso to section 149 of the Act as introduced in Finance Act, 2021, inter alia stipulated that no notice under section 148 shall be issued at any time in a case for the relevant Assessment Year beginning on or before 1st day of April 2021, if such notice could not have been issued at that time on account of being beyond the time limit specified under the provision as it stood immediately before the commencement of the Finance Act, 2021. In respect of the notice u/s 148 of the Act relating to the assessment year beginning on or before 01.04.2021, the operational conditions in the provision as they stood before 01.04.2021 were maintained. It thus included the factor of prescription of time limit-the limitation. The Supreme Court in Ashish Agarwal [ 2022 (5) TMI 240 - SUPREME COURT] striking balance between the notices issued by the Department under the old regime and the provisions brought into force under the new regime held that all notices issued under Section 148 of the Act between 01.04.2021 to 30.06.2021 shall be deemed to have been issued under section 148A of the Act to be treated as show-cause notices under section 148A(b) of the Act. The Supreme Court observed that new provisions substituted by the Finance Act, 2021 were remedial and benevolent in nature, came to be inserted with an object to protect the right and interests of the assessee as well to sub-serve the public interest. Thus, one of the direction and clarification in Ashish Agarwal (supra), is that all the defences that were available to the Assessee under section 149 under the Finance Act, 2021 and in law whatever rights are available to the assessing officer under the Finance Act, 2021 are kept open to be continued to be available. The notice which could not have been issued in the old regime period due to becoming time barred as per then operating provision, would also not be permissible to be issued post-01.04.2021. As already noticed, Section 149 as it stood immediately before commencement of Finance Act, 2021, that is before 01.04.2021 in the old regime inter alia provided for time limit for notice. It stated inter alia that no notice under section 148 shall be issued for the relevant assessment year, as per clause (b), if four years, but not more than six years, have elapsed from the end of the relevant assessment year unless the income chargeable to tax, which has escaped assessment, amounts to or is likely to amount to one lakh rupees or more for that year. Limitation of six years from the end of relevant assessment year operated as timeline in the old regime for issuance of notice u/s 148 beyond which period, it was not competent for the assessing officer to issue notice for reassessment. This embargo is made to continue in the new regime also. Now the reopening notices which related to the period prior to 01.04.2021, but issued between 01.04.2021 to 30.06.2021 came to be challenged before the Division Bench of this Court in Keenara Industries Pvt. Ltd [ 2023 (3) TMI 104 - GUJARAT HIGH COURT] proceeded to hold that enacting the provisions in Taxation and Other Laws (Relaxation Amendment of Certain Provisions) Act, 2020, was not the permissible device whereby the time limit could be legitimately extended for the purpose of issuing Notices under Section 148, which were otherwise barred in terms of Section 149, as it exists in the old regime. The Taxation and Other Laws Act, 2020 was rightly viewed to be a secondary legislation. It was therefore held that secondary legislation would not override the principal legislation-the Finance Act, 2021. Also negatived by the Division Bench in Keenara Industries Pvt. Ltd. (supra) as per observations in paragraph 36 of the judgment, the concept of freezing the time limit. It was held that it was not permissible in law for the Revenue to travel back in time. Nor does the Taxation and Other Laws Act endorse to such concept. It was held that Notifications extending the due dates under the old provisions could not breath any more after the repeal of the old provisions. Therefore, the point is no more res integra that all original notices under section 148 of the Act referable to the old regime and issued between 01.04.2021 to 30.06.2021 would stand beyond the prescribed permissible timeline of six years from the end of Assessment Year 2013-14 and Assessment Year 2014-15. Therefore, all such notices when they would relate to Assessment Year 2013-14 or Assessment Year 2014-15 would be time barred as per the provisions of the Act as applicable in the old regime prior to 01.04.2021. Furthermore, these notices cannot be issued as per the amended provision of the Act. All the impugned notices in the respective petitions u/s 148 of the Act relatable to Assessment year 2013-14 or the assessment year 2014-15, as the case may be, are beyond the permissible time limit, therefore, liable to be treated illegal and without jurisdiction.
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2023 (10) TMI 1139
Stay of demand - revenue directed the petitioner to pay 20% of the demand as a pre-condition for stay of demand - HELD THAT:- It is trite law that when an income tax authority exercises jurisdiction under Section 220(6) of the Act, he exercises quasi judicial power. While exercising quasi judicial powers, the authority is not bound or confined by departmental instructions. He has to apply his mind which must be reflected in the order. This position has been clarified by the Supreme Court in the case of Principal Commissioner of Income Tax Vs. M/s. L.G. Electronics India Private Limited [ 2018 (7) TMI 1905 - SC ORDER] That being the position, we set aside the order dated 02.02.2023 and remand the matter back to the file of the first respondent for passing fresh order(s) in accordance with law after giving due opportunity of hearing to the petitioner to be done within a period of six (6) weeks from the date of receipt of copy of this order.
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2023 (10) TMI 1138
Taxability of receipts from airlines in India - PE in India - profits attributable to the PE - Whether the booking fee received by the assessee from CRS is in the nature of royalty income taxable in India? - Whether the receipts from Altea Reservation System are in the nature of royalty/FTS taxable in India? - HELD THAT:- We find that the impugned issue is squarely covered in favour of the Revenue by series of Tribunal s order from AYs 1996-97 to 2019-20 in assessee s own case which has been affirmed by the Hon ble Delhi High Court [ 2022 (9) TMI 709 - ITAT DELHI] confirming that 15% of the revenue earned by the assessee is taxable in India. Attribution of profit to the PE, the Ld. AO computed income from bookings made in India after adding back development costs, distribution fees and attributed 75% to the alleged PE - It is undisputed that the facts of the AY under consideration (i.e. AY 2020-21) and that of the earlier years are same. We find that the Hon ble Supreme Court in its decision [ 2023 (5) TMI 227 - SUPREME COURT] has upheld the order(s) of the Hon ble Delhi High Court that 15% of the revenue earned by the assessee is taxable in India and that since the assessee pays 33% of the booking fees to the distributors, no income is attributable to tax in India. Accordingly, we deem it fit to remit this issue to the file of the Ld. AO to decide it afresh in light of the decision (supra) of the Hon ble Supreme Court. Disallowance of expenses incurred by the assessee while computing the income attributable to the PE - AO disallowed the expenditure of Euro 45,917,375/- claimed by the assessee under the head Distribution fee following the assessment order for AY 2007-08 - HELD THAT:- It is not in dispute that facts of the present case and business model of the assessee and its PE in India are identical to the earlier years. We find that Tribunal has consistently decided the impugned issue in favour of the assessee in series of its orders for AYs 2007-08 to 2019-20 against which Revenue has not preferred any appeal before the Higher Forum. It can very well be inferred that the Revenue has accepted the said decision of the Delhi Tribunal which is evident from the fact that the Revenue has not challenged the impugned issue before the Delhi High Court in its appeals for earlier AYs 2007-08 till 2016-17 - we hereby allow ground of the assessee. Nature of receipts - CRS income - Royalty - taxability in India of booking fee received by the assessee as royalty both u/s 9(i)(vi) of the Act as well as under Article 13(3) of the India- Spain DTAA - AO, on an alternate basis, held that the 'booking fee' received by the assessee from various airlines is payment for use of process and scientific equipment - AR argued that in terms of section 44DA of the Act and Article 13(5) of the India-Spain DTAA payment in the nature of royalty which is effectively connected with the PE of the non-resident is required to be taxed as business income - HELD THAT:- We find that the impugned issue is squarely covered by the decision of the Hon ble Delhi High Court in assessee s favour wherein it has been held that the booking fee received by the assessee is taxable as business income and not as royalty . See order dated 04.05.2023 for AY 2013-14 to 2016-17 [ 2023 (5) TMI 1249 - DELHI HIGH COURT] , order for AY 2009-10 and for AY 2012-13 - Decided in favour of assessee. Addition of payments received from various airlines in relation to the use of Altea System as royalty both u/s 9(1)(vi) and Article 13(3) of the India-Spain DTAA on the ground that the payment received by the assessee is for use of process and scientific equipment - HELD THAT:- Following the order passed by the coordinate bench of the Tribunal in AYS 2007-08 to 2012-13 [ 2021 (2) TMI 358 - ITAT DELHI] we are of the considered view that payment received by the taxpayer from British Airways in relation to alleged use of 'Altea system' cannot be characterized as 'royalty' either under the Act or under the Indo- Spain Treaty because Altea system was installed at the airport and was accessed only by the airlines and not by the Amadeus's agents viz. Resbird, Amadeus India and that during the year, the said system was available to British Airways for the aforesaid purpose and that too only at the airport counter and the said software was not available outside the Indian airport or to any of the agents of the taxpayer since the agents were booking the tickets only through the CRS of the taxpayer. Levy of interest u/s 234A and 234B - HELD THAT:- As regards levy of interest under section 234A of the Act, we observe that the Tribunal in its decision [ 2022 (9) TMI 709 - ITAT DELHI] for AY 2017-18 to 2019-20 remitted the matter back to the file of Ld. AO for verification and decide the matter afresh in accordance with law. Thus we deem it fit and proper to restore this issue to the file of Ld. AO for verification as to the filing date of return viz-a viz the due date of filing of return for the year under consideration in the light of the CBDT Circular dated 30.12.2020. Levy of interest under section 234B - As in the absence of any liability for payment of advance tax since tax is deductible at source on the income of the assessee held liable to tax in India, the levy of interest under section 234B of the Act is not warranted. Further, in the present case the income has been received by the assessee after deduction of tax at source. Thus levy of interest under section 234B of the Act is not called for.
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2023 (10) TMI 1137
Bogus advances receipts - advances against sale of flats which have been shown under the head unsecured loans and advances from the parties - AO held that the advances from these parties were not proved - HELD THAT:- We have perused and examined the profit and loss account for the FY ending 31.03.2012 and found that the assessee has shown sales of flats which is in agreement with the details furnished by the assessee in which the amount received from party was duly adjusted and shown as sale. We note that the assessee has sold these flats in the subsequent years and the sale has duly been shown in the books of accounts and due taxes have also been paid. We are surprised to note that the AO has treated the advances as bogus in respect of which the sale deeds were executed in the subsequent years. We direct the AO to delete the addition. Project expenses disallowed - addition by CIT(A) as made by the AO on estimated basis by adding 25% of the total project expenses claimed by the assessee - HELD THAT:- After examining profit and loss account, the vouchers filed by the assessee, we note that these were expenses incurred in connection with the construction of the flats project which were duly supported with the bills and vouchers and has been correctly shown in the expenses side of the profit and loss account. We note that the substantial part of the project expenses has gone into closing work-in-progress which was carried forward to the subsequent year as closing stock as there were 14 unsold flats in hand. We note that the AO has not given any reason for disallowing 25% of the project expenses and only cited the non-production of bills and vouchers whereas on the other hand the assessee has filed all the evidences before us and we note that all these expenses were genuinely incurred for the project of construction of flats. Accordingly, we are not in a position to sustain the ad-hoc disallowance of expenses that too without any basis - Decided in favour of assessee.
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2023 (10) TMI 1136
Penalty u/s 271C - period of limitation - whether Notice time barred and beyond the jurisdiction of the ld. AO? - long time revenue was totally inaction and not levied the penalty - HELD THAT:- The notice u/s 274/271C was duly issued to the assessee by the ACIT, Circle-1, Jodhpur on dated 08.01.2015, the liable for imposition of penalty was duly crossed the limit by violating the provision of section 275(1)(c).The levying the penalty U/s 271C is time barred and beyond the jurisdiction of the ld. AO. We do not intervene the appeal order. The appeal order is upheld. Accordingly, the penalty U/s 271C is quashed. Decided in favour of assessee.
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2023 (10) TMI 1135
TP Adjustment on notional interest on advances - HELD THAT:- The issue has already been decided against the assessee for A.Y. 2012-13 [ 2022 (7) TMI 888 - ITAT AHMEDABAD ] holding that advances were not in the nature of quasi capital. The main argument of the assessee against the transfer pricing adjustment made on account of the short term advances given to its subsidiaries in Mauritius and Nigeria, fails. The assessee being unable to demonstrate that the advances were not in the nature of loan/advance but were quasi capital in nature and for commercially expedient purposes of the assessee and hence the LIBOR rate could not be applied to them for the purposes of making ALP adjustment on the interest to be charged, the decision of the Ahmedabad Bench in the case of Micro Inks Ltd. is not applicable to the assessee - Decided against assessee. Disallowance u/s 14A - strategic investment made in SPV - HELD THAT:- As relying on own case for A.Y. 2012- 13 [ 2022 (7) TMI 888 - ITAT AHMEDABAD ] assessee seeking exclusion of strategic investments while computing disallowance as per Rule 8D of the Rules is dismissed. TP Adjustment on Liason Support Services - company has benchmarked the transaction by applying CUP as MAM using US Census Bureau annual data relating to commission on sales made by agents, wherein the rate determined was at 4.1% - TPO made downward adjustment by applying rate of 2% instead of 3% following the order for A.Y. 2012-13 - HELD THAT:- The issue is decided in favour of the assessee in A.Y. 2012-13 [ 2022 (7) TMI 888 - ITAT AHMEDABAD ] wherein it is held that the assessee has applied appropriate comparables for determining the ALP and benchmarking the transaction. TPO has selected the comparables which are functionally different from the assessee. Decided against revenue. Nature of receipt - profit on sale of carbon credit - capital receipt or revenue receipt - HELD THAT:- Issue is decided in favour of the assessee in A.Y. 2012-13 2013-14 [ 2022 (7) TMI 888 - ITAT AHMEDABAD ] as held CER receipts as capital in nature and income earned there from also being capital receipt.
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2023 (10) TMI 1134
LTCG invoking the provisions of Section 50C - property transferred through Sale Deed - as argued land was transferred by the assessee to his daughter-in-law without any consideration whatsoever - Whether case of family arrangement not liable to capital gain? - as submitted that the gift given to relative is not considered as a transfer as per Section 47(iii) and said transfer is not taxable in the hands of the daughter-in-law in view of the provisions of Section 56(2)(vii) - HELD THAT:- We observe that this issue has been directly dealt with in the case of Smt. Balwant Kaur Mangat [ 2017 (8) TMI 1129 - ITAT DELHI] as held transaction is clearly through sale deed and submission that it was a gift is not borne out from the deed of transfer - mode of receipt of consideration not mentioned. Since the consideration has not received through cheque, there is no question of it being reflected in the bank account of the daughter. The provisions of section 50C are clearly applicable in this case as it is a case of transfer of property through sale deed at a price lower than the value adopted for stamp duty valuation. Section 47(iii) comes to play only in cases of transfer through gift or will or an irrevocable trust. Transfer in the present case is not through these modes. The transaction has been held to be gift in the hands of the daughter, the transferee, and therefore it should be held so in the case of the assessee also is not tenable because in case of the daughter the consideration as per stamp duty valuation is not taxable as per proviso to section 56(2)(vii). However, the provisions of capital gains taxation and the income from other sources are independent of each other. The income in the hands of the daughter having been held to be exempt, does not absolve the assessee from the capital gain liability. Also decided in the case of Shri Jay Atulbhai Mody [ 2022 (12) TMI 1260 - ITAT RAJKOT] held that property transferred to Mother through Sale Deed is a sale and not Gift, taxable as capital gain. Decided against assessee.
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2023 (10) TMI 1133
Short credit of tax deducted at source - HELD THAT:- As we find that this was not the part of the draft assessment order and therefore the assessee came to know only about this adjustment at the time of making of the final assessment order, hence, in the interest of justice, we set-aside it to the file of AO to verify the credit claimed by the assessee in the return of income - Thus, ground is allowed with above direction. MAT computation - not granting assessee the lower of brought forward losses or unabsorbed decision while computing book profit u/s 115JB - HELD THAT:- In this case as the unabsorbed depreciation is rupees nil whereas the unabsorbed business losses are ₹ 201.76 crores and therefore the assessee is entitled to deduction of rupees nil. The view of the AO is also supported by the decision of MILAN INTERMEDIATES LLP [ 2018 (7) TMI 1724 - ITAT AHMEDABAD] no infirmity was shown to us that how the order of the AO is erroneous. It was also not shown to us that the decision of the coordinate benches relied upon by the learned assessing officer is incorrect or upset by the decision of the honourable High Court. We are not inclined to set aside back to the file of the learned assessing officer because there is no purpose. Accordingly, we dismiss ground of the appeal confirming the action of AO that assessee has already been granted deduction while computing book profit under section 115JB of the act of lower of unabsorbed business losses or unabsorbed depreciation. Adjustment of the book profit u/s 115JB - addition on account of the foreclosure cost was made by AO - As assessee has debited capital expenditure and did not reduce it book profit - when company provides for premium on redemption out of the profits of the company whether it needs to be debited as expenses in the statement of profit and loss account or it is to be deducted from balance of surplus in the balance sheet? - HELD THAT:- In the present case, in form number 3CD, assessee has classified the above expenditure as capital expenditure. Form number 3CD is always prepared by the assessee. The report is given by an accountant in form number 3CA or Form No. 3CB. Thus, there is a basic contradiction in the claim of the assessee that tax audit report (form number 3CD) cannot be used by the learned assessing officer for making adjustment under section 115JB. The fact shows that in form number 3CD assessee is stating that foreclosure cost is in the form of premium paid on redemption of redeemable preference shares and is capital expenditure, whereas while computing book profit, assessee pleads that it is a revenue expenditure which can be debited to the profit and loss account. In the result we do not find any infirmity in the order of the lower authorities in making addition of Rs 200 crores to the book profit u/s 115 JB of The Act holding that it is statement of assessee that it is a capital expenditure. Thus Ground no 2 to 9 of the appeal are dismissed. Nature of expenses - share issue expenses - revenue or capital expenditure - HELD THAT:- As per provisions of section 37 (1) any capital expenditure is not allowable as deduction. Assessee has incurred this expenditure only for the share issue and capital reduction. In view of this, we do not find any infirmity in the order of the lower authorities in holding that expense is capital in nature. Further in form number 3CD assessee itself is qualified it to be a capital expenditure and therefore now assessee cannot argue otherwise as form number 3CD is also prepared by the assessee. The claim of assessee is contradictory on the same issue. Therefore, no infirmity in the orders of the lower authorities in holding that expenditure incurred by the assessee is a capital expenditure relying on assessee's own claim in Form no 3 CD. Accordingly ground number 10 12 of the appeal are dismissed. TPA - sale of fuel stock and purchase of fuel stock - MAM selection - assessee concluded that comparable Uncontrolled Price Method (CUP) cannot be applied due to non-availability of transaction level data through both internal and external sources - TPO rejected the benchmarking analysis and held that Comparable Uncontrolled Price [CUP] method is the most appropriate method, he used TIPS database to benchmark the transaction by using that method and accordingly he benchmarked the purchase and sale of fuel stock transaction - HELD THAT:- The product Transacted is coal. On careful look at Rule 10 AB of the ITA Rules 1962 introducing Other method , it merely facilitates considers the price which has been charged or paid, or would have been charged or paid, for the same or similar uncontrolled transaction, with or between non-associated enterprises, under similar circumstances, considering all the relevant facts. As assessee has failed follow mandate of section 92CA (3) of the Act, the ld. TPO adopted the Uncontrolled Comparable price Method [CUP], adopted TIPS data base and held part of transaction of purchase and sale at Arm s length price and without respect of few transactions made the adjustment. The ld. DRP also upheld the TP approach of ld. TPO. TPO found the comparable prices of the transacted goods and then made adjustment wherever the prices are found not comparable. No infirmity pointed out in the transactions compared, timing of transactions and on any other parameter of transaction. Therefore, we do not have any hesitation in confirming the adjustment on account of Arm s length price of specified domestic transaction. It is not the case that TIPS database is not reliable. No evidence was produced before us that there is any infirmity in the database used by the TPO. Many coordinate bench decisions have held that TIPS database is the appropriate database in determining comparable uncontrolled prices of products. No infirmity was pointed out in approach of ld. TPO before us other than above, hence transfer pricing adjustment on account of sale of fuel stock and on account of purchase of fuel stock are confirmed. Decided against assessee.
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2023 (10) TMI 1132
TP Adjustment - exclusion of Eclerx Services Limited from the set of comparable companies while determining Arm s Length Price (ALP) - HELD THAT:- Assessee is rendering back office support service to its AE. There is no change in the services performed by the assessee right from the AY 2007-08 onwards. We find that this Tribunal in assessee s own case for AY 2007-08 [ 2017 (1) TMI 1546 - ITAT DELHI ] had excluded Eclerx from the list of comparable companies as functionally not comparable with the assessee. Hence, we direct the Ld. AO to exclude Eclerx Service Limited from the final list of comparables while determining the ALP of International Transactions of the assessee. Accordingly, Ground raised by the assessee is allowed.
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2023 (10) TMI 1131
Revision u/s 263 - addition u/s 40A(3) - assessee by paying huge cash in excess of Rs. 20,000/- alleged to have violated the provision of Section 40A(3) - PCIT is of the opinion that the AO failed to enquire the above aspect in the books of accounts including the cash book and vouchers while completing the assessment in the case of the assessee - case of the assessee is this that the cash payment made is nothing but the withdrawal of the partners of the firm and the partners capital account has also been produced before the Ld. PCIT - HELD THAT:- We find substance in such arguments made by the Ld. DR. Furthermore, it is a settled principle that the capital cannot be attributable as expenses and in the instant case part of the old capital had been withdrawn by the partners of the firm, which is not liable to be subjected to the provisions of Section 40A(3). Moreso, when the entire materials were placed before the Ld. AO during the course of assessment proceeding and only upon verification of the same, the return of income was accepted, which is also reflecting from the order passed by the Ld. AO mentioned therein, in our considered opinion, assessment cannot be reopened by exercising power conferred u/s 263 of the Act by the Ld. PCIT in the manner it has been done. We find that the issue raised by the Ld. PCIT was already adjudicated upon due application of mind by the Ld. AO in the assessment proceedings under Section 143(3) of the act and return was accepted. The copy of the partners capital account, payment vouchers made to the partners, the ledger of cash book alongwith narration for the period 01/04/2016 to 31/03/2017 were duly placed before the Ld. AO during the original assessment proceeding and only upon verification of the same, the assessment was finalized. It is relevant to mention that the Ld. PCIT referred Explanation (2) to Section 263(1) of the Act while holding the order of assessment erroneous and prejudicial to the interest of the Revenue and exercising power in passing direction for re-assessment by the Ld. AO which in our considered opinion is not having any manner of application as the examination and/or verification of the issue involved in the PCIT s order were duly been made by the Ld. AO which is also reflected in the order so passed by the Ld. AO. Thus, prima facie finding made by the Ld. PCIT holding the order passed by the ld. AO dated 10.12.2019 is erroneous and prejudicial to the interest of the Revenue, in our considered opinion, is found to be wrong and direction for re- assessment by the Ld. AO is, thus, found to be not sustainable. The entire proceeding is, thus, void ab initio and quashed. Assessee s appeal is allowed.
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2023 (10) TMI 1130
Disallowance u/s 14A r.w.r. 8D - assessee is NBFC - whether addition could be made if the assessee had not earned any exempt income during the year under consideration? - HELD THAT:- There is no dispute that the assessee is a non-banking finance company, making investment in the group companies to meet their business requirements. In such a situation, it is beyond doubt that whenever the investee company declares dividend, such dividend would invariably be earned by the assessee and the assessee alone. It is not a case where only by chance the shares would be in the hands of the assessee when such a dividend is declared. If the assessee holds these shares as stock-in-trade, to be liquidated whenever the share price goes up in order to earn profits, then it would be possible that during such holding, the investee company may declare dividend. Purpose of assessee holding the shares is not to liquidate when the share price goes up and thereby to earn profit, but the assessee holds such shares in the group companies to meet the business requirements of such companies. Assessee is bound to receive the dividend when it is declared. Therefore, the decision of Maxopp Investment Ltd [ 2018 (3) TMI 805 - SUPREME COURT] as followed by Kingfisher Finvest India Ltd [ 2020 (10) TMI 518 - KARNATAKA HIGH COURT] is applicable to the facts of the case. Argument of the learned Counsel that the issue is held in favour of the assessee in assessee s own case for earlier assessment years does not hold much water. A careful reading of order cited makes it clear that for the earlier assessment years, this fact of assessee investing in group companies for the business requirements was not brought to the notice of the Bench by either side. When once it has come to the notice of the Bench, it is not possible to perpetuate the mistake occurred on earlier occasion. It is the settled principle of law, as observed in the case of Distributors (Baroda) (P.) Ltd. vs. Union of India [ 1985 (7) TMI 1 - SUPREME COURT] that there is no heroism to perpetuate an error and to rectify such an error is a compulsion of the judicial conscious. Errors cannot be perpetuated on the name of consistency. We find it difficult to follow the view taken in the appeals for the assessment years 2016-17 2017-18 - Decided in favour of revenue.
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2023 (10) TMI 1129
Interest receivable relatable to Non-Performing Assets - CIT(A) allowed the relief related to interest receivable on NPA - HELD THAT:- The issue is well adjudicated by the ld. CIT(A). The entire issue is covered by the RBI guideline in respect of accounting of policies on NPA which is duly covered by the AS-9. In our considered view, we do not intervene in the order of the ld. CIT(A). Accordingly, the ground of the revenue is dismissed. Not allowing the net claim made in ROI on account of adjustment in income and expenditure through Memorandum of Changes (MOC s) made by the Statutory Auditors during finalisation of financial statements - CIT(A) had not adjudicated details related to claim of deduction submitted as assessee has not submitted formal application under Rule 46-A of the Income Tax Rules, 1962 for admission of additional evidence and accordingly confirmed the additions made by the ld. AO - HELD THAT:- In the interest of substantial justice and fairness to both the rival parties, as also that adjudication of this issue will require enquiries and verification of the facts, we are inclined to set aside the appellate order passed by ld. CIT(A) and restore the matter back to the file of ld. CIT(A) for fresh adjudication on merits and in accordance with law. The ld. CIT(A) is directed to pass detailed, reasoned and speaking order after making such enquiries and verifications as he may deem fit. CIT(A) shall give proper and adequate opportunity of being heard to the assessee in accordance with principles of natural justice in accordance with law, and evidence/explanations submitted by assessee in its defence shall be admitted by ld. CIT(A) in the interest of justice
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2023 (10) TMI 1128
Disallowance of sales and marketing expenses u/s. 37(1) - Assessee has incurred sale promotion expenses in relation to brand reminders, Medical Camp expenses, Professional fees-Medical Advisory, Market Research / Survey and Travel Accommodation relating to advisors attending conferences - assessee has declared certain percentage of disallowance of respective expenses incurred for marketing expenses before ITSC in order settle the disputes raised during the search proceedings - CIT(A) accepted the Assessee's contention that in view of orders passed by ITAT in Assessee's own case for Brand Reminders and there being assessment order for other heads where in the AO has himself applied a lower rate the same rate of disallowance could not be applied for the three (3) months and on an adhoc basis, made additional disallowance in the range of 2-5% for different heads - HELD THAT:- The offer before ITSC to settle the dispute amicably cannot be the basis of making any regular assessment without their being any proper material on record to substantiate the relevant disallowances. In the given case, the assessing officer merely followed the percentage of disallowance adopted by the ITSC without their being any material to support the disallowances for the impugned assessment year. Similarly, the Ld.CIT(A) even though agreed that the percentage declared before ITSC cannot be adopted but proceeded to adopt percentage on adhoc basis. Therefore, in our considered view, the reasons given by the Ld CIT(A) to adopt the respective percentage are mere assumptions and there is no basis. Assessee adopted the relevant percentage of disallowance based on the findings of appellate authorities particularly the ITAT. Therefore, we are inclined to direct AO to verify the percentage proposed by the assessee and the relevant findings of the coordinate bench in each and every expense. Before we depart, for the distribution of Brand Reminder, being less than ₹ 1,000/- (below the threshold provided by MCI), this particular marketing expenses are within the threshold limit prescribed by the MCI and the coordinate benches have allowed this expense and also the revenue allowed the same in the subsequent assessment years. Therefore, in over all the disallowance proposed by the Ld CIT(A) is without basis and mere assumptions. With regard to DR submissions regarding applicability of decision in Apex Laboratories [ 2022 (2) TMI 1114 - SUPREME COURT] , we observe that this is not case of either AO nor CIT(A). We cannot stretch the issues beyond assessment order. Accordingly, we direct the Assessing Officer to delete the additions sustained by the Ld CIT(A) and verify the percentage offered by the assessee with the subsequent orders of appellate proceedings. Accordingly, the grounds raised by the assessee are allowed and revenue is dismissed. Weighted deduction u/s. 35(2AB) - AO rejected the submission made by the Assessee, based on amount quantified by the DSIR in the certificates for previous year made disallowance of weighted deduction claimed u/s. 35(2AB) thereby granting only 100% deduction and rejected additional 50% of following R D expenses - HELD THAT:- With regard to Clinical Trials we observe that in assessee s own case the Coordinate Bench for AY 2008-2009 2009-2010 [ 2015 (2) TMI 1348 - ITAT MUMBAI] relying upon decision in CIT v. Cadila Healthcare [ 2013 (3) TMI 539 - GUJARAT HIGH COURT] held that expenses incurred for clinical trials were eligible for deduction u/s. 35(2AB) though incurred outside the R D facility and thus the view of DSIR came to be rejected. Consultancy and professional fees - As in own case the Coordinate Bench for the A.Y. 2007-08 [ 2012 (9) TMI 43 - ITAT MUMBAI] these expenditures have been incurred towards research expenses and not towards any patent filing. Further, it is also observed that the expenditure incurred in respect of patent application filed under The Patent Act, 1970. Explanation to section 35(2AB), as reproduced herein above, specifically provides that the expenditure on scientific research for the purpose of section 35(2AB) of the Act shall include filing of application for a patent under The Patent Act, 1970, in relation to drugs and pharmaceuticals. Any application for patent foreign country has to be filed in India as per section 7 of The Patent Act, 1970, according to patent cooperation treaty. Therefore, we hold that the Commissioner (Appeals) has rightly held that the said expenditure incurred by the assessee towards patent filing charges is eligible for weighted deduction u/s 35(2AB). Rent taxes and repairs to building - As decided in assessee s own case [ 2012 (9) TMI 43 - ITAT MUMBAI] held that the repairs, rent, etc., the expenditure incurred relating to R D premises cannot form part of cost of land or building. In the absence of any fact that the said claim of the assessee aggregating to 62,00,689, is not the expenditure on rents, rates and taxes relating to R D premises, we are of the considered view that the said expenditure has to form part of weighted deduction as per section 35(2AB) of the Act. Therefore, we, by reversing the orders of the authorities below, hold that the assessee is entitled to weighted deduction on the said amount @ 150% as per section 35(2AB) of the Act. Netting off of sale proceeds of fixed assets against the expenses - As issue has diverse views. We are inclined to remit this issue back to the file of Assessing Officer to follow the decision of Wockhardt Ltd [ 2012 (5) TMI 823 - ITAT MUMBAI] Accordingly, the grounds raised by the revenue are dismissed except the issue of netting of sales proceeds, which we are inclined to allow for statistical purpose. Analysis and testing charges - Merely because the prescribed authority segregated the expenditure into two parts, namely, those incurred within the inhouse facility and those can were incurred outside, in our opinion, by itself would not be sufficient to deny the benefit to the assessee under section35(2AB) of the Act. It is not as if that the said authority was addressing the issue for deduction under section 35(2AB) of the Act in relation to the question on hand. The certificate issued was only for the purpose of listing the total expenditure under the Rules. See Cadila Healthcare [ 2013 (3) TMI 539 - GUJARAT HIGH COURT] . Also decided in assessee own case A.Y. 2014-15 [ 2022 (10) TMI 214 - ITAT MUMBAI] held no infirmity in the order passed by the CIT(A) in allowing weighted deduction at the rate of 200% in respect of Quality Control/Testing Expenses. Set-off of brought forward business loss and unabsorbed depreciation of Bharavi Laboratories - HELD THAT:- We observe that the company Bharavi Laboratories was merged with the assessee company and as per the provisions and in line with the NCLT directions, the assessee is eligible to set off the losses carried forward by the Bharavi Laboratories at the appointed date. Therefore, we direct AO to verify the claim of the assessee alongwith the order of NCLT dated 06.07.2017. It is directed to allow the claim as per law. Accordingly, the additional ground raised by the assessee is allowed for statistical purpose. Inclusion of surcharge and cess while computing MAT Credit - HELD THAT:- We observe that the issue of giving MAT credit in the subsequent assessment years are already well settled that the tax paid as per provisions of sec.115JB always includes surcharge and cess. Similarly, while giving credit in the subsequent year shall include the surcharge and cess. One cannot separate the tax liability differently while calculating tax due and tax credit. Therefore, we are inclined to dismiss the grounds raised by the revenue. Education Cess claim u/s 37(1) - HELD THAT: - We note that by way of Finance Act 2022 Explanation 3 has been inserted in Section 40(a)(ii) of the Act with retrospective effect from 01.04.2005 which clearly provides that the term tax' includes and shall be deemed to have always included any surcharge or cess, by whatever name called, on such tax. Therefore, in view of the same no deduction is allowable in respect of Education Cess for the Assessment Year 2014-15 in terms of Section 40(a)(ii) of the Act read with Explanation 3 thereto - we observe that this issue of claim on account of education cess is held to be against the assessee. Accordingly, the ground raised by the revenue is allowed.
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Customs
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2023 (10) TMI 1127
Maintainability of SLP - Seeking permission to avail of the appellate remedy - HELD THAT:- The Special Leave Petition is disposed of by reserving liberty to the petitioner herein to seek permission to avail of the appellate remedy, if so advised - If any appellate remedy is availed of by the petitioner herein, the same shall be considered by the Appellate Authority on merits.
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2023 (10) TMI 1126
Valuation of imported goods - Brass Ceramic Cartridge (L) size Parts for use in Sanitary ware - 2976 kg. weight of the consignment was found in excess than the declared weight - rejection of declared value - Confiscation - redemption fine - penalty - HELD THAT:- The basis of the order under challenge has been the market enquiry and the valuation in terms of Rule 7 of the Valuation Rules coupled with the acceptance of reassessed value by the appellant. The modus operandi for reassessment has been objected by the appellant - As per Section 14 of the Act, value of the imported goods shall be the transaction value of such goods, which means the price actually paid or payable for the goods when sold for export to India where the buyers and sellers are not related and the price fixed is the sole consideration for sale. Proper officer can reject the declared transactional value based on certain reasons to doubt the truth or accuracy of the declared value in which event the proper officer is entitled to make assessment as per Rules 4 to 9 of the 2007 Rules. What is meant by the expression grounds for doubting the truth or accuracy of the value declared has been explained and elucidated in clause (iii) of Explanation appended to Rule 12 which sets out above-mentioned conditions when the reason to doubt exists. These instances are not exhaustive but are inclusive for there could be other instances when the proper officer could reasonably doubt the accuracy or truth of the value declared. The expression reason to doubt cannot be equated with the requirements of positive reasons to believe, for the word doubt refers to un-certainty and irresolution reflecting suspicion and apprehension - It is therefore held that in the context of the proviso to Section 14 read with Rule 12 and clause (iii) of Explanation to the 2007 Rules, the doubt must be reasonable and based on certain reasons . The proper officer must record certain reasons specified in Clause (a) to (f) Rule 12 or similar grounds in writing at the second stage before he proceeds to discard the declared value and decides to determine the same by proceeding sequentially in accordance with Rules 4 to 9 of the 2007 Rules. Reverting to the facts of the present case, it is observed that the only reason to invoke Rule 12 of Valuation Rules was the difference in weight of the goods. It has been the apparent submission of appellant since the very first stage of interception of goods that the goods have been imported on piece basis and not on the basis of weight - there was no cogent reason to doubt the truth and accuracy of the value declared. Hence the transaction value mentioned in the Bills of Entry should have been accepted Rule 12 should not have been invoked. Appellants have no reason to be concerned about the actual selling price of the impugned goods in the retail market. He also conveyed vide the said statement that their supplier i.e. manufacturer in China is not related to them except that they have continuous business relations with the said manufacturers. In the light of this statement, there are no convenience to accept the statement of the appellant made the very next day as a cogent admission - Since it is apparent that the Department has not followed the statutory procedure nor there was any mis-declaration of quantity as alleged, the mere acceptance of the re-assessed value and payment thereof will not be sufficient to confirm the allegations of under valuation. The burden was still on the Department to prove the allegations levelled. The said burden has not been discharged. Appeal allowed.
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2023 (10) TMI 1125
Levy of Anti-dumping duty - imported goods (live consignment) cleared by the appellant are mill edged or slit edged - goods assessed and cleared out of charge can be reopened by issuance of a notice and duty be demanded or not - the earlier consignments which are not available for examination can also be said to be mill edged coils which attracted antidumping duty or not - Confiscation - redemption fine - penalty. HELD THAT:- The live consignment consisting of 31 coils was Mill edge and the allegation by the appellant that only one or two core coils have been inspected proved baseless in as much as the above report clearly shows that all coils were inspected and the report was submitted based on physical examination of the same. These goods are also tested by Shri R. Sreedhar, Chartered Engineer and his certificate where it was held that Based on these reports the goods are Mill edge and liable to payment of anti-dumping duty is beyond doubt therefore the demand for 31 coils is upheld. Whether the Department was right in reopening the assessments for the past imports based on their investigations? - HELD THAT:- The Revenue can reopen the assessments after out of charge being given if investigations proved deliberate attempt to evade duty based on the incriminating documents if unearthed by the Revenue. The law laid down by the Hon ble Court and maintained by the apex court in the case of VENUS ENTERPRISES VERSUS COMMISSIONER [ 2007 (1) TMI 564 - SC ORDER] relied by the learned Authorised Representative clearly allows the Revenue to reopen the assessments if on investigation and evidences surface subsequently to prove misdeclaration or undervaluation of already assessed and cleared goods. Whether these reports can be extrapolated to the consignments already cleared and assessed to duty by the customs authorities? - HELD THAT:- The 13 consignments which were imported earlier were from the same supplier is not in dispute and the price quoted in the earlier consignments when compared to the present consignments are more or less the same. It is also not under dispute that the slit edge coils are more expensive when compared to the Mill edge coils because the Mill edge coils are trimmed and slit to size to arrive at a uniform width and contours - Appellants were aware of the fact that anti-dumping duty is to be paid if it is less than 1250 mm and the reply given by the appellant also suggest that they can buy coils of 1255 mm to avoid antidumping duty. This mail clearly suggests that the appellant was aware of the fact that if the coil was of 1260 mm they had to pay anti-dumping duty which is not under dispute. In the present case, investigations have only proved that the appellant was aware of the fact that anti-dumping was leviable on mill edged coils and he had imported some of the consignments from other suppliers with the specifications regarding mill edged or slit edged. However, no incriminating documents were unearthed to prove the consignments cleared earlier were mill edged coils - Without any such evidences based on the examination report of live consignment, one cannot extrapolate the same to the past consignments. For all the past consignments is set aside and therefore, the order to the extent of confiscation and penalty also stands set aside. We uphold that the live consignment of 31 coils is mill edged and anti-dumping duty is liable to be paid on the same. The matter is remanded to the original authority to re-determine the demand only for the 31 coils for which the reports suggest they are mill edged coils. The appeals are disposed of by way of remand.
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2023 (10) TMI 1124
Valuation of imported goods - old and used Digital Multi Function Printer - restricted goods or not - applicability of Circular No.27/2011-Customs dated 04.07.2011 - confiscation - redemption fine - penalty - HELD THAT:- As the Bill of Lading is in this case is 06.02.2013, which was issued prior to 28.02.2013 and this Tribunal in the case of COMMISSIONER OF CUSTOMS (PORT) , KOLKATA VERSUS BHAWANI ENTERPRISES [ 2017 (11) TMI 974 - CESTAT KOLKATA] , has observed We agree with Commissioner (Appeal) s findings that (i) mere enhancement of value on the basis of C.E. certificate cannot be a ground for treating declared value as mis-declared unless there is other corroborative evidence. (ii) except enhancement on the basis of C.E. s Certificate, there is no other material on record to inform that declared value was mis-declared. It is also held that the Bill of Lading is prior to 28.02.2013 for import of the identical goods as in the case of Bhawani Enterprises, wherein it has been held that there was no restriction on import of the subject goods, therefore, the appellant is not required to obtain any specific license for import of the impugned goods. The enhancement of value on the basis of Chartered Engineer s certificate cannot be a ground for treating declared value as mis-declared unless there is other corroborative evidence. As the issue is no more res integra, it is held that the value declared by the appellant is correct and no license is required by the appellant for import of the said goods. The impugned order is set aside - Appeal allowed.
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2023 (10) TMI 1123
Confiscation - redemption fine - penalty - import of Brass Scrap Pallu - mis-declaration of Country of Origin - Customs officials alleged that the goods originated from Pakistan instead of UAE - cancellation of bill of entry under Section 149 of the Customs Act, 1962 Country of Origin - HELD THAT:- On physical examination of the goods some worn and torn PP bags filled with brass scrap were found on which the words Karachi, Pakistan, Government of Punjab, Korangi Industrial Area etc. were found printed. Coupled with this, the tracking details also revealed the actual arrival date of the said container, i. e. the B/L from Karachi to JEBEL ALI was issued on 18.11.2021 at Karachi and B/L from JEBEL ALI to Nhava Sheva was issued on 28.11.2021 and the container was found to be intact with the same seal throughout from Pakistan to India. This only reflects that there could not have been any inspection at Sharjah, UAE as per the PSIC Certificate dated 13.11.2021 issued by PSIA and therefore the necessary corollary is that the PSIC was fake and forged. This also points to the fact that the container in question originated from Pakistan. The department having found that the goods originated from Pakistan was not wrong in re-classifying the goods under CTH 98060000 as per Notification No. 5 /2019-Cus dated 16.2.2019. Nothing further was required to be done at the end of the department as pleaded by the importer company. The justification or non-justification of procuring the goods i. e., Brass scrap Pallu from Pakistan was on the importer company which they failed to substantiate by any valid supporting evidence. The burden was exclusively on the importer company and not on the revenue to place on record positive evidence in support of their submissions. Responsibility of the Importer Company - HELD THAT:- Declaring the Country of Origin is an essential part of the Bill of Entry and the assessment, inter alia, depends on the Country of Origin. Duty could be exempted or increased (as in this case) depending on the Country of Origin. Restrictions on imports and exports could also depend on the Country of Origin. The Country of Origin Certificate also has to be obtained from the authorized agency of that country. Pre-shipment inspection certificates have to be obtained from the agency, which is authorized to issue such certificate in the country, where they are exported from. Thus, it is impossible that any importer would not know both the Country of Origin and the Country of Export of every single consignment - The appellant has attributed the burden of mis-declaration of the country of origin as UAE on the supplier or the indenter, however the same is not believable as the appellant is a regular importer of these goods and during the investigation of the live consignment the past imports were also unearthed which were also routed in similar fashion - the authorities below have rightly observed that in terms of Para 2.32 of FTP 2015-2020 read with para 2.54 of Handbook of Procedures, such PSI Certificate is not valid and no reliance can be placed thereon. Confiscation of goods - HELD THAT:- The issue needs to be examined in the light of the provisions of section 46 under which the appellant had filed the bill of entry for home consumption as the provisions thereof makes it obligatory on the part of the importer to make a declaration as to the truth of the contents of such bill of entry and shall in support of the same produce to the proper officer the invoice relating to the goods under import. The appellant has submitted commercial invoices along with bill of lading etc showing the country of origin of the goods as UAE, country of origin of the goods herein is Pakistan. In that view, the goods are liable for confiscation under section 111 (m) of the Act, which categorically provides any goods which do not correspond in respect of value or in any other particular with the entry made under this Act. Thus the order of confiscation passed by the authorities is held to be in accordance with law. Penalty under Section 112 (a)(ii) and 114AA of Customs Act - HELD THAT:- The quantum of penalty imposed by the impugned order is justifiable. Section 112 (a)(ii) provides for duty related penalty, i.e., penalty not exceeding ten percent of the duty sought to be evaded. Thus the outer limit or the maximum amount of penalty that could be levied could not be more than ten percent of the duty. Similarly, the penalty under section 114AA is value related, i.e., penalty not exceeding five times the value of goods - Here also the Commissioner has proportionally increased the penalty and we find no reason to interfere with the same. Normally, the principle in levying penalty by way of punishment has to commensurate in terms of the provisions providing the penalty. As against the penalty imposed by the adjudicating authority, the appellate authority has considerably increased the penalty amount on all counts both against the importer company and also its director which is not only sufficient to penalise them but would also act as a deterrent in future. Hence no interference is called here. Re-export Redemption Fine with Penalty - HELD THAT:- The exercise of discretion both by the adjudicating authority as well as by the appellate authority in not ordering absolute confiscation and allowing the importer to redeem the goods on payment of redemption fine and penalty with permission to re-export the goods is in consonance with the object and purpose with which the notification was issued, i.e. to dissuade commercial transactions with Pakistan byimposing extremely high penalty of 200%. Notification No 05/ 2019 dated 16.2.2019 in simple words provides that the goods imported having country of origin as Islamic Republic of Pakistan shall be classified under the new entry CTH 9806 0000 and BCD @200% shall be applicable on them. It nowhere says that such goods shall not be allowed to be re-exported. It is a settled principle of law that the words of the notification has to be read as they are and the contents thereof cannot be added or expanded by way of implication. Since there is no express bar for re-export of such goods in the notification, we uphold the impugned order allowing the appellant to re-export the goods. The country of origin of the containers in question is Pakistan and therefore, the same are classifiable under the Notification No.5/2019 as per CTH 980060000. Since the goods have been imported on the basis of fake PSIC, they are liable to be confiscated in terms of Section 111(m). - In the event of confiscation, the redemption fine under Section 125 has been rightly levied. As the importer company and its director are responsible for the import having been made in violation of the statutory provisions and FTP 2015-2020, they are liable to penalty both under Section 112 (a)(ii) and also under 114 AA. There are no reason to interfere with the impugned order - appeal dismissed.
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Corporate Laws
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2023 (10) TMI 1122
Professional Misconduct - Chartered Accountant (CA) - Lapses in evaluation of writing-back of liabilities - Failure in evaluation and attendance at physical verification of Inventory - Inappropriate reporting of matters through KAM - Forming inappropriate Audit Opinion - Non-evaluation of utilisation of IPO proceeds - Non-evaluation of Related Parties Transactions - Non-implementation of Quality Control Measures - Failure on the part of audit firm - Penalties and sanctions. Lapses in evaluation of writing-back of liabilities - HELD THAT:- It is expected that the Auditors would show a high level of professional skepticism and be alert to the possibility of mis-statement if restrained by the management from obtaining external confirmations, which is an essential component of independent audit. The Auditors should not only have re-assessed the risks posed by this restraint on their audit and performed alternative audit procedures to mitigate such risk (Para 8 of SA 505) but also considered this informing their audit opinion. Instead, it is found that the auditors have given unmodified opinion ignoring the restraint imposed by the management on their independent audit. The procedures referred to by the Auditors neither meet the requirements of alternate audit procedures, nor were appropriate or documented. Therefore, the Auditors responsible for carrying out the audit without due diligence and in a perfunctory manner. Failure in evaluation and attendance at physical verification of Inventory - HELD THAT:- There are no audit documentation regarding the physical count of the inventory. It is noted that SA 501 mandates an auditor to attend physical count of the inventory (para 4) and if it is impracticable to attend the physical count and not possible to apply alternative audit procedures, then the auditor is required to modify the audit opinion (para 7). In the case of LGIL, inventory constituted 49.85% of the current assets in FY 2017-18, 65.10% in FY 2018-19 and 65.53% in FY 2019-20, making it a significantly material item for the Auditors to attend its physical count, but they failed to do the same. As per section 143 (9) of the Act, it is the statutory duty of the auditor to comply With the SAS and Para 18 of SA 200 also requires the auditor to comply with all the SAS relevant to the audit. Failure to attend the physical count of the inventory was a serious non-compliance of SA 501 and the provisions of the Act - the charge that the Auditors did not comply with the provisions of SA 200, 230, 315 and 501 to obtain sufficient appropriate audit evidence for the audit of the inventory, is established. Inappropriate reporting of matters through KAM - HELD THAT:- When enquired by NFRA with the company, replied vide email dated 14.09.2023 that there was a failure on the part of the company as there was error on printer side while composing the Annual Report for better presentation. LGIL said that the error was unintentional and regretted the same. However, it is observed that this does not appear to be a printing error, as there were differences not only in the number of the KAMs issued, but also there were differences in the subject matter of KAMs - Para 13 of SA 720 requires an auditor to determine through discussion with the management, the documents that comprise the annual report; the entity's planning and timing of the issuance of such documents; make appropriate arrangements with the management to obtain the final version of the documents comprising the annual report in a timely manner and, if possible, prior to the date of the auditor's report. Therefore, the reply of the Auditors attributing the errors to the company also shows ignorance of SA 720 and its eventual non-compliance. Forming inappropriate Audit Opinion - HELD THAT:- It is observed earlier that the accounting policy regarding unilateral extinguishment of liabilities and valuation of finished goods was not in accordance with the FRF, and the Auditors were restrained from obtaining external confirmation in respect of extinguishment of liabilities. Therefore, the Auditors could not conclude that they had obtained sufficient appropriate audit evidence to state that the FS were free from material misstatements and to issue unmodified opinion, which they did. Non-evaluation of utilisation of IPO proceeds - HELD THAT:- The audit procedures mentioned by the Auditors in their reply to the SCN is not evidenced from the Audit File. Mere obtaining a certified copy from the management regarding utilisation of the IPO proceeds, does not relieve the Auditors from the responsibility of performing the required audit procedures. There is no evidence in the Audit File that the auditors had performed risk analysis of potential misstatements before the issuance of IPO (over statement of revenue / assets or understatement of expenses / liabilities to present rosy picture to the investors) and after realization of the IPO proceeds (misappropriation of the proceeds for purposes other than the declared purpose). The Auditors did not show the skepticism expected from them while reporting under CARO 2016 about proper utilization of money raised from the IPO, especially in light of the observed instances of artificial inflation of profits and reduction of liabilities by unilateral write-back of outstanding payables, and significant payments (44.29% of the IPO proceeds) to the related party from the IPO proceeds - the Auditors responsible for not performing the due audit procedures, for failure to obtain sufficient appropriate audit evidence for reporting under CARO 2016 about proper utilisation of IPO proceeds, and for their failure to comply With SA 315. Non-evaluation of Related Parties Transactions - HELD THAT:- There are no audit documentation by the Auditors in respect of verification of the RPTs, except for obtaining the list of Related Parties and their transactions. It is also observed that the Auditors are frequently mentioning of keeping the data in the digital files, which could easily be made part of the audit files, but the same was not done. The Auditors while replying to the SCN submitted minutes of meeting of the Audit Committee for three FYs and price comparison statement of purchase of coal from the related party with the price from the other parties etc. as a token of their performance in accordance with SA 550. This is not evidenced from the audit files, and therefore is deemed an afterthought, as Para S and 1 4 of SA 230 requires the assembling of such documents in the audit file within 60 days after the date of the auditor's report, which the Auditors failed to do. Non-implementation of Quality Control Measures - HELD THAT:- There are no audit documentation establishing that CA Ashok Holani was appointed as EQCR. Name of CA Ashok Holani has been referred at only one of the workpapers named 'Activity Log' at page no. 3.1 of the audit files, however it does not establish his appointment as EQCR. The EQCR is duty bound to document his work as per Para 25 of SA 220, however we did not find any working of EQCR in the audit files, establishing performance of his work during the audit. Therefore, the Auditors' failure in implementation of quality control measures and ensuring of independence is established. Failure on the part of audit firm - HELD THAT:- M/S Ashok Holani Co. was the statutory auditor of LGIL for the FYs 2017-18 to 2019-20 and, the Audit Firm and the EP have made departures from the SAS and the Companies Act, 2013 and have been grossly negligent in performing the audit of LGIL, by placing blind reliance on the assertions of the management in accounting of unilateral extinguishment of liabilities, valuation of inventory, verification of the utilisation of IPO proceeds and RPTs etc. The contention that they are a small audit firm, cannot be accepted as auditors are duty bound to comply with the requirements of the statutes to safeguard the interest of public. Therefore, in addition to the EP, we hold the Audit Firm also responsible for the lapses discussed. Penalties and sanctions - HELD THAT:- Considering the fact that professional misconducts have been proved and considering the nature of violations and principles of proportionality, in exercise of powers under Section 132(4)(c) of the Companies Act, 2013, it is ordered: i. Imposition of a monetary penalty of Rupees Ten Lakhs upon the Audit Firm M/S Ashok Holani Co., the appointed Statutory Auditor ii. Imposition of a monetary penalty of Rupees Five Lakhs upon CA Rahul Jangir, the Engagement Partner. In addition, CA Rahul Jangir is debarred for three years from being appointed as an auditor or internal auditor or from undertaking any audit in respect of financial Statements or internal audit of the functions and activities of any company or body corporate.
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Insolvency & Bankruptcy
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2023 (10) TMI 1121
CIRP - Distribution methodology as per categorisation of financial creditors based on the security structure - distribution of the amount of Rs. 351 Crores which has been deposited by the SRA - HELD THAT:- It is true that there was discussion regarding CoC expenses which was to reimburse from the amount as part of the upfront payment to the Financial Creditors but for the voting only two resolutions were put as noted above. The Resolution which received 74.41% vote and was approved was Resolve that Resolution Plan shall be approved along with the distribution methodology which shall be as per categorisation of Financial Creditors based on the security structure and as discussed in 24th CoC Meeting . The two discussion methodology was up for consideration that is one based on the share of voting of each financial creditor and other based on security structure of the Financial Creditor. Even on accepting the argument saying that distribution methodology which was circulated by Process Advisor to all Members of CoC which was also discussed in the meeting it having not specifically approved in the minutes resolution can be read only to mean that distribution methodology based on security structure have been approved - it is clear that CoC expenses which is figured at 4.01 Crores was to be repaid by the members of the CoC which has contributed the COC expenses along with resolution proceeds which clearly indicates that said amount has to be deducted from Rs. 351 Crores Upfront amount. The payment towards fee of Process Advisor to the CoC was to be contributed by the CoC which required to be reimbursed from the proceeds of the Resolution. The Respondents claim deduction of Rs. 4.01 Crores which is under heading COC Expense and Future Litigation Fund which is at page 18 of the Reply of Respondent No. 2 and 3, as held above COC expenses could have been very well deducted from the upfront payment but there is no requirement of deduction of future litigation fund. No Litigation Fund was required to be created nor for that said period any amount need to be deducted from the upfront payment - out of amount of Rs. 4.01 Crores only that much amount need to be deducted, which is COC expenses i.e. which is required to be reimbursed to the CoC as per their contribution. The Adjudicating Authority ought not to have directed the Monitoring Agency to determine and appropriate the amount. The Adjudicating Authority itself could have considered the issue since there was divergent statement raised before the Adjudicating Authority which is reflected from the pleadings in the Application which was filed by the Respondent No. 1 i.e. I.A. No. 724/KB/2022 and detailed reply filed by the Appellant. The issue as to what is the correct amount to which the Appellant is entitled under the Resolution Plan was very much disputed and raised before the Adjudicating Authority and the Adjudicating Authority ought to have proceeded to determine and ought to have directed for issuance of NDC only after direction for payment of the Resolution Plan. The Respondents are directed to make the payment of principal balance amount of Rs. 248,02,09,427/- along with accrued interest of Rs. 14,94,28,383/- (upto 10th July, 2024) along with further interest payable upto date of payment within one week from this order which amount shall be transferred in the account, details of which has already been communicated by the Appellant to the ex-RP - Out of Rs. 4.01 Crores which has been deducted towards COC expenses and Future Litigation Fund, only COC Expenses are required to be deducted and any amount towards Future Litigation Fund need not be deducted from the upfront payment. The Ex-RP shall recalculate the amount towards COC Expenses which need only to be deducted from the upfront payment and any amount kept under Future Litigation Fund need to be distributed to the Financial Creditors as per their Security Interest, which amount need to be paid to the Appellant as per its share of security interest and shall be paid by the Resolution Applicant - the Appellant shall issue a No Dues Certificate and execute the assignment agreement in terms of approved resolution plan and hand over title deeds of the corporate debtor within two weeks from the date of the receipt of the payment. Appeal disposed off.
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2023 (10) TMI 1120
Rejection of application seeking a direction to the Resolution Professional to convene a meeting of the CoC to comply with the provision of Regulation 39(3)(b) of the CIRP - HELD THAT:- The time for filing the Affidavit already extended by order dated 18.09.2023. Now the CoC having approved the Resolution Plan with voting share of 99.84%, Resolution Professional seeks liberty to file an application before the Adjudicating Authority for approval of the Resolution Plan - Considering the facts of the present case, the highest Resolution Plan having now received the majority of votes, the Resolution Professional may file an application before the Adjudicating Authority for approval of the plan which may be done within three weeks from today. Nothing survives to be decided in this Appeal - Appeal disposed off.
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2023 (10) TMI 1119
Violation of principles of natural justice - impugned order passed without perusing the law of the land (the Code) and also ignoring the precedent cases - Levy of penalty u/s 70 of IBC - HELD THAT:- It is concluded that clearly the Adjudicating Authority erred in passing the Impugned Order overlooking the law of the land (the Code) and also ignoring the precedent cases settled by this Appellate Tribunal. The impugned order cannot be sustained - matter remanded back to the National Company Law Tribunal, New Delhi Bench, Court - III to have a fresh look of the case and decide in accordance with the law and pass suitable order.
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FEMA
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2023 (10) TMI 1118
Proceedings initiated u/s 56 of FERA - non issue of SCN - Violation of principle of natural justice - HELD THAT:- No complaint can be filed unless the person accused of such offence has been given an opportunity of showing that he has such requisite permission. It is clear that from the facts of this case and also not disputed by Respondent that there is no such show cause notice which was issued and served on the fresh address of the petitioner at Gurugram. That apart, it is pertinent to note that though the notice issued under proviso to Clause (ii) of sub section (2) of Section 61 FERA was not served upon the petitioner, the demand notice dated 28.08.2020 was served upon the correct address. There is no explanation as to how and from where the ED obtained this correct address of the petitioner while issuing the demand notice. So far as the judgments of State Bank of India [ 2023 (3) TMI 1205 - SUPREME COURT] and Oil and Natural Gas Corporation Limited [ 2014 (10) TMI 589 - SUPREME COURT] relied upon are concerned, they laid down the law in respect of what is trite by now that rule of Audi Alteram Partem is fundamental to the policy of Indian law and as such any order by any quasi-judicial authority or any administrative authority entailing drastic civil consequences cannot be sustained except after affording an opportunity to the person who would have to face such civil consequences. There is no doubt in the mind of this Court that there has been clear violation of principles of natural justice in the present case. Since the respondent therein had failed to comply with the mandatory requirement of Section 61(2) of FERA, the Trial Court in that case clearly had erred in taking cognizance and on that basis, quashed and set aside the impugned order on charge. This Court respectfully concurs with the observations and the ratio laid down in the case United India Airways Ltd. Anr. [ 2018 (4) TMI 421 - DELHI HIGH COURT] Proceedings being separate and not intertwined in respect of violation u/s 18(2) and (3) and Section 56 of the FERA - This Court is of the considered opinion that the substratum of violation of under Section 18(2) for becoming an offence u/s 56 has to be tested first by issuing show cause notice/opportunity notice so as to permit the petitioner to explain as to whether it got the requisite permission in accordance with law or not. Since the show cause notice or opportunity notice was never served upon the petitioner, the consequent proceedings initiated u/s 56 FERA cannot be continued. It is for violation of Section 18(2) and Section 18(3) of the FERA that would entail action u/s 56 FERA, but the intervening threshold of issuance of show cause notice/opportunity notice and hearing the notice before passing the decision upon such mandatory application of principles of natural justice alone that the action u/s 56 could, at all, have been initiated. As such the submission of Respondent on that count are found to be untenable. Present writ petition is allowed and as a consequence thereof, a writ of certiorari is issued quashing the exparte proceedings issued by the ED.
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Service Tax
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2023 (10) TMI 1117
Review of final order - correct interpretation of Section 128 of SVLDRS Scheme - HELD THAT:- After having gone through the order under review, it is obvious that this Court has considered the aspect in detail in para 5.1 and has taken a conscious decision against the petitioner which may be erroneous but cannot thus be termed as palpably erroneous. As regards non consideration of the Bombay High Court Judgment in case of A.C. Nielsen Research Services Private Limited vs. Union of India [ 2022 (11) TMI 1094 - BOMBAY HIGH COURT] is concerned, the same fades into insignificance due to the fact that in para 5.1. of the order under review reliance has been placed on Apex Court decision to take the view against petitioner. The remedy of the petitioner lies elsewhere in case the petitioner feels that the order under review is erroneous. Accordingly, no case for review is made out - Review petition stands dismissed.
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2023 (10) TMI 1116
Levy of Service Tax - Club and association service - mutuality of interest - advance entrance/admission fee collected by the appellant from the applicants - period from April 2012 to June 2012 - amended scheme of Service Tax from July 2012 to March 2014 - scope of service - HELD THAT:- Though in the show-cause notice dated 22.5.2014, the applicability of definition of service has not been raised, however, in the show-cause notice dated 10.4.2015 it is alleged that the advances collected by the appellant would fall under the scope of service as defined under Section 65B(44) of the Finance Act, 1994; also it is alleged that the activity of the appellant does not fall under the Negative List of services contained in Section 66D of the Finance Act, 1994, hence leviable to service tax. The Ld. Commissioner in the impugned order by interpreting the definition of Service has confirmed the demands for the period after 01.7.2012. The Hon ble Supreme Court in STATE OF WEST BENGAL ORS. VERSUS CALCUTTA CLUB LIMITED AND CHIEF COMMISSIONER OF CENTRAL EXCISE AND SERVICE ORS. VERSUS M/S. RANCHI CLUB LTD. [ 2019 (10) TMI 160 - SUPREME COURT] observed that Doctrine of Mutuality of Interest is also applicable for the period after 01.7.2012; interpreting newly introduced definition of person under Section 65B(37) and explanation 3(a) to Section 65B(44) of Finance Act,1994, Their Lordships observed as The expression body of persons may subsume within it persons who come together for a common purpose, but cannot possibly include a company or a registered cooperative society. Thus, Explanation 3(a) to Section 65B(44) does not apply to members clubs which are incorporated. There are no merit in the impugned order and accordingly, set aside the same - appeal allowed.
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2023 (10) TMI 1115
Levy of service tax - erection, commissioning and installation of railway signalling and telecommunication facilities - construction of Rail Over Bridges for companies other than Indian Railways - exemption from service tax as provided in Entry 14 (a) of N/N. 25/2012 - HELD THAT:- The appellant have done the work for railways, as is evident from the nature of work from the show cause notice. It is further found that the said works qualify for exemption under Sl.No.14(a) of Mega Exemption Notification No.25/2012- ST. This Tribunal has held in the precedent rulings that there is no distinction drawn by the statute with respect to public railways or private railways. It is further found that the work has been done and or the services provided to the Government companies like RITES, NTPC, IRCON, which are wholly owned by the Government of India and the management of these companies are controlled by the Ministry of Railways. The impugned order set aside - appeal allowed.
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2023 (10) TMI 1114
Taxability - supply of tangible goods service - appellant had supplied tangible goods namely transit mixtures to the clients - declared service or not - HELD THAT:- A perusal of the work order clearly shows that it is a work order for transportation of RMC in vehicles from the plant of the appellant at Jaipur and responsibility has been cast upon the appellant to ensure transportation and delivery of the material within the time specified. The appellant is also required to pay transportation charges at Rs. 114/- per CuM for actual quantity of RMC transported during a calendar month. Of course, the work order also requires the appellant to deploy a fleet of 6 MB capacity of vehicles mounted on suitable chassis in numbers adequate to transport 1490 MB of RMC. Learned authorized representative of the department has, however, placed reliance upon the judgment of the Andhra Pradesh High Court in G.S. Lamba Sons [ 2011 (1) TMI 1196 - ANDHRA PRADESH HIGH COURT] and the decision of the Tribunal in Ultratech Concrete [ 2018 (9) TMI 1204 - CESTAT CHENNAI ] - These two decisions would not come to the aid of the department for the reason that the contracts involved in the two decisions, as is clear from a perusal of the decision, is for hiring of vehicles for transportation of transit mixtures and not for transportation of RMC. The order dated 16.03.2018 passed by the Commissioner (Appeals), therefore, deserves to be set aside and is set aside - Appeal allowed.
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2023 (10) TMI 1113
Rejection of refund in respect of input services - out of pocket expenses collected by the service provider - rent-a-cab service - convention service - rejection of refund claim also on the ground that in invoice issued by the service provider the item code does not tally with one mentioned in the enclosed gate pass. Input services - out of pocket expenses collected by the service provider - rent-a-cab service - convention service - HELD THAT:- These services were received by the appellant even though outside the SEZ but these services are directly for use of the entire business activity of the appellant located in SEZ. It is not the case of the department that these services were used by any other person other than the appellant. Therefore, all these services were indeed used for the authorized operation of SEZ hence rightly eligible for refund under Notification No 09/2009-ST. Accordingly, the appellant is entitled for the refund in respect of these services. Rejection of refund on the ground that the item code between the invoice and the enclosed gate pass does tally - HELD THAT:- It is finding of the Commissioner ( Appeals ) that the appellant have not made any explanation to this discrepancy in their appeal. Moreover, in the present appeal also, no ground is made on this issue therefore, in absence of any explanation by the appellant any benefit cannot be given on this count. Accordingly, the rejection of refund claim of Rs. 3090/- is maintained. Appeal allowed in part.
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Central Excise
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2023 (10) TMI 1112
Invocation of extended period of limitation - applicability of proviso to Section 11A of the CE Act - Classification of goods - chewing tobacco - to be classified under the CET SH 2403 9910 as 'chewing tobacco' or to be classified under CET SH 2403 9930 as 'zarda/jarda scented tobacco' - product manufactured and cleared by the Assessee for the period 01.03.2006 to 10.07.2006 - penalty u/r 26. Invocation of extended period of limitation - applicability of proviso to Section 11A of the CE Act - HELD THAT:- The tribunal has proceeded to hold that limitation would apply and show cause notice should not have been issued beyond one year in view of the fact that the Assessee intimated their intention to change, without addressing the various issues which has been raised. In other words, the tribunal by cryptic order has negatived the contentions of the Revenue and held that the invocation of the extended period of limitation was not warranted. This finding, not being in consonance with the facts obtained on the hand, we are unable to subscribe our views to the judgment of the tribunal. The question is to be answered against the Assessee and in favour of the Revenue and affirm the finding of the adjudicating authority and reverse and/or set aside the finding recorded by the tribunal which has been observed at the initial stage herein given that it is not only contrary to the facts but also contrary to law as noticed hereinabove. It is for these precise reasons the Adjudicating Authority was of the clear view that there has been a deliberate intention to avoid payment of duty by the Assessee by misclassification and willful misstatement of its product and hence it was justified in invoking the extended period as provided in the proviso to Section 11A(1) of CE Act, 1944. Classification of goods - HELD THAT:- The stand of the Assessee has been consistent to the effect that product manufactured by it is to be classified as 'zarda/jarda scented tobacco' and at the insistence of the jurisdictional Deputy Commissioner the Assessee was classifying the goods under CET SH 2403 9910 i.e., 'chewing tobacco', for which there was also an order of determination passed Under Rule 6(2) of CTPM rules. Whereas in the other matters, namely URMIN PRODUCTS P. LTD. VERSUS COMMR. OF C. EX., AHMEDABAD [ 2010 (3) TMI 461 - CESTAT, AHMEDABAD] and Flakes-n-Flavourz the facts were entirely different. In Urmin Products the Assessee had declared the product as 'chewing tobacco' and then changed the classification to 'zarda/jarda scented tobacco' and again came back to the original position of declaring it or classifying it as 'chewing tobacco'. These classifications in Urmin Products were at the behest of the Assessee himself - In Flakes-n-Flavourz, the Assessee was alleged to be manufacturing 'zarda/jarda scented tobacco' and clearing it as 'chewing tobacco', and on facts it was found that there were additives added to the tobacco. In the said case this Court on facts held that there was no wilful suppression attributable to the assesssee and the Revenue had failed to establish the product as 'zarda scented tobaccot'. In the instant case the Assessee had clearly declared his product as 'zarda/jarda scented tobacco' falling Under Sub-heading 2403 9930 in Form 1 filed and based on the said declaration, capacity determination order dated 04.03.2015 Under Rule 6(2) had been passed re-classifying the product as 'chewing tobacco'. Accordingly, for the period April 2015 in Form-1 the Assessee had described the product as 'Jayanti Zarda Scented- 2403 9910'. However, in the capacity determination order dated 05.05.2015, the Deputy Commissioner classified the goods as 'chewing tobacco'. As such, there was no misstatement or suppression of facts, collusion, or fraud in the instant case and hence on facts, the principles enunciated in Urmin's case is distinguishable. Penalty u/r 26 of CER - HELD THAT:- There has been no penalty levied Under Rule 26 on the ground that there has been no intent to evade duty. The findings of the tribunal warrant no interference by this Court and the appeal has to fail - Appeal dismissed.
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2023 (10) TMI 1111
CENVAT Credit - machineries used in the co-generation/captive power plant - electricity - exempted product applying the terms of rule 6(4) of the CENVAT Credit Rules 2004 or not - Revenue had observed that the co-generation power plant is a turn-key project like power plants which are not excisable goods. HELD THAT:- The show cause notices which are the subject matter of these writ petitions have been issued between the period 2009 to 2015 on the ground that the machineries/components which are used in the cogeneration plant is being used for generating electricity which is an exempted commodity and therefore the petitioners are not entitled to CENVAT Credit. This conclusion has been arrived at by applying the provisions of Rule 6(4) of the CENVAT Credit Rules 2004 which states that CENVAT Credit cannot be allowed on capital goods which are used exclusively in the manufacture of exempted goods other than the final products which are exempted from whole of duty of Excise duty leviable. Therefore, it is clearly seen that the respondents whose earlier show cause notices have reached finality are attempting to raise a new issue which was not pleaded earlier. The issue of producing a User Test Certificate not having been demanded in the impugned Show Cause Notices and the order dated 28.06.2023 having been passed on the joint submissions of the counsel where once again there was no reference to the User Test Certificate, the Review petitions have to be allowed and since the question of CENVAT Credit having reached finality, and the impugned Show Cause Notices are issued on a new ground with reference to the subsequent periods of the writ petitions have to be allowed - the writ petitions/review petitions are allowed and the show cause notices subject matter of the writ petitions are quashed. The writ petitions are allowed.
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2023 (10) TMI 1110
Delay in issue of show cause notice under Section 11 A of the Central Excise Act, 1944 - taking almost full 9 years for adjudication of the show cause notice after the first remand order - not considering the judgements regarding grant of cross-examination and the interpretation of section 9D of the Central Excise Act, 1944 - remanding the case second time in August 2022 to the original adjudicating authority - HELD THAT:- The Tribunal by the impugned order has only remanded the matter directing the authority to decide the matter afresh. There are no question of law muchless substantial question of law arising in the present appeal. Hence, the appeal is dismissed.
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2023 (10) TMI 1109
Reversal of CENVAT Credit - demand on the ground that the Appellant has not followed the ISD procedure for passing of the Cenvat Credit when the Invoices were issued by the vendors in the name of the Head Office - HELD THAT:- There is no allegation in respect of goods on which Cenvat Credit has been taken by them. The utilization within the factory is also not in dispute. Admittedly, all the original documents have been produced by the Appellant before the Adjudicating Authority. Since the Appellant has clearly claimed that they have only one unit and there was no possibility of taking the Cenvat Credit in different units when the vendor has raised the invoice in the name of head office, there are no reason as to why the submission was not taken up for consideration by the Adjudicating Authority. The Gujarat High Court in the case of COMMISSIONER OF CENTRAL EXCISE VERSUS DASHION LTD [ 2016 (2) TMI 183 - GUJARAT HIGH COURT] has held that even in the absence of any ISD Challan in such cases, Cenvat Credit cannot be denied. The CBIC Circular No.1063/2/2018-CX dated 16/02//2018 has accepted the decision of the Hon ble High Court of Gujarat. The confirmed demand under OIO set aside - appeal allowed.
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2023 (10) TMI 1108
CENVAT Credit - fake invoices - allegation is that the appellants have not received the materials and have taken the cenvat credit without receiving the goods - HELD THAT:- Appellants have produced the documents evidencing the transportation of goods to the factory premises from M/s Shree Ganesh Forging Company and the payment of transportation charges were also recorded in the books of accounts. In that circumstances merely alleging that without any evidence that the appellants have not received the goods, the cenvat credit cannot be denied. Moreover, the appellants have produced the documents for transportation of goods and the said goods have been used in their factory for manufacture of final product, which has suffered duty. The cenvat credit on the invoices received in their factory against the invoices issued by M/s Shree Ganesh Forging Company, cannot be denied to them - CENVAT Credit allowed - appeal allowed. The Appellants Nos.(2),(3),(4),(5), (6), (7) (11) have failed to produce any evidence with regard to transportation of goods - the cenvat credit is denied to them, therefore, their appeals are dismissed.
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2023 (10) TMI 1107
Recovery of short paid duty - job-work - rule 10A of Central Excise Valuation (Determination of Price of Excisable Goods) Rules, 2000 - HELD THAT:- A method of valuation for goods entrusted to be manufactured by job-worker was incorporated only with effect from 1st April 2007 in Central Excise Valuation (Determination of Price of Excisable Goods) Rules, 2000 and. quite undubitably, to fill a necessary want in the context of transactions not fitting within the existing rules which provided alternatives to non-fitment within section 4(1) of Central Excise Act, 1944 owing to non-conformity with one or the other desiderata of transaction value for assessment - The incorporation, insofar as job-work is concerned, would have emerged from the imperative to handle a situation where the manufacturer, though a producer, is not the seller but does deliver to the buyer even though consideration for the goods is received by the seller. Essential to such framework arrangement is that inputs should be supplied by the seller. It is the imperative of a want in the transaction value of the assessee that is contemplated, by the rules intended by section 4(1)(b) of Central Excise Act, 1944, to stand in as alternative in the design of each of the methods of valuation in Central Excise Valuation (Determination of Price of Excisable Goods) Rules, 2000. Thus, in the absence of sale , rule 4 is applicable, rule 5 when sale occurs beyond place of removal, rule 6 when the excisable goods are sold at a price that is not the sole consideration, rule 7 when sale takes place beyond both time and place of removal, rule 8 when goods are captively consumed by the assessee and rule 9 and 10 when clearance is not to independent person. A common characteristic of all of these, except where there is no sale, is sale by assessee - It would, thus, appear that the several rules, as originally included, were intended to make up for deficiencies in sale by assessee. Rule 10A of Central Excise Valuation (Determination of Price of Excisable Goods) Rules, 2000 is certainly intended for sale but by person other than assessee. From a harmonious reading of section 4 of Central Excise Act, 1944 and of the attendant Central Excise Valuation (Determination of Price of Excisable Goods) Rules, 2000, it is abundantly clear that it is not the method of valuation that determines the applicability but that the method flows from the identification of the rule most apt for each transaction - Job work existed before April 2007 and incorporation effected thereafter was not intended to cover every job-worker as per common parlance but of specific situations contemplated in rule 10A of Central Excise Valuation (Determination of Price of Excisable Goods) Rules, 2000. That has not been demonstrated in the orders of the lower authorities. Appeal allowed.
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2023 (10) TMI 1106
Clandestine removal - shortage of finished goods - clearance made under parallel invoice number - evidences for which were gathered from various incriminating records recovered from its premises - department did not provide non-relied documents , neither examined the witnesses nor opportunity of cross-examination was given. Shortage of Billet - Demand of Rs.90,749/- - HELD THAT:- The physical stock taking had been done by way of estimation and there is no exact weighment done. Thus, the variation in the physical stock being less than 10%, is considered to be normal variation, not calling for any adverse inference. Accordingly, the demand of Rs.90,749/- set aside. Clearances under parallel invoice - Demand of Rs.69,648/- - HELD THAT:- The appellant had given cogent explanation during the course of investigation being that as the goods were not accepted by the Saurabh Rolling Mills Pvt. Ltd., the same were diverted by way of sale in transit to M/s. Om Kiran Ispat Udyog - the court below erred in confirming this amount, solely based on the statement of the Director of Saurabh Rolling Mills, without examining the said Director in the adjudication proceedings. Such evidence is not reliable as in spite of request by the appellant, cross examination was not allowed. Thus, the evidence of Shri M.K. Gupta is hit by the provisions of Section 9 D of the Act - there is no other evidence or reason to reject the cogent explanation given by the appellant - Demand deleted. Goods rejected by consignee - demand of Rs.54,550/- Rs.32,603/- - HELD THAT:- The goods were rejected by the consignee /buyer. The same were returned to the factory of the appellant. In his statement, Shri Sanjay Nachrani, Director had explained that the goods have been received back on the rejection by the buyer and further, in support thereof, submitted the goods receipt note for proper accounting of the same - Revenue had not made further investigation in the matter nor the cogent explanation found to be false - due to some error in record keeping or procedural lapse on the part of the appellant, the demand is held to be unsustainable - demand set aside. Evasion of Central Excise duty by Clandestine Removal - demand of Rs.3,98,700/- - HELD THAT:- For each of the instance/allegation, the appellant have given cogent explanation explaining the nature of kachcha parchies, which have not been found to be false. Further, no evidence has been found of any clandestine removal. Accordingly, the said demand o Rs.3,98,700/- is unsustainable and the same is hereby deleted. Evasion of Central Excise duty in respect of Finished Goods and Inputs respectively - Clandestine removal - demand of Rs.10,88,887/- - HELD THAT:- The demand is based on third party records. There is no corroboration nor any admission. Further, the said third party (Sunil Steels) have denied the evidence, as to have been maintained by them or at their instance. Thus, the demand is simply presumptive, hence the same is deleted. Removal of excisable goods clandestinely on the basis of incriminating notebook recovered and seized from the common office premises of the group companies - demand of Rs.1,94,514/- - HELD THAT:- The demand is confirmed on the allegation of clandestine removal. There is no basis to confirm the demand, based on rough note book and thus, the demand is presumptive. Hence, the same is set aside. The impugned order is set aside - appeal allowed.
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2023 (10) TMI 1105
Condonation of delay in filing appeal - appeal dismissed on the ground that the appeal is filed beyond the period of limitation of 60 days and further beyond the condonation period of 30 days - HELD THAT:- There is no lack of diligence on the part of the appellant in presenting their appeal. It is further found that although there is error or mistake on the part of the staff or clerk in filing of the appeal, but it is found that there is also constructive error or negligence on the part of the receiving clerk in the Department. Either such clerk should have directed and guided the person, who had come to file appeal, to the right counter. Alternatively, it was the duty of the Assistant Commissioner to forward the appeal papers to the office of the Commissioner (Appeals), as it has been received by him mistakenly. The appellant has filed the appeal on 26.09.2018 and the Commissioner (Appeals) have erred in taking the date of filing appeal as 15.03.2022 - the appeal was filed in proper time as permitted under law. The impugned order is set aside and the appeal is allowed by way of remand to the Commissioner (Appeals) to hear the appellant on merits and pass a reasoned order, in accordance with law - Appeal allowed by way of remand.
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2023 (10) TMI 1104
Exemption from Central Excise duty - Huydel Gates, Hoist Mechanism Gate Parts and materials including mandatory tools and tackles for hydro mechanical works cleared to Mega Power Project of NPTC - applicability of N/N. 06/2006-CE dated 01.03.2006 and N/N. 12/2012-CE dated 17.03.2012 - HELD THAT:- It is open to the Board to issue instructions that appeal should not be filed where the monetary aspect is not very high to reduce litigation, but it cannot be urged by the appellant that the decision of the Tribunal would not have any precedent value. Any decision of the Tribunal would continue hold the field till it is set aside by the High Court or the Supreme Court. It is only because of the Circular that a ground has been taken in this appeal that the Commissioner (Appeals) erred in relying upon case laws which were not acceptable to the department as the appeal was withdrawn from the Supreme Court on monetary limits. The intention of the Circular is to prevent an assessee from asserting that the department has accepted the decision. Such cases in the Circular refers to decisions taken by the authority not to file an appeal because of monetary limits and not to the decision of the Tribunal. There is, therefore, no merit in this appeal. It is accordingly dismissed.
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CST, VAT & Sales Tax
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2023 (10) TMI 1147
Review petition - Jurisdiction of Section 41(7)(b) of the KGST Act - re-visiting an issue settled by the Amnesty Order - HELD THAT:- The golden rule of interpretation means that the words of a Statute must prima facie be given their literal and natural meaning and that the language of the Section is read as it is. Applying the said interpretative tool, Sub-section (7) of Section 23B means that (a) the amount settled under Section 23B has been a subject matter of appeal or revision; (b) such appeal and revision may be continued and if the final orders of such appeal or revision results in the reduction of tax payable under this Act; (c) so the tax received more than legally payable will be refunded. In the case of the State, if the appeal or revision is allowed, the excess amount to be collected from the dealer is collected. The sine qua non for operating the last two stages referred to above is that the amount settled has been a subject matter of appeal or revision. The protection under Section 23B(7) cannot be logically extended to appeal and revision filed ex-post to the Amnesty order. For the above view, it is sufficiently clear that the precedents on which the dealer relied are distinguishable, both in law and fact. Thus, no ground is made out warranting interference with the judgment - review dismissed.
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2023 (10) TMI 1103
Quashing of penalty - forged document or not - necessary document not considered on the sole ground that it was produced after 08 days and presumption has been made that it was a forged document - import of badam for which the additional duty of custom is paid and this duty is also refunded. HELD THAT:- In M/s Anand Refrigeration Co. (P) Ltd s case [ 2010 (1) TMI 1116 - PUNJAB AND HARYANA HIGH COURT] , the Division Bench has considered Section 14-B (7) of PGST Act, 1948 and held that the combined reading of these provisions would reveal that the appropriate authority under the Act, is under legal obligation to conduct an enquiry after serving a notice to the consignor or consignee and give him an opportunity of being heard. If after the enquiry, such officer finds that there has been an attempt to avoid or evade the tax due or likely to be due under this Act, he shall, by order, impose on the consignor or consignee of the goods, a penalty, which shall not be less than twenty per cent and not more than thirty per cent of the value of the goods and in case he finds otherwise, he shall order the release the goods and the vehicle. In the present case, the only ground for imposing penalty was given that the document (P-8) was given by the petitioner after 08 days. However, giving the documents after 08 days would not make it a forged document. Further the invoice has been issued by a Company from U.S.A. The finding that this invoice is forged and fabricated has been given without verifying the contents of the invoice (P-8). This finding cannot be given without enquiry and there was no attempt of evading tax. Moreover, the petitioner was importing the badam for which he has paid the additional duty of custom and this duty is also refunded. Petition allowed.
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2023 (10) TMI 1102
Validity of continuing the criminal proceedings on the same set of facts, which the Adjudicating Authorities declared that the allegations against the petitioners of having contravened the provisions of the VAT Act with an intent to evade tax cannot be sustained - Purchase of new vehicles from secret routes to avoid the barriers established by the Punjab Govt. on the basis of fake papers with an intent to evade tax - HELD THAT:- In view of the ratio of law laid down in Radheyshyam Kejriwal's case [ 2011 (2) TMI 154 - SUPREME COURT ] this Court is of the view that the twin test prescribed for determining the effect of the orders passed by Adjudicating Authority/Tribunal on the criminal proceedings is : (i) Whether the allegations in the adjudication proceedings as well as the proceedings for prosecution are identical? and (ii) Whether the exoneration of the person concerned in the adjudication proceedings is on merits ? The afore-prescribed twin test when applied to the present case, this Court finds that the case of the petitioners is fully covered by the ratio of law laid down in Radheyshyam Kejriwal's case and thus merits acceptance. Keeping in view the fact that the Tribunal has already quashed the penalty against the Firm and has found that there was no case of tax evasion as being alleged by the Revenue, this Court finds that the FIR on the same set of allegations cannot be allowed to continue. Petition allowed.
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Indian Laws
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2023 (10) TMI 1101
Professional Misconduct - allegation of assisting various companies in availing credit facilities of huge amounts from various banks by issuing false documents certifying valuation of work undertaken and completed by the accused companies - allegation of also certifying the sales registers and list of supply bills of the accused companies without verifying facts and figures to facilitate loans being sanctioned to the said companies. HELD THAT:- The stipulated procedure under Regulation 13, 14 and 15 of Chartered Accountants Regulations, 1964 required the Committee report to contain a statement of allegations, the defense entered by the delinquent Chartered Accountant, the recorded evidence and the conclusions of Committee. The Council is to apply its mind to the report of Committee and is empowered to conclude regarding the guilt of its member or otherwise. It appears from the reports of Committee that the working papers of Respondent revealed nothing of substance pertaining to the basis of material on which the certificates were issued by him. The certificates simply stated that the certificates were issued on the specific request of the firm. On being asked to produce documents regarding statements of expenditure incurred by the accused firms, invoices/vouchers for purchase of plant and machinery for civil work and land development etc., Respondent was unable to produce any document. The Committee has recorded its findings on the basis of the inability of Respondent to provide any material on the basis of which he satisfied himself as to the genuineness of accused firms and the valuation of their properties sufficient enough to justify issuing as many as 11 certificates used by the accused firms to avail credit facilities. The Committee has also recorded its view that Respondent failed to perform due diligence before issuing certificate and he was unable to co-relate any document/papers with the certification/valuation done by him. The Committee thus held Respondent guilty of professional misconduct on the basis of issuance of a large number of certificates at regular intervals, issued as and when asked for by his clients and most importantly in the absence of any papers to indicate due diligence employed by him. It is true that the employees of the banks were not available for cross-examination by Respondent. Respondent had absented himself at the final hearing of the Committee. Respondent has relied on the absence of witnesses for cross-examination and has contested the finding of Committee at the same time admitting omissions committed by him and his failure to comply with the due diligence, which he ought to have done while issuing the certificates. On perusal of the committee report and the deposition of Respondent himself, we have no hesitation in accepting that Respondent has been found guilty of certain degree of negligence amounting to misconduct justifying some action against him - Refusing to accept the recommendation of Council will be deleterious to the maintenance of discipline or the professional conduct on the part of members of a professional institute or association. In this case, Respondent was completely aware that accused companies were seeking specific verification and certification from a chartered accountant to complete the documentation required by Banks to sanction credit facilities to them. Thus he was naturally aware that issuing such certificates in the absence of proper valuation was a fraud on the Banks as such public and financial institutions rely upon certificates of professionals as part of its due diligence. Hence a contrary view would easily defeat the purpose of the Act and the object behind regulatory measures envisaged in Section 21 of the Act. The view of Council is correct - Respondent is thus reprimanded in accordance with Section 21(6)(b) of the Act.
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2023 (10) TMI 1100
Dishonour of Cheque - insufficient funds - settlement of matter between parties - compounding of offences - HELD THAT:- Having taken note of the fact that the petitioner-accused and the complainant-respondent have settled the matter and the complainant has no objection in compounding the offence, therefore, this Court sees no impediment in accepting the prayer made on behalf of the accused-petitioner for compounding of offence while exercising power under Section 147 of the Act as well as in terms of guidelines issued by the Hon'ble Apex Court in DAMODAR S. PRABHU VERSUS SAYED BABALAL H. [ 2010 (5) TMI 380 - SUPREME COURT ], wherein the Hon'ble Apex Court has held Section 147 of the Negotiable Instruments Act, 1881 is in the nature of an enabling provision which provides for the compounding of offences prescribed under the same Act, thereby serving as an exception to the general rule incorporated in sub-section (9) of Section 320 of the CrPC which states that 'No offence shall be compounded except as provided by this Section'. A bare reading of this provision would lead us to the inference that offences punishable under laws other than the Indian Penal Code also cannot be compounded. However, since Section 147 was inserted by way of an amendment to a special law, the same will override the effect of Section 320(9) of the CrPC, especially keeping in mind that Section 147 carries a non obstante clause. In K. SUBRAMANIAN VERSUS R. RAJATHI REP. BY P.O.A.P. KALIAPPAN [ 2009 (11) TMI 1013 - SUPREME COURT ], it has been held by the Hon'ble Apex Court that in view of the provisions contained in Section 147 of the Act read with Section 320 of Cr.P.C., compromise arrived at can be accepted even after recording of the judgment of conviction. Since, in the instant case, the petitioner-accused after being convicted under Section 138 of the Act, has compromised the matter with the complainant, prayer for compounding the offence can be accepted in terms of the aforesaid judgments passed by the Hon'ble Apex Court. The present matter is ordered to be compounded and the impugned judgment of conviction, dated 12.06.2018, and order of sentence dated 11.09.2018, passed by the learned Additional Chief Judicial Magistrate, Court No. 1, Kangra, H.P., is quashed and set-aside - the petitioner-accused is acquitted of the charge framed against him under Section 138 of the Act. Bail bonds, if any, stand discharged. Petition disposed off.
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2023 (10) TMI 1099
Dishonour of Cheque - discharge of existing debt/liability - it is the case of the petitioner that the learned trial Court has wrongly drawn the presumption under Section 118 of the N.I. Act, against the accused, without any evidence on record - HELD THAT:- Firstly, coming to the fact that complainant by examining CW-1 has proved the demand promissory note Ext. CW-1/D, in which, it has been mentioned that Rs. 1,60,000/-has been obtained by accused Dinesh Kumar. The said amount was received vide Cheque Nos. 113001 and 113002 dated 22.09.2015. Ext. CW-1/F is the agreement for loan. The cheque is Ext. CW-1/G, which was issued on 10.06.2016 for a sum of Rs. 1,46,400/-in favour of the complainant. The said cheque was not encashed and the same was returned back vide memo Ext. CW-1/J. Reason for non-encashment, as has been mentioned in the memo, is that the person, who has issued the cheque, was not having the sufficient balance, in his account. The same address has been mentioned in the complaint. The accused has been served on the said address, as depicted in the summons issued against the accused. Moreover, the accused has not disputed the said address. Even otherwise, for the sake of argument, if this notice was not received by him, no efforts have been made by the accused to make the payment of the cheque on the first available opportunity, when, he had appeared before the learned trial Court. In such situation, the said argument is not liable to be accepted - the learned trial Court has rightly held that the presumption under Section 118 of the N.I. Act has rightly been drawn in favour of the complainant. So far as the argument of learned counsel for the petitioner-accused qua the fact that in the document Ext. DW-4/A, the date of payment of a sum of Rs. 60,000/-is 22.09.2015, which is contrary to the document Ext. CW-1/D, is concerned, when in the document Ext. CW-1/F, which is agreement for loan, the total amount, which has been paid as loan is Rs. 1,60,000/-, then, the variation, which has been highlighted, is inconsequential. From this evidence, the petitioner could not rebut the presumption under Section 118 of the N.I. Act in favour of the holder of the cheque, in due course. This Court is not inclined to interfere with the findings given by the learned trial Court, which have been affirmed by the learned Appellate Court - this Court finds no merit in the revision petition - revision petition dismissed.
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