TMI Tax Updates - e-Newsletter
October 30, 2021

Case Laws in this Newsletter:

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

News

1. IITF Trade Fair back again at Pragati Maidan from 14th Nov

2. Finance Secretary Dr T.V. Somanathan releases guidelines for reforms in Public Procurement and Project Management

3. Finance Secretary Dr T.V. Somanathan releases Model Tender Documents (MTDs) for Procurement of Goods and non-Consultancy Services

Notifications

Customs

1. 64/2021 - dated 28-10-2021 - ADD

Seeks to impose anti-dumping duty on 'Seamless tubes, pipes and hollow profiles of iron, alloy or non-alloy steel (other than cast iron and stainless steel), whether hot finished or cold drawn or cold rolled of an external diameter not exceeding 355.6 mm or 14" OD' originating in or exported from China PR for a period of 5 years.

GST - States

2. S. R. O. No. 774/2021 - dated 28-10-2021 - Kerala SGST

Amendment in Notification G.O.(P) No.19/2019/TAXES. dated 28th January, 2019

3. S. R. O. No. 773/2021 - dated 28-10-2021 - Kerala SGST

Kerala Goods and Services Tax (Eighth Amendment) Rules, 2021

4. S. R. O. No. 768/2021 - dated 27-10-2021 - Kerala SGST

Amendment in Notification G.O.(P)No. 62/2017/TAXES. dated 30th June, 2017

5. S. R. O. No. 754/2021 - dated 16-10-2021 - Kerala SGST

Amendment in Notification G.O.(P) No.79/2017/TAXES. dated 30th June, 2017

6. S. R. O. No. 753/2021 - dated 16-10-2021 - Kerala SGST

Kerala Goods and Services Tax (Sixth Amendment) Rules, 2021.

Circulars / Instructions / Orders

SEBI

1. SEBI/HO/IMD/IMD-I DOF5/P/CIR/2021/654 - dated 28-10-2021

Investment/ trading in securities by employees and Board members of AMC(s) and Trustees of Mutual Funds

Companies Law

2. 17/2021 - dated 29-10-2021

Relaxation on levy of additional fees in filing of e-forms AOC-4, AOC-4 (CFS), AOC-4, AOC-4 XBRL AOC-4 Non-XBRL and MGT-7/MGT-7A for the financial year ended on 31.03.2021 under the Companies Act, 2013

3. 18/2021 - dated 29-10-2021

Extension of last date of filing of Cost Audit Report to the Board of Directors under Rule 6(5) of the Companies (Cost Records and Audit) Rules, 2014

Highlights / Catch Notes

GST

• High Court Stays Tax Levy Order; Goods and Vehicles to Be Released Under CGST Act Section 129(3) for 2021-22.

  Case-Laws - HC : Levy of tax and penalty - enhancement of value of goods - case of petitioner is that no grounds have been mentioned in the order of the officer of the Mobile Squad for enhancing the value of the goods - The impugned order passed by the Additional Commissioner Grade-2 (Appeal) First, Commercial Tax, Kanpur Year 2021-22 under Section 129(3) of the CGST Act, shall remain stayed and the seized goods and vehicles shall be released - HC
  Visit to Get Source

  ---

• Court Reviews Constitutional Framework of CGST, IGST Acts; Focus on Section 6 Tax Officer Appointments, Halts Refunds Pending Further Orders.

  Case-Laws - HC : Refund - Constitutional architecture of CGST Act, 2017, IGST Act 2017, SGST and UGST Acts as well as width, ambit and application of Section 6 of CGST and SGST Acts - Appointment of Central Tax and State Tax officers - Right from the day the final hearing commenced all the aforesaid matters were taken up for hearing together. This Court did not advice any counsel to argue in a particular manner or not to argue at all. It is only when the petitioner concluded their arguments that this Court called upon learned counsel for respondents to argue. Today to state that learned counsel for respondents should confine their arguments to the issue of law - question of law cannot be decided in a vacuum. The facts put forward by the respondents would help the Court in determining the question of law correctly - Till further order, no refund to be granted. - HC
  Visit to Get Source

  ---

• High Court Remands Case: Summary Order Challenged for Violating Natural Justice, Lacking Fair Hearing u/ss 140 and 43(9.

  Case-Laws - HC : Validity of summary order passed u/s 140 and 43(9) - Matching of credit - Violation of principles of natural justice - order passed ex-parte in nature - Violation of principles of natural justice, i.e. Fair opportunity of hearing. No sufficient time was afforded to the petitioner to represent his case - Also, order passed ex-parte in nature, does not assign any sufficient reasons even decipherable from the record, as to how the officer could determine the amount due and payable by the assessee. - Matter restored back - HC
  Visit to Get Source

  ---

Income Tax

• Reopening Tax Assessment u/s 147 Deemed Invalid Due to Lack of New Evidence; Merely a Change of Opinion.

  Case-Laws - HC : Validity of reopening of assessment u/s 147 - Proof of new material to justify the re-opening of the assessment - change of opinion - there was conscious application of mind by the AO to the said materials. Therefore, the inevitable conclusion as far as the present case is concerned is that the ‘reason to believe’ of Opposite Party No.1 that income for the AY in question had escaped assessment is based on a mere ‘change of opinion’ - HC
  Visit to Get Source

  ---

• Assessment Proceedings u/s 153A Unjustified Due to Lack of Incriminating Evidence; Writ Petitions to Succeed.

  Case-Laws - HC : Assessment proceedings u/s 153A - whether no incriminating material recovered? - In the present cases, with there being absolutely no incriminating materials found or seized at the time of search, there was no justification for the initiation of assessment proceedings under Section 153A. On this ground therefore the writ petitions ought to succeed. - HC
  Visit to Get Source

  ---

• Court Holds Assessee Must Prove Innocence for Charges u/ss 276CC and 276C(1) of Income Tax Act.

  Case-Laws - HC : Offences u/s 276CC and 276C[1] - Non disclosure of income - assessee had not filed the Annual Return - This Court cannot presume that the petitioner herein is innocent of any of the offences complained. It is for the petitioner to establish such innocence. The platform for establishing such innocence is the Court where the trial is to be conducted and in the present case - HC
  Visit to Get Source

  ---

• Cash Loan Penalties Not Applicable: Personal Transactions with Relatives Exempt from Sections 269SS and 269T Restrictions.

  Case-Laws - AT : Penalty u/s 271D and penalty u/s 271E - Assessee for taking loan in cash and repaying the loan in cash - the moneys in question were received and repaid for personal transaction and there is no material to come to the conclusion that these were in relation to any business transactions - acceptance and repayment of cash for personal purpose between near relatives do not attract the provisions of sec.269AA and 269T. - AT
  Visit to Get Source

  ---

• Court Rules Only Profit from Unaccounted Receipts Can Be Taxed, Not Entire Amount, Following Judicial Precedents.

  Case-Laws - AT : Additions of varied amounts on account of unaccounted on-money - Seized material in search - the Assessing Officer was not justified in bringing to tax the whole amount of unrecorded receipts. In the light of judicial precedents cited above and many more, entire gross receipts cannot be brought to tax. The action of the assessee to restrict the inclusion of unaccounted income in ROI to the extent of profit embedded in such unaccounted receipts cannot be faulted in the facts and circumstances of the case - AT
  Visit to Get Source

  ---

• Transfer Pricing Adjustment Made for Software Charges to Associated Enterprise; Third-Party Audit and Invoices Provided.

  Case-Laws - AT : TP adjustment against payment to AE for Software charges - The charges have been paid pursuant to the agreement and the assessee has already placed on record third part audit certificate along with sample third party invoices raised by the vendors on its AE. In support of benefits, the assessee submitted a flowchart of the manufacturing operations, depicting the inter-linkage between the manufacturing operation and application provided /services received as part of IS and S3 services. - AT
  Visit to Get Source

  ---

• Education and Higher Education Cess Allowed as Deductions Under Income Tax Act Section 40(a)(ii.

  Case-Laws - AT : Allowable deduction - Education Cess (EC) and Secondary & Higher Education Cess (SHEC) on income-tax - It is settled that, education cess on income-tax, dividend distribution tax and fringe benefit tax is not a disallowable expenditure under section 40(a)(ii) of the Act having been expressly excluded from section 40(a)(ii) - education cess and secondary & higher education cess is an allowable deduction being not hit by the provisions of section 40(a)(ii) of the Act. - AT
  Visit to Get Source

  ---

• Assessing Officer Can't Judge Business Necessity of Expenses; Disallowance of Supervisory Charges Overturned.

  Case-Laws - AT : Disallowance of supervisory charges paid - ingenuine expenditure - As gone through reasons given by the AO in light of various evidences filed by the assessee including agreement between parties and we do not ourselves subscribe to reasons given by the Assessing Officer for the simple reason that it is well settled principle of law that the Assessing Officer cannot sit in the armchair of businessman and decide whether particular expenditure is required to be incurred or not. - AT
  Visit to Get Source

  ---

• CIT's Section 263 revision on land sale as "Capital Gains" quashed due to lack of substantial evidence.

  Case-Laws - AT : Revision u/s 263 by CIT - As per CIT sale of land parcels as taxed under the head "Capital Gains" - AO found that the actual sale consideration of land parcels shown as business assets/stock-in-trade in the books of accounts is lesser than the corresponding value assessable for the purposes as stamp duty - - We do not see any such material which can make the conclusion of the PCIT indefeasible - the revisional order under Section 263 of the Act is quashed and set aside - AT
  Visit to Get Source

  ---

• Penalty u/s 271B for not maintaining books voided as contractor's estimated income was accepted by Assessing Officer.

  Case-Laws - AT : Levy of penalty u/s 271B - violation of section 44AB - assessee has failed to maintain the books of accounts - assessee is a Civil Contractor - the assessee has offered an income on estimate basis and the same is accepted by the A.O. - penalty u/s. 271B imposed by the A.O in this case cannot be sustained. - AT
  Visit to Get Source

  ---

Customs

• Court Overturns Penalty on Copper Sulphate Import, Citing Insufficient Grounds for Insecticide Classification Violation.

  Case-Laws - AT : Imposition of Redemption Fine and Penalty - import of Copper Sulphate Pentahydrate Industrial grade (powder) - insecticide goods or not - Strangely and without placing anything on record, the Order-in-Original has proceeded to confiscate and offer redemption fine only for the reasons that the appellant had violated the port restriction. Port restrictions would apply if the cargo imported is per se insecticide. - Appeal allowed - AT
  Visit to Get Source

  ---

• Customs broker's license revocation overturned; misdeclaration penalties deemed too harsh after verifying importer's genuine Delhi address.

  Case-Laws - AT : Revocation of Customs Broker License - forfeiture of security deposit - misdeclaration of goods - There is no violation which is so grave for imposing such a harsh punishment of revocation of license. Taking note of the fact that the appellant has visited the Delhi address of the importer and such address being not fake, we are of the considered opinion that the imposition of penalty is not justified. - AT
  Visit to Get Source

  ---

PMLA

• High Court Rules Against Unilateral Hearings by ED, Sets Aside Orders u/s 17(1A) PMLA for Transparency.

  Case-Laws - HC : Freezing of petitioner's Bank Account - allegations of corruption and money laundering were levelled - diversion of funds - It would not be permissible for the complainant-ED to show any documents or material to the Adjudicating Authority outside of the hearing being given, or behind the back of the parties concerned. The hearing has to also be transparent and in the presence of the parties concerned. Unilateral hearings in the absence of the opposing party would not be permissible before the AA. - The impugned order under Section 17(1A) of the PMLA in all these petitions, as also the orders passed by the Adjudicating Authority under Section 8 of the PMLA dated 28th December 2020, are set aside - HC
  Visit to Get Source

  ---

Service Tax

• Service Tax Not Applicable: Appellant Not Proven as Intermediary in Student Recruitment for IDP Australia.

  Case-Laws - AT : Levy of service tax - activity of arranging or facilitating recruitment of student in India - services naturally bundled in the ordinary course of business or not - As a sub contractor, it is receiving commission from the main contractor for its services. The main contractor, IDP Australia, in turn, is receiving commission from the foreign universities who pay a percentage of the tuition fee to IDP Australia - Revenue has not established that the appellant is acting as an intermediary between M/s IDP Australia and the foreign universities, as alleged or held in the impugned order and the show cause notice. - AT
  Visit to Get Source

  ---

• Penalties u/s 78 of the Finance Act set aside after appellant paid service tax with interest; deemed unjustified.

  Case-Laws - AT : Levy of penalty u/s 78 of FA - services received from abroad, but service tax not paid - even if the appellant pays service tax, they would be eligible for the credit and the situation is entirely revenue-neutral. The appellant has paid service tax along with interest - Taking into consideration all these aspects, it is opined that the penalties cannot sustain and the same require to be set aside - penalties set aside. - AT
  Visit to Get Source

  ---

Central Excise

• CENVAT Credit Demand Dismissed: Lack of Documentary Evidence and Lab Reports u/s 9D of Central Excise Act.

  Case-Laws - AT : CENVAT Credit - demand based on statements only and is not supported by any documentary evidence - reliability of statements - section 9D of Central Excise Act, 1944 - The very object of documenting something is to perpetuate the memory of what has been written down so as to furnish prove of itself. If the department relies upon the difference in the chemical composition of the raw materials used by the appellant and the goods cleared by the manufacturer as waste from their factory to be different, then they have to produce both these lab test reports. - There are no hesitation to conclude that the department has miserably failed to establish the allegations raised in the Show Cause Notice - AT
  Visit to Get Source

  ---

VAT

• Dealers Face Reassessment for Input Tax Credit Reversal Due to Mismatch; Respond to AO Summons as Required.

  Case-Laws - HC : Reversal of ITC - the assessment are sought to be re-opened and the ITC availed by the dealers are directed to be reversed, when a mismatch occurs - If an instruction has already been given to the AO and if any such summon is issued, it is open to the petitioner to make response to the said summons and accordingly, the exercise of revisiting the assessment order can be completed by the third respondent. - HC
  Visit to Get Source

  ---

Case Laws:

• GST

• 2021 (10) TMI 1226
  Levy of tax and penalty as well as the proceedings under Section 129(1)(b) of the CGST Act - unilateral enhancement of the amount of the invoices - driver produced the invoices - drivers are owners of goods or not - notification dated 31.12.2018 - HELD THAT:- The matter requires consideration. Learned Standing Counsel prays for and is granted three weeks time to file counter affidavit. Rejoinder affidavit, if any, may be filed within two weeks thereafter - List thereafter.

  ---

• 2021 (10) TMI 1225
  Levy of tax and penalty - enhancement of value of goods - case of petitioner is that no grounds have been mentioned in the order of the officer of the Mobile Squad for enhancing the value of the goods - HELD THAT:- Learned counsel for the petitioner states that the petitioner undertakes to deposit 50% of the amount assessed by the appellate authority under section 129(1)(a) of the IGST Act after deducting the amount, if any, already deposited within a period of four weeks from today. For the remaining 50%, the petitioner shall furnish security other than cash or bank guarantee to the satisfaction of the competent authority. The impugned order passed by the Additional Commissioner Grade-2 (Appeal) First, Commercial Tax, Kanpur Year 2021-22 under Section 129(3) of the CGST Act, shall remain stayed and the seized goods and vehicles shall be released - petition disposed off.

  ---

• 2021 (10) TMI 1224
  Seeking a direction to upload the Form GST TRAN-2 within extended timeline - HELD THAT:- Identical issue decided in the case of M/S RATEK PHEON FRICTION TECHNOLOGIES PRIVATE LIMITED VERSUS PRINCIPAL COMMISSIONER AND 2 OTHERS AND M/S MODERN PLYWOOD CENTRE, M/S ALLIED AGENCIES VERSUS UNION OF INDIA AND 5 OTHERS [ 2021 (9) TMI 1042 - ALLAHABAD HIGH COURT] where it was held that there is no hesitation in observing that a reasonable opportunity ought to have been granted to all registered persons /taxpayers to submit/revise/re-revise electronically their Form GST TRAN-1/TRAN-2. Petition allowed.

  ---

• 2021 (10) TMI 1223
  Refund - Constitutional architecture of CGST Act, 2017, IGST Act 2017, SGST and UGST Acts as well as width, ambit and application of Section 6 of CGST and SGST Acts - Appointment of Central Tax and State Tax officers - availment and utilization of fake ITC - supply of low-grade tobacco products in the garb of smoking mixture for pipes and cigarettes - Overvaluation - HELD THAT:-Right from the day the final hearing commenced all the aforesaid matters were taken up for hearing together. This Court did not advice any counsel to argue in a particular manner or not to argue at all. It is only when the petitioner concluded their arguments that this Court called upon learned counsel for respondents to argue. Today to state that learned counsel for respondents should confine their arguments to the issue of law or the petitioner should be allowed to argue first would amount to derailing the hearing. Moreover, question of law cannot be decided in a vacuum. The facts put forward by the respondents would help the Court in determining the question of law correctly - Since, in the interim, investigation by DGGI Ahmedabad has been stayed and in effect no investigation is taking place, this Court, to balance the equities, directs that till further orders, no refunds shall be released to the petitioners. Till further order, no refund to be granted. Application disposed off.

  ---

• 2021 (10) TMI 1222
  Seizure of goods alongwith the vehicle - absence of E-way bill prescribed under the UPGST Rules, 2017 - HELD THAT:- The matter is covered by the Judgment and order passed by the Division Bench in M/S. LOVELY TRADERS VERSUS STATE OF U.P. AND 3 OTHERS [ 2021 (10) TMI 1065 - ALLAHABAD HIGH COURT] where it was held that For the period 1.2.2018 to 31.3.2018, the condition of E-way bill has been held to be not applicable. Petition allowed.

  ---

• 2021 (10) TMI 1221
  Validity of summary order passed u/s 140 and 43(9) - Matching of credit - Violation of principles of natural justice - order passed ex-parte in nature - no sufficient reasons even decipherable from the record - HELD THAT:- This Court, notwithstanding the statutory remedy, is not precluded from interfering where, ex facie, we form an opinion that the order is bad in law. Violation of principles of natural justice, i.e. Fair opportunity of hearing. No sufficient time was afforded to the petitioner to represent his case - Also, order passed ex-parte in nature, does not assign any sufficient reasons even decipherable from the record, as to how the officer could determine the amount due and payable by the assessee. Petition disposed off.

  ---

• 2021 (10) TMI 1220
  Seeking direction to release the seized goods along with the books of account - Areca Nuts - HELD THAT:- With the consent of the parties, the Respondents are directed to release the entire seized quantity of 48.36 lakhs kgs of Areca Nuts, subject to the Petitioner furnishing a bank guarantee without prejudice to its rights for 31.24 lakhs kgs (being 48.36 lakhs kgs - 17.12 lakhs kgs) @ Rs. 274/- per kg. Petition disposed off.

  ---

• 2021 (10) TMI 1218
  Refund the tax, penalty and cess - contention is that the order passed under Section 129(3) of the CGST Act was not uploaded in the portal and certified copy was not issued despite request by the petitioner - HELD THAT:- Without entering into the detailed hearing and in light of the undertaking by the respondent to issue a fresh certified copy, the petition is disposed off.

  ---

• Income Tax

• 2021 (10) TMI 1219
  TDS u/s 194J - Accrual of income - payment for service charges - whether the payment paid by the assessee includes the service charges and constitutes the income - Assessee s main ground that no service charges were paid to the KIADB and the amount of Rs. 1225 Crores paid to the KIADB is part of the compensation to the lands acquired requires consideration - HELD THAT:- The liability to deduct tax would arise only if payment was made towards service charges by the assessee which attracts tax liability. The primary factor to attract Section 194J is the ingredient of income comprised therein as held in Kalyani Steels Ltd. [ 2018 (5) TMI 152 - KARNATAKA HIGH COURT] . In order to establish the same,assessee has referred to Annexure to Schedule D Annexure D1; deposit from allottees in the balance sheet of the KIADB as at 31.03.2013, copy of which is made available at page 179 of the appeal memo. In Sl.No.16 of the said Annexure D1, Code No.5047 shows deposit of Bangalore Metro Rail Project as Rs. 12250000050.00 and it is submitted that the same tallies with the payment shown by the assessee for the assessment years in question. It is vehemently contended that ledger accounts in books of KIADB reflects that no service charges from BMRCL has been collected. On the contrary, the assessment orders of the KIADB placed before the Court refers to certain sum shown as the amount received towards service charges. However, the break-up of the same is not available. Be that as it may, it is the strong case of the assessee that the amount of Rs. 1225 Crores paid by it, is shown as deposit by the KIADB. The aforesaid factual aspects requires re-examination by the Tribunal being the last fact finding authority inasmuch as the payment of Rs. 1225 Crores made by the assessee vis- -vis the accounts of KIADB relating to the said transaction - A finding is necessary whether Rs. 1225 Crores includes the service charges or not which is the primary dispute. Hence, we restore the matter to the file of the Tribunal sans answering the substantial questions of law, setting aside the impugned order, keeping open all the rights and contentions of the parties.

  ---

• 2021 (10) TMI 1217
  Assessment proceedings u/s 153A - whether no incriminating material recovered? - HELD THAT:- The exercise u/s 153A is not to be undertaken mechanically - it is not possible to accept the contention of the Department that there was an obligation to initiate the assessment proceedings u/s 153-A of the Act only because a search has been conducted, even though no incriminating materials whatsoever have been found during search. It does not matter that the original assessment was not completed under Section 143(3) of the Act for that purpose. In the present cases, with there being absolutely no incriminating materials found or seized at the time of search, there was no justification for the initiation of assessment proceedings under Section 153A. On this ground therefore the writ petitions ought to succeed. - Decided in favour of assessee.

  ---

• 2021 (10) TMI 1216
  Validity of reopening of assessment u/s 147 - Proof of new material to justify the re-opening of the assessment - change of opinion - whether the reopening of the assessment was based on mere change of opinion as contended by the Assessee or was there new material which could not have been examined earlier and which justified the reopening of the assessment? - HELD THAT:- In the present case, the reasons for reopening the assessment do not point to any new material that was available with the Department. What appears to have happened is that the same material viz., the accounts produced by the Assessee were reexamined and a fresh opinion was arrived at by the Opposite Party No.1 regarding the claim of the deduction on account of the loss of sale of assets. This had already been disclosed in the detailed accounts filed by the Assessee. In fact, a questionnaire had been issued by the AO in the course of the original assessment proceedings to the Assessee which was responded to by the Assessee - there was conscious application of mind by the AO to the said materials. Therefore, the inevitable conclusion as far as the present case is concerned is that the reason to believe of Opposite Party No.1 that income for the AY in question had escaped assessment is based on a mere change of opinion The threshold set by the Supreme Court of India in Kelvinator of India Limited [ 2010 (1) TMI 11 - SUPREME COURT] to justify the reopening of the assessment has not been met in the present case. Consequently, the Court is unable to sustain the reopening of the assessment. Accordingly, for the aforementioned reasons, the impugned notice and all proceedings of the Department pursuant thereto stand hereby quashed. - Decided in favour of assessee.

  ---

• 2021 (10) TMI 1215
  Offences u/s 276CC and 276C[1] - Non disclosure of income - assessee had not filed the Annual Return as mandated under Section 139[1] of the Act, 1961, nor under the extended time u/s 139[4] - HELD THAT:- As the petitioner had laid the blame on his previous employer stating that there has been a mismatch in the income earned as given in Form 16 and as uploaded in Form 26AS. It had also been stated that this was not brought to the knowledge of the petitioner since he had left employment. It was also stated that even though the Show Cause Notices have been received, he was under the bona fide impression that since tax had been paid, no further action is required to be clarified from his end. It is the case of the petitioner herein that there was no wilful act of non disclosure of income. As a matter of fact, it is the further contention that not just was tax paid, but Self Assessment Tax had also been paid. However, it is seen that it is the consistent case of the respondent / Department that the petitioner had not explained the high level transactions in purchase and sale of mutual funds and transactions in credit cards. As stated in SASI ENTERPRISES [ 2014 (2) TMI 19 - SUPREME COURT] the claim of the petitioner herein that he was innocent and ignorant and therefore, indulgence should be granted to him, is actually a fact which should be proved by him in a Court of law. Such innocence or ignorance cannot be presumed. On the other hand, what can be presumed is the culpable mental status and it is for the petitioner herein to prove the contrary. Insofar as the judgment relied on by the learned counsel for the petitioner in VINAYCHANDRA CHANDULAL SHAH [ 1993 (12) TMI 10 - GUJARAT HIGH COURT] learned Judge, with due respect, has not at all considered the presumption as given in Section 278E of the Act, 1961, regarding culpable mental state. This was a provision brought into the Taxation Law in the year 1986 itself. The burden lies on the assessee to show that he had no wilful intention not to file the Return. Any explanation to discharge such burden can be tested only during the course of trial. This Court cannot presume that the petitioner herein is innocent of any of the offences complained. It is for the petitioner to establish such innocence. The platform for establishing such innocence is the Court where the trial is to be conducted and in the present case, that particular Court is the Court of the Additional Chief Metropolitan Magistrate/EO-I, Egmore, Chennai. A direction is given to the learned Additional Chief Metropolitan Magistrate/EO-I, Egmore, Chennai, to commence trial and to complete the same on or before 31.01.2022. The petitioner is directed to cooperate in the trial process.

  ---

• 2021 (10) TMI 1214
  Validity of assessment u/s 144B - no draft assessment order was issued as required under sub clause (xvi) of sub Section (1) of Section 144B - Addition u/s 68 - there is a specific allegation that there is not even a whisper of these additions either in the alleged draft assessment order or in any of the notices issued in the course of assessment proceedings and no opportunity whatsoever was given to petitioner to file its objections against these additions - HELD THAT:- In the affidavit in reply of respondent, there is no denial of this fact. In the affidavit in reply, the affiant has gone on the merits of the two additions but does not deny the fact that neither the alleged draft assessment order or any of the notices have not even referred to this proposed additions under Section 68 of the Act. Issuance of show cause notice is the preliminary step which is required to be undertaken. The purpose of show cause notice is to enable a party to effectively deal with the case made out by respondent - See Om Shri Jigar Association Vs. Union of India - [ 1994 (5) TMI 24 - GUJARAT HIGH COURT] Therefore, on this ground also the impugned order is required to be set aside. This Hon ble Court be pleased to issue a Writ of Certiorari or any other writ, order or direction under Article 226 of the Constitution of India calling for the records of the case leading to the passing of the impugned order u/s 143(3) r.w.s. 144B of the Act for the assessment year 2018-19 and after going through the same and examining the question of legality thereof quash, cancel and set aside such impugned order.

  ---

• 2021 (10) TMI 1213
  Assessment u/s 144B - no draft assessment order was served - HELD THAT:- Sub Section 5 reproduced earlier provides that all communication among the assessment unit, review unit, verification unit or technical unit or with the assessee or any other person with respect to the information or documents or evidence or any other details, as may be necessary for the purposes of making a faceless assessment shall be through the National Faceless Assessment Centre. Even the final assessment order has been issued by the National Faceless Assessment Centre. Therefore, even for a moment we accept what the affidavit in reply says that Regional Unit sent draft assessment order under Section 143(3) of the Act, it could not have sent any such communication to the assessee. The said communication should have originated from the National Faceless Assessment Centre. Affidavit in reply has not been filed by the person who passed the assessment order. Nobody knows, even counsel does not know, who is the faceless person who passed the assessment order. The only person who could have answered this point categorically was the person who wrote and pass the assessment order and not some other officer who is relying upon input received from the National Faceless Assessment Center. We have to hold that the assessment order has been issued without following the mandatory procedure prescribed under Section 144B of the Act, in as much as, if the review unit of respondents had reviewed the draft assessment order, it should have followed the procedure laid down under sub clause (b) of clause (xvi) of sub-Section (1) of Section 144B.

  ---

• 2021 (10) TMI 1212
  Certificate for deduction at lower rate u/s 197 - India Netherlands DTAA read with the Protocol and MFN clause - HELD THAT:- Issue notice. Mr.Ruchir Bhatia, Advocate accepts notice on behalf of the Respondents. He admits that the issue raised in the present writ petition is squarely covered in CONCENTRIX SERVICES NETHERLANDS B.V. OPTUM GLOBAL SOLUTIONS INTERNATIONAL BV [ 2021 (4) TMI 1051 - DELHI HIGH COURT] - Accordingly, the impugned order and certificate are set aside. Consequently, a certificate u/s 197 of the Act will be issued in favour of the Petitioner, indicating therein, that the rate of tax, on dividend, as applicable qua the Petitioner is 5% under India-Netherlands DTAA.

  ---

• 2021 (10) TMI 1211
  Validity of Reopening of assessment u/s 147 - disallowing the provision for negative reserve - HELD THAT:- This Court in a recent judgment in Ananta Landmark (P.) Ltd [ 2021 (10) TMI 71 - BOMBAY HIGH COURT] has held that where assessment was not sought to be reopened on reasonable belief that income had escaped assessment on account of failure of assessee to disclose truly and fairly full material fact that were necessary for computing of income it was not the case wherein assessment as sought could be reopened. On account of change of opinion of Assessment Officer about the manner of computation to deductions u/s 57 of the Act, reopening was not justified. The proposition in this judgment squarely applies to the case in hand as well. ITAT has concluded that during the assessment proceeding respondent had furnished actuarial form that showed negative result and the Assessing Officer had made addition during the original assessment proceeding on account of actuarial surplus. Negative reserve was part of document furnished during the assessment and therefore it cannot be said that there was non disclosure of material facts relevant for assessment. ITAT has also observed that AO while passing assessment order has referred to the actuarial report as on 31/3/2003 and hence it cannot be said that AO has not made any inquiry in respect of negative reserve which has been shown in actuarial report. ITAT has also observed that the assessment order was passed with due application of mind and the Assessing Officer has not brought any tangible material on record to show that there was any failure on the part of the assessee to disclose fully and truly all material on record necessary for assessment. - Decided in favour of assessee.

  ---

• 2021 (10) TMI 1210
  Revision u/s 263 - Deduction u/s 80-IB(10) - HELD THAT:- CIT, in exercise of powers u/s 263 of the Act, had concededly, even according to the petitioner, interceded, via order dated 18.05.2012, and held that, the assessment order passed by the petitioner was erroneous and prejudicial to the interest of the revenue. The petitioner s asserts that the case set up by him, which was not examined by the Tribunal, was simply this: the subject assessment order was passed in good faith, in exercise of the adjudicatory powers conferred upon him by the Act and that it was passed neither on account of corrupt motive or recklessly. According to the petitioner, since he had passed the assessment order in his role, as a quasi-judicial authority, he could not have been served with the chargesheet for performing such functions unless his action could be slotted into exceptions adverted hereinabove. In our opinion, the manner in which the matter has been dealt with by the Tribunal, is less than satisfactory. The action of the respondent which was impugned by the petitioner before Tribunal has serious ramifications for petitioner, and thus, could not have dealt with the matter so nonchalantly. Accordingly, the impugned order is set aside.

  ---

• 2021 (10) TMI 1209
  Revision u/s 263 by CIT - Deduction u/s 35D - assessee had wrongly claimed the deduction as it was not an industrial undertaking within the meaning of such expression as envisaged u/s 35D - HELD THAT:- Considering the fact that in respect of financial year 2006-07 relatable to assessment year 2007-08 the assessee had been granted the benefit of amortization under Section 35D[1] of the Act and no action under Section 147 or 263 of the Act had been taken in relation to the said assessment year. Thus, it has been held that once the claim has been granted by the assessing officer in respect of previous years, such claim cannot be disallowed subsequently without disturbing the decision in the initial year. In that context, it was held that the view adopted by the assessing officer is not a plausible view, it is now well settled that if two views are possible and the assessing officer has adopted one view, the same would not warrant exercise of the powers under Section 263 of the Act. No doubt, in the present case, it is not in dispute that during the first year relating to the assessment year 2007-08, Section 154 proceedings were initiated, subsequent to initiation of revisional proceedings under Section 263, the same would not pass the test of law as enunciated by the Hon ble Apex Court in Shasun Chemicals and Drugs Ltd.[ 2016 (9) TMI 1199 - SUPREME COURT] since the same being post revision proceedings and has resulted in giving relief to the assessee on some other ground. Even in terms of Gujarat Narmada Valley Fertilizers Co. Ltd. [ 2013 (8) TMI 300 - GUJARAT HIGH COURT] , the claim which has been granted by the Assessing Officer could not be disallowed subsequently, without disturbing the decision in the initial year. Post action of the Assessing Officer in modifying the original order would not cure the flaw pointed out in Shasun Chemicals and Drugs Ltd. [ 2016 (9) TMI 1199 - SUPREME COURT] - We answer this issue in favour of the assessee and against the Revenue. Whether share premium collected on the issue of Share Capital by the Appellant cannot be taken as part of the Capital Employed for allowing deduction under Section 35D? - HELD THAT: This question of law has been considered by the Hon ble Apex Court and answered in favour of the Revenue in Berger Paints India Ltd., V/s. Commissioner of Income-tax, Delhi-V, [ 2017 (3) TMI 1531 - SUPREME COURT ] Accordingly, this substantial question of law is answered in favour of the Revenue and against the Assessee. Cost of acquisition of companies cannot be treated as asset for allowing deduction u/s 35D - assessee submitted that the acquisition of 100% subsidiary shares of the two companies has to be construed as cost of project - HELD THAT:- The assessee itself stated before the revisional authority under 263 proceedings with regard to computation of cost of project it had incurred, that expenditure towards issue of Global Depository Receipt and Foreign Currency Convertible Bonds was related to extension of industrial undertaking of the assessee; there being no definition of the word extension under the Act, the word expansion has to be considered as extension . Thus, going by meaning assigned to the word extension , quite apart from the horizontal expansion in the industrial undertaking, vertical expansion also stands included within the meaning of the term extension of the industrial undertaking. It was further stated that the assessee has incurred expenditure for the purpose of acquisition of Subex Americas Inc., and Subex UK Limited and the same was incurred for the purpose of expansion of the business. As aforementioned, there being vast difference between expansion and extension , the arguments of the learned counsel for the assessee, placing reliance on the consolidation procedures as per the Accounting Standard [AS-21], cannot be countenanced. - Decided in favour of revenue.

  ---

• 2021 (10) TMI 1208
  Penalty u/s 271D and penalty u/s 271E - Assessee for taking loan in cash and repaying the loan in cash - failure to comply with the provisions of secs. 269SS and 269T - HELD THAT:- The material in record clearly goes to show that the assessee as well as Dr. P Dayananda Pai who were admittedly nephew and uncle and confirmed that the loans were personal loans to enable the assessee to purchase a flat. The source of cash has also been explained by Dr. P Dayananda Pai in his letter addressed to the AO dated 21/2/2013. The facts as asserted by the assessee and supported by Dr. P Dayananda Pai have not been controverted with any material by the Revenue - We concur with the view of the CIT(A) that the moneys in question were received and repaid for personal transaction and there is no material to come to the conclusion that these were in relation to any business transactions. The decision relied on by the ld.Counsel for the assessee before us and several other decisions clearly supports the proposition that acceptance and repayment of cash for personal purpose between near relatives do not attract the provisions of sec.269AA and 269T. Hon ble Madras High Court held that receipt of cash by the daughter-in-law from father-in-law does not attract the provisions of sec. 269SS of the Act. Similarly in SRI MANSUR ALI LASKAR [ 2011 (12) TMI 732 - ITAT KOLKATA] wherein, it was held that niece, uncle, aunty, wife of brother, wife s sister and cousin are part of family members and the transactions with sister-in-law and nephew should also to be considered as a transaction between family members - Decided against revenue.

  ---

• 2021 (10) TMI 1207
  Additions of varied amounts on account of unaccounted on-money - Seized material in search - whether the whole amount of on-money received can be subjected to taxation or only the income embedded therein can be brought to tax in the facts of the case? - HELD THAT:- Undisputed fact that certain seized materials were found in the course of search showing unrecorded receipts and consequently, a disclosure of this amount was made in aggregate in various assessment years by way of statement recorded u/s 132(4) of the Act at the time of search. The assessee, however, has offered the net profit elements whereas the Revenue has attempted to tax the gross amount in tune with deposition made in the statement on behalf of the assessee- company at the time of search. In the course of search, certain loose-papers were found showing unaccounted receipts. The assessee readily surrendered the aforesaid receipts as undisclosed income of the assessee. Apart from the loose-papers of incriminating nature, the search team could not lay on hands on any excess cash of serious amount, nor could unearth any unaccounted assets or investment to corroborate the unaccounted gross receipts in question. Besides, the deposition made in statement u/s 132(4) suggests that the amount generated by way of gross receipts have been ploughed back in the business of the assessee. Question No.13 of the statement under Section 132(4) clearly vouches this significant aspect. In this factual backdrop, the case made out on behalf of the assessee that only the profit element embedded in the gross receipt is susceptible to tax cannot be brushed aside. We find merit in the plea of the assessee that the Assessing Officer was not justified in bringing to tax the whole amount of unrecorded receipts. In the light of judicial precedents cited above and many more, entire gross receipts cannot be brought to tax. The action of the assessee to restrict the inclusion of unaccounted income in ROI to the extent of profit embedded in such unaccounted receipts cannot be faulted in the facts and circumstances of the case. - Decided in favour of assessee.

  ---

• 2021 (10) TMI 1206
  TP adjustment on Export of finished products - Selection of MAM - application of CUP method - HELD THAT:- While considering the issue of comparability with an uncontrolled transaction, the condition prevailing in the market in which the respective parties to the transaction operate, including the geographical location along with other factors would be relevant to decide which method would be suitable for benchmarking the transactions. Finally, the application of CUP method has been rejected by the bench and the adjustment has been deleted - we reject application of CUP method and delete the impugned adjustment as proposed by Ld. TPO. This ground stand allowed. TP adjustment against payment for technical know-how (Royalty) - AO Adopted the benchmarked royalty rate of 4% as against effective rate of 4.57% paid by the assessee and proposed an adjustment - TPO disallowed the royalty payment on adhoc basis and benchmarked the transactions using CUP method - HELD THAT:- Tribunal deleted the adjustment on the premises that Ld. TPO was bound to determine the ALP by following any one of the prescribed method and determination of ALP on adhoc basis could not be sustained. It was also held that CUP method could not be applied since comparable agreements were between entities located outside India. In AY 2014-15[ 2019 (7) TMI 1314 - ITAT MUMBAI] , Ld. TPO applied CUP method to benchmark the transactions. However, the coordinate bench, in its order for AY 2014-15, held that CUP was not most appropriate method for benchmarking the transactions because of geographical differences. We find that in this year, Ld. TPO has followed same methodology as in AY 2014-15 and applied CUP method which has already been rejected by Tribunal in AY 2014-15. Therefore, following consistent view of Tribunal, we delete this adjustment. The ground thus raised stands allowed. TP Adjustment against payment of interest on ECB Loan - HELD THAT:- ALP of such transaction could be more accurately determined by following rate of interest fixed by RBI in respect of ECB loan. This decision has subsequently been followed in AY 2014-15[ 2019 (7) TMI 1314 - ITAT MUMBAI] - The assessee has followed the same RBI rate to benchmark the transactions in this year. Therefore, respectfully following earlier stand of Tribunal, we delete the impugned adjustment. The grounds thus raised stand allowed. TP adjustment against payment to AE for Software charges - According to the terms of agreement, the assessee was required to pay two (2) charges namely, IS charge (a recurrent service fee for regular recurrent services) and S3 charge (a specific service fee for development /acquiring and implementation of S3 ERP Program ) - HELD THAT:- We find that IS charges were paid by the assessee for obtaining access to ERP software and for regular recurrent services and such charges were paid in earlier years also. In AY 2012-13, similar adjustment proposed by Ld. TPO was deleted by coordinate bench on the premises that Ld. TPO was duty bound to determine ALP by following any one of the prescribed methods and determination of ALP on adhoc basis could not be sustained. It was also observed that the assessee had submitted substantial evidences in support of the claim. This order was followed subsequently in AY 2013-14. In AY 2014-15, Ld. TPO allowed external cost but did not allow cost allocated to the assessee on the ground that the claim was unsubstantiated. This adjustment was also deleted by the Tribunal. Therefore, we find that this issue is recurring in nature. The charges have been paid pursuant to the agreement and the assessee has already placed on record third part audit certificate along with sample third party invoices raised by the vendors on its AE. In support of benefits, the assessee submitted a flowchart of the manufacturing operations, depicting the inter-linkage between the manufacturing operation and application provided /services received as part of IS and S3 services. Therefore, Ld. TPO, in our opinion, was not justified in denying this cost to the assessee.

  ---

• 2021 (10) TMI 1205
  Exemption u/s 11 - Whether CIT(A) is not justified in accepting the contentions of the assessee and not accepting the findings of the AO in violation of Rule 46A of the IT Rules? - HELD THAT:- CIT(A) had called remand report from the Assessing Officer but the AO has not objected to the written submission filed by the assessee trust. Therefore, the ld. CIT(A) is fully justified in directing the AO allow exemption u/s. 11 of the Act. As regards the acceptance of submission of the assessee in violation of Rule 46A as claimed by the department, we find that after receiving the various written submissions and documents, the CIT(A) had called for the remand report and after getting the remand report, the explanation of the assessee was called for and the rejoinder was filed by the assessee. Therefore, it cannot be established that the CIT(A) has accepted the new evidence in violation of Rule 46A of the IT Rules. Therefore, we reject the grounds of appeal of the revenue.

  ---

• 2021 (10) TMI 1204
  Accrual of income - Addition account of accrued interest on seed money loans - classification of sticky advances - whether there was no basis for accounting said accrued interest income on cash basis as section 145(1)? - HELD THAT:- Admittedly, the respondent-assessee is following the mercantile system of accounting. It is the policy of the respondent-assessee company to account for the interest on such loans under seed money assistance scheme on receipt basis following the uncertainty of the recovery, realization of the interest. This policy is clearly stated in Clause (5) of Note No.23 read with 36 of Notes to Accounts forming part of Audited Financial Statements. Thus, material on record clearly indicates that there is uncertainty as to the recovery of the principal amount and interest on such advances. Therefore, the issue that comes up for our consideration is that whether can it be said that the interest had accrued on such advances when the assessee is following mercantile system of accounting. As decided in own case WESTERN MAHARASHTRA DEVELOPMENT CORPORATION LIMITED [ 2021 (6) TMI 1068 - ITAT PUNE] we do not find any merit in the grounds of appeal raised by the Revenue. Accordingly, the appeal filed by the Revenue stands dismissed.

  ---

• 2021 (10) TMI 1203
  Rejection of books of accounts - best judgment assessment - gross profit estimation - CIT(A) was of the view that 1% to 2% on profits may be estimated depending upon the market situation in such cases - CIT(A) noted that all transactions in assessee`s case are with the associated concerns and no physical transfer of goods took place thus profit cannot be estimated at a normal market rate. In fact, it calls for appropriate rate HELD THAT:- It is well settled that in a best judgment assessment there is always a certain degree of guesswork. No doubt the authorities concerned should try to make an honest and fair estimate of the income even in a best judgment assessment and should not act totally arbitrarily. Department must act judiciously, while passing the order u/s 144 of the Act and must be guided by judicial consideration and by rule of justice, equity and good conscience. And also that there must be honest and fair estimate of the proper figure of assessment, for which consideration of local knowledge and repute, besides the previous returns an assessment of the assessee concerned, and all other matters must be taken into account for fair and proper estimate which of course, would fall in the category of guesswork, but a honest guesswork. In the assessee`s case under consideration, we note that assessee did not submit books of accounts. On examination of the profit and loss account of the assessee, the ld CIT(A) noted that total expenditure other than purchases mentioned in the profit and loss account, is a negligible amount of Rs. 2,71,150/- for business turnover of Rs. 2,39,05,01,881/-. Therefore, books of accounts of the assessee cannot be believed. The breakup of these expenses also shows that no expenses were recorded towards transportation. With negligible amount of transportation cost, how the assessee has achieved turnover of Rs. 2,39,05,01,881/-? Therefore, it simply implies that the transactions of purchase and sales are made through book entry. Needless to say, that no physical transfer of goods has taken place in view of the fact that there was no transportation expenses recorded. Hence, we are of the view that Gross Profit rate at 1% sustained by ld CIT(A) is quite reasonable. There is gross failure on the part of the assessee, as the assessee has deliberately refrained from producing the books of account till the very last stage of the assessment proceedings. The reason being that the books of account were not good enough to pass the test of verification of the Assessing Officer. It needs to be appreciated that verification of the books of account is a primary and fundamental tool for finalizing the assessment under section 143(3) - in the light of the judgment of the Hon`ble Apex Court in the case of CIT Vs. Simon Carves Ltd [ 1976 (8) TMI 4 - SUPREME COURT] , and taking into account the assessee`s facts, as narrated above, we are of the view that estimation made by ld CIT(A) is based on sound reasoning. That being so, we decline to interfere with the order of Id. CIT(A) in sustaining the additions at the rate of 1% of gross profit. His order on these additions are, therefore, upheld and the grounds of appeal of the assessees, as well as Revenue are dismissed.

  ---

• 2021 (10) TMI 1202
  Sundry debtors written off - assessee has not demonstrated how the debts have become bad or what efforts have been taken for recovery - HELD THAT:- CIT(A) has given finding that it is clear that the ledger accounts and sales invoices along with a detailed chart has been furnished by the assessee which demonstrates that the amount involved in the debts have been offered as income in the earlier years. CIT(A) has rightly rejected the AO s plea that the assessee has not demonstrated how the debts have become bad or what efforts have been taken for recovery. As the said issue is duly covered by the decision in the case of TRF Ltd. [ 2010 (2) TMI 211 - SUPREME COURT] wherein it was held that after amendment in the Act write off in the account is sufficient for the claim of debts written off. Hence, in our considered opinion there is no infirmity in the order of learned CIT(A). Moreover, this ITAT in assessee s own case for A.Y. 2011-12 2012-13 in [ 2021 (6) TMI 615 - ITAT MUMBAI] on the issue of bad debts similarly raised, has allowed the same in favour of the assessee. Finished goods written off - HELD THAT:- In order to bring out the effect of the change in the method of accounting the assessee had reduced the effect which is Rs. 37.41 cores from the consumption which would decrease valuation of opening stock and increase the profit. Further in order to negate this effect the assessee had debited the same amount to the profit and loss account as exceptional items written off. Thus there is no effect on the profit and loss account and the assessee has not tinkered with the opening stock. To recapitulate, the assessee has reduced the value of opening stock by a sum of Rs. 37.41 crores which is a credit effect increasing the income and has simultaneously debited the profit and loss account by the same amount as exceptional items written off to nutralize the effect. Thus actually there is no effect and this has also been detailed in Note No. 4 given by the auditors in the notes to accounts. In this view of the matter in our considered opinion, we do not find any infirmity in the order of learned CIT(A). We note that in the present case before us aforesaid amount added by the AO is erroneous as assessee s adjustment has not affected to the profit and loss account. In this view of the matter we do not find any infirmity in the order of learned CIT(A). Hence, we uphold the same.

  ---

• 2021 (10) TMI 1201
  Addition u/s 68 - Unexplained cash credit - primary discharge of onus - HELD THAT:- Where the document furnished explained a credit - cash available to the required extent in the instant case, there is a prima facie discharge of the onus on the assessee, and it is for the AO to, where not satisfied, seek further explanation, so that his non-seeking the same, as stated by Sh. Modh during hearing, cannot disturb the said prima facie discharge of the onus by the assessee. In the instant case, however, the argument of a prima facie discharge of onus by the assessee is not available to him as, as found, he had been specifically required by the AO to furnish the source of the cash available with the creditors, also drawing their cash flow statements, and which had not been complied with. As afore-stated, the reference of cash availability to the opening cash-in-hand (i.e., as on 31/3/2011), only implies that the source of the cash is to be found in an anterior period - nothing more and nothing less. The matter, on balance, warrants being remitted back to the file of the AO for fresh adjudication, which is hereby directed. It shall be open for him to question the assessee, or even, where so considered, the concerned creditor/s, and/or seek further evidence in validation of the document/s (balance-sheet, income statement, etc.) submitted, which, where belonging to the creditors, would need to be signed by them. He shall make an objective and fair assessment of the different variables impinging on the cash availability, and decide in accordance with law per a speaking order after affording a reasonable opportunity to the assessee to present his case before him. Another aspect of the matter that needs to be before parting clarified is that the Revenue has not disallowed the interest allowed by the assessee on the impugned credits, stated to be loans thereto, and which in fact follows in consequence of the same being, or ought to be the case where it is, deemed as the assessee s income. Though inconsistent, that would not by itself render the assessee s case as proved, which will have to be adjudged on its merits. Why, regarding so would make the Revenue s case a non-starter, and allowing the assessee the benefit of what is essentially a fallacy on the part of the Revenue, which ought to have been addressed by the first appellate authority inasmuch as it is, as afore-said, inconsistent with the impugned credits being regarded by it as the assessee s income. Why, for that matter, even the said interest having been returned by them, may have been assessed as the creditor s income for the relevant year. That, again, though would not by itself absolve the assessee from discharging the burden of proof on it Addition toward low house-hold withdrawals - AO effected the same finding the disclosed withdrawal as inadequate to satisfactorily explain the personal and house-hold expenditure, i.e., for self and family. The position before the first appellate authority, and in fact even at the second appellate stage, remains the same; the assessee being unable to show as to how the estimated expenditure was excessive, as alleged per his ground of appeal. The same is found reasonable considering the obtaining price levels, with, as afore-said, the assessee not improving his case before me in any manner. We decide accordingly.

  ---

• 2021 (10) TMI 1200
  Disallowance u/s 14A r.w.r. 8D - mandation of recording satisfaction - Addition being 0.5% of the average of opening and closing investment in mutual funds pertaining to financial year 2012-13 - whether AO failed record his dissatisfaction with the working given by the assessee that they have not incurred any expenditure to earn the dividend income? - HELD THAT:- When assessee has come up with a categoric defence that no expenditure has been incurred to earn the dividend income during the years under assessment and that all the investment during the years under assessment are dividend reinvested (Debt Oriented Funds) and that no direct investment has been made rather dividend has been reinvested by the company during the years under assessment and has brought on record complete fund statement issued by the ICICI Prudential Fund wherein the entire investment shown in the year under consideration is dividend reinvested (Debt Oriented Funds), AO was required to record his categoric dissatisfaction as to working of the assessee that such and such expenses have been incurred to earn dividend income, but not shown. When ld. CIT (A) himself recorded that, it may not be possible to find out the actual expenditure incurred in relation to the earning of exempt income , it is difficult to reject the working brought on record by the assessee too that no expenditure has been incurred to earn dividend income by the assessee. Moreover, the entire investment made by the assessee during the years under assessment is dividend reinvested and in these circumstances, the provisions contained u/s 14A read with Rule 8D cannot be invoked mechanically. In AY 2014-15 also, AO has mechanically applied section 14A read with Rule 8D without recording any dissatisfaction as to the working given by the assessee as to not incurring any expenses to earn the dividend income rather based his findings on the basis of generic observations that such a huge investment cannot be made without incurring expenditure. For AY 2014-15 also, assessee has brought on record fund statement also showing entire investment for the year under assessment as dividend reinvested which ratifies the working given by assessee. By following the law laid down in Godrej Boyce Manufacturing Company Ltd. [ 2017 (5) TMI 403 - SUPREME COURT] and Maxopp Investment Ltd . [ 2011 (11) TMI 267 - DELHI HIGH COURT] we are of the considered view that disallowance for Assessment Years 2013-14 2014-15 respectively by mechanically applying the provisions contained u/s 14A read with Rule 8D(2) are not sustainable in the eyes of law because sub-section (2) (3) of section 14A with Rule 8D of the Rules has only prescribed a formula for determination of an expenditure to earn the income which does not form part of the total income under the Act, which can only be invoked if the AO is not satisfied with the claim of the assessee. It is a matter of fact that the entire investment during the year under consideration is on account of dividend reinvested (Debt Oriented Funds) not creating any occasion for the assessee company to put in their administrative and managerial manpower for making investment. So, AO is directed to delete the disallowance for Assessment Years 2013-14 2014-15 respectively after due verification that apart from dividend reinvested no other investment has been made by the assessee company. - Decided in favour of assessee. Education Cess (EC) and Secondary Higher Education Cess (SHEC) on income-tax being an allowable expenditure for computing the total income - HELD THAT:- As it is settled principle of law that Education Cess and Secondary Higher Education Cess paid on income-tax is an allowable deduction for computing the total income being not hit by the provisions contained u/s 40A(ii) of the Act, as has been held by Hon ble Bombay High Court in case of Sesa Goa Ltd. [ 2020 (3) TMI 347 - BOMBAY HIGH COURT] . Hon ble High Court in Sesa Goa Ltd. case (supra) held that education cess or any other cess is not included in clause (ii) of section 40(a) of the Act so there is no prohibition in claiming deduction of such amounts while computing the income of the assessee under the head profits gains of business or profession . Coordinate Bench of the Tribunal in case of Sicpa India Private Ltd. [ 2020 (4) TMI 425 - ITAT DELHI] also decided the identical issue by holding that education cess on income-tax, dividend distribution tax and fringe benefit tax is not a disallowable expenditure under section 40(a)(ii) of the Act having been expressly excluded from section 40(a)(ii) - education cess and secondary higher education cess is an allowable deduction being not hit by the provisions of section 40(a)(ii) of the Act. - Decided in favour of assessee.

  ---

• 2021 (10) TMI 1199
  Disallowance of supervisory charges paid - ingenuine expenditure - assessee had made a claim for deduction u/s. 40(a)(i) of the supervisory charges paid to the parent company - as per DR CIT(A) has erred in deleting supervisory fees paid by the assessee to its parent company based on fresh evidences submitted for the first time during appellate proceedings without giving any opportunity to the Assessing Officer in violation of Rule 46A of Income Tax Rules, 1962 - HELD THAT:- The assessee has furnished necessary evidences, including agreement between the parties, invoices raised by parent company, travel documents of expatriates, who visited India for rendering services, their visa, passport and air tickets. The assessee had also furnished e-mail correspondence between its parent company for exchange of information regarding technological support required for manufacturing and installation of industrial furnaces. The said payment has been made after withholding necessary TDS applicable as per law - supervisory fees paid by the assessee to its parent company M/s. Dong Woo HST Co. Ltd. in pursuant to an agreement dated 25.12.2007 is genuine expenditure incurred wholly and exclusively for the purpose of business of the assessee and which is supported by necessary evidences. AO has disbelieved genuine expenditure incurred by the assessee for the purpose of business only for the reason that said transaction was entered into between the assessee and its parent company. AO had also questioned necessity of making such payments. Therefore, he opined that payment made to its parent company for rendering supervisory fees is nothing but shifting of profit from one tax territory to another tax territory without any actual business expediency and as against which no particular service is received. As gone through reasons given by the AO in light of various evidences filed by the assessee including agreement between parties and we do not ourselves subscribe to reasons given by the Assessing Officer for the simple reason that it is well settled principle of law that the Assessing Officer cannot sit in the armchair of businessman and decide whether particular expenditure is required to be incurred or not. It is also an admitted legal position that the Assessing Officer cannot question rational and necessity of incurring any particular expenditure. What is required to be seen is whether particular expenditure is incurred wholly and exclusively for the purpose of business of the assessee and further such expenditure is supported by necessary evidences. In this case, the assessee has filed all possible evidences including agreement between parties to prove genuineness of expenditure incurred for supervisory services. There is no doubt of whatsoever with regard to genuineness of payment made by the assessee to its parent company, because such payment was made in pursuant to agreement between parties and further, the assessee has deducted applicable TDS as per law. The assessee had also furnished other supporting evidences to prove receipt of services from its parent company - expenditure incurred by the assessee towards payment made to its parent company for rendering supervisory services is genuine expenditure, which was incurred wholly and exclusively for purpose of business of the assessee. AO without appreciating facts has simply disallowed supervisory fees paid to the assessee s parent company. The learned CIT(A), after considering relevant facts has rightly deleted additions made by the Assessing Officer. Hence, we are inclined to uphold findings of the learned CIT(A) and reject grounds taken by the Revenue. Non-deduction tax deducted at source and consequent disallowance of expenditure by the assessee in certain years and claiming deduction for said expenditure in the year of payment is not disputed by the Assessing Officer, because the Assessing Officer has primarily held that expenditure incurred by the assessee under the head supervisory fees is held to be not deductible under section 37 of the Income Tax Act, 1961. But, the ld. CIT(A) has examined suo motu disallowance made by the assessee in earlier years for non-deduction of tax deducted at source and subsequent deduction claimed in the year of payment and held that the assessee has rightly claimed deduction towards expenditure incurred in earlier years in the impugned assessment years, because, it was disallowed in earlier years for non deduction of TDS and further, the same has been claimed as and when TDs has been deducted and remitted to Govt. account. - Decided in favour of assessee.

  ---

• 2021 (10) TMI 1198
  Assessment u/s 153A - HELD THAT:- The impugned addition made in Section 143(3) r.w.s. 153A assessment is not liable to be sustained since not based on any incriminating material and the same had already been made in Section 143(3) assessment. We therefore accept the assessee s grievance herein. Addition u/s 14A r.w.r 8D - HELD THAT:- As decided in own case [ 2021 (9) TMI 124 - ITAT HYDERABAD ] the very disallowance stood accepted on the ground that it had not derived any exempt income. We therefore adopt the very precise reason herein as well to delete the impugned disallowance in light of case law Chettinad Logistics Pvt. Ltd. [ 2017 (4) TMI 298 - MADRAS HIGH COURT ], Corrtech Energy Pvt. Ltd. [ 2014 (3) TMI 856 - GUJARAT HIGH COURT ] and Cheminvest Ltd. [ 2015 (9) TMI 238 - DELHI HIGH COURT ] - Decided in favour of assessee.

  ---

• 2021 (10) TMI 1197
  Income from other sources - valuing shares and the procedure to be followed - AO rejected the DCF method followed by assessee and recomputed under NAV method and made addition as income from other sources u/s 56(2)(viib) - HELD THAT:- An identical issue was considered in case of M/s. Town Essential Pvt. Ltd. [ 2021 (7) TMI 17 - ITAT BANGALORE] Primary onus to prove the correctness of the valuation Report is on the assessee as he has special knowledge and he is privy to the facts of the company and only he has opted for this method. Hence, he has to satisfy about the correctness of the projections, Discounting factor and Terminal value etc. with the help of Empirical data or industry norm if any and/or Scientific Data, Scientific Method, scientific study and applicable Guidelines regarding DCF Method of Valuation. The order of ld.CIT(A) is accordingly set aside and this issue is remanded to the AO for decision afresh, after due opportunity of hearing to the Assessee. Thus we remand this issue back to the Ld. AO. The Ld. AO is directed to carry necessary verification as directed hereinabove. Assessee is directed to file all relevant documents as called for support the claim. Ld. AO is then to consider the claim in accordance with law. Needless to say that proper opportunity of being heard to be granted to assessee. Assessee s appeal is allowed for statistical purposes.

  ---

• 2021 (10) TMI 1196
  Addition u/s 36(1)(va) - employees contribution to ESI before the due date for filing of return u/s. 139(1) - HELD THAT:- Admittedly, the assessee has remitted the employees contribution to ESI before the due date for filing of return u/s. 139(1) of the I.T. Act. The Hon ble jurisdictional High Court in the case of Essae Teraoka (P.) Ltd. [ 2014 (3) TMI 386 - KARNATAKA HIGH COURT] has categorically held that the assessee would be entitled to deduction of employees contribution to ESI provided the payment was made prior to the due date of filing of return of income u/s. 139(1). Whether the amendment to section 36(1)(va) and 43B of the I.T. Act by Finance Act, 2021 is clarificatory and declaratory in nature? - Supreme Court in the recent judgment in the case of M.M. Aqua Technologies Limited v. CIT [ 2021 (8) TMI 520 - SUPREME COURT] had held that retrospective provision in a taxing Act which is for the removal of doubts cannot be presumed to be retrospective, if it alters or changes the law as it earlier stood - amendment brought about by the Finance Act, 2021 to section 36(1)(va) and 43B of the I.T. Act, alters the position of law adversely to the assessee. Therefore, such amendment cannot be held to be retrospective in nature. Even otherwise, the amendment has been mentioned to be effective from 01.04.2021 and will apply for and from assessment year 2021-2022 onwards. The amendment to section 36(1)(va) and 43B of the I.T. Act by Finance Act, 2021 is only prospective in nature and not retrospective. The amendment by Finance Act, 2021 to Sec. 36(1)(va) and 43B of the I.T. Act will not have application to relevant assessment year, namely A.Y. 2019-2020. Accordingly, we direct the A.O. to grant deduction in respect of employees contribution to ESI since the assessee has made payment before the due date of filing of the return of income u/s. 139(1) - Decided in favour of assessee.

  ---

• 2021 (10) TMI 1195
  Revenue recognition - method of accounting - sale of residential/commercial units - revenue from booking of units by the customers - Addition invoking percentage of completion method - completed contract method v/s percentage of completion method - Addition deleted by CIT(A) - HELD THAT:- Accounting standard AS-7 relied upon by the Assessing Officer is applicable strictly in the case of construction contracts only. CIT(A) has followed binding precedent of the jurisdictional High Court in the case of Paras buildtech India private limited [ 2015 (11) TMI 1217 - DELHI HIGH COURT ] ; Sabh infrastructure Ltd. [ 2015 (11) TMI 1283 - DELHI HIGH COURT ] and Manish Buildwell P. Ltd. [ 2011 (11) TMI 35 - DELHI HIGH COURT ] Further, the assessee is following consistently this method of revenue recognition in prior years as well as in subsequent years and which has been accepted by the revenue and thus rule of consistency also demand that in the year under consideration the assessing officer is not justified in deviating the consistent approach of the Department. No error in the order of the Ld. CIT(A) on the issue in dispute and accordingly we uphold the same. The grounds of the appeal of the revenue are accordingly dismissed.

  ---

• 2021 (10) TMI 1194
  Revision u/s 263 by CIT - As per CIT sale of land parcels as taxed under the head Capital Gains - AO found that the actual sale consideration of land parcels shown as business assets/stock-in-trade in the books of accounts is lesser than the corresponding value assessable for the purposes as stamp duty - HELD THAT:- If the course suggested by the PCIT is adopted and on profits arising on sale of land parcels are taxed under the head Capital Gains , the assessed income could be lower than the income assessed by the AO. The tabular statement demonstrating the aforesaid fact is self-speaking in this regard and does not require much delineation. Consequently, where the course suggested by the PCIT results in greater prejudice to the Revenue and the course adopted by the AO has resulted in lesser prejudice, the action of the PCIT under Section 263 falls flat on the ground. In order to usurp jurisdiction u/s 263, both the conditions, i.e. order being erroneous as well as prejudicial to the interest of the revenue, must simultaneously coexist. In absence of any prejudice caused to the Revenue by the action of the Assessing Officer, the order cannot be revised even if it is momentarily considered to be erroneous. Hence, the revisionary action of the PCIT requires to be set aside on this ground alone without going into other aspect of arguments. We also take into account the other line of arguments propounded on behalf of the assessee that the nature and character of an income depends on host of factors which are required to be cumulatively weighed and thus is inherently a very highly subjective exercise. There is no straight jacket formula to determine whether an asset held by the assessee should be treated as capital asset or business asset. Such issues are inherently highly debatable and arguable in nature. One cannot definitely say with precision and more so under the revisional jurisdiction that the action of the AO in adopting one course of view is erroneous per se. There is invariably a scope of argument on determination of character of income. Indulgence on such aspect under the revisional jurisdiction is not appropriate in the absence of cogent facts adverse to the assessee. We do not see any such material which can make the conclusion of the PCIT indefeasible. This being so, the action of the PCIT cannot be endorsed on this ground also. Hence, looking from any angle, the revisional action of the PCIT under Section 263 is not sustainable in law. Consequently, the revisional order under Section 263 of the Act is quashed and set aside. - Decided in favour of assessee.

  ---

• 2021 (10) TMI 1193
  Unexplained deposits in bank - Withdrawal of cash from bank and re-deposit of the same into the bank account - contention of the assessee i.e. withdrawn the money for the purpose of giving advance to the landlords and since the land deal could not materialize, the amount had been re-deposited back into his bank accounts - HELD THAT:- Withdrawal of cash has been accepted by the AO. In such scenario, unless the AO is able to show that the assessee has been able to utilize this withdrawn cash for some investment/undisclosed expenses of the same/like amount, we infer that the assessee has been able to show that money re-deposited in the bank account of the withdrawn/like amount, so the assessee s contention need to be accepted without any rebutted material to suggest otherwise. DR could not rebut/controvert the cash flow statement vis- -vis the bank statements filed - The assessee had enough money in his bank as disclosed, therefore, no addition u/s. 68 of the Act was warranted in this case and therefore, the assessee succeeds and since the assessee has been able to explain the nature and source of the deposits in the bank account which has been found adversely by the Department. Therefore, we direct the AO to delete the addition - Decided in favour of assessee.

  ---

• 2021 (10) TMI 1192
  Levy of penalty u/s 271B - violation of section 44AB - assessee has failed to maintain the books of accounts - assessee is a Civil Contractor - Proof of reasonable cause within the scope of section 273B - A.O has completed the assessment u/s. 143(3) by disallowing 5% of the expenses on the ground that non submissions of bills and vouchers - HELD THAT:- In this case, the assessee has not maintained any books of accounts and the assessee has offered an income on estimate basis and the same is accepted by the A.O. Keeping in view of the case of CIT v. Bisuali Tractors [ 2007 (5) TMI 181 - ALLAHABAD HIGH COURT] penalty u/s. 271B imposed by the A.O in this case cannot be sustained. Therefore, the penalty imposed by the A.O and confirmed by the Ld. CIT(A) is cancelled. Thus, the appeal filed by the assessee is allowed.

  ---

• 2021 (10) TMI 1191
  Validity of Proceedings u/s 153C - whether no proper satisfaction note of the Ld. Assessing Officer has been prepared having jurisdiction over the searched person as well as the assessee for initiating the proceeding u/s 153C - HELD THAT:- As in the case of M/s Super Malls Pvt. Ltd [ 2020 (3) TMI 361 - SUPREME COURT] and on examining the satisfaction note reproduced above we are of the considered view that a proper satisfaction note of the Ld. Assessing Officer has been prepared having jurisdiction over the searched person as well as the assessee for initiating the proceeding u/s 153C of the Act and therefore we find no merit in the additional legal ground raised by the assessee. We accordingly dismiss the same. Long term Gain on sale of land - claim of section 54 - From perusal of records we find that registered sale deed was executed on 12.12.2006 but on perusal of paper book we find that the possession of the said flat was given to the assessee on 10.02.2007. The transfer of residential flat in favour of the assessee is completed only when the possession is given i.e. 10.02.2007. On adopting the date of purchase of flat on 10.02.2007 the assessee s claim for section 54F of the Act would be valid as it is within one year. The revenue authorities have adopted the date of sale of land on the basis of registered sale deed dated 28.12.2007 but have not considered the date of possession given by the assessee of the said land on 06.12.2007 but for the purchase of flat revenue authorities have adopted the date of purchase as the registered deed i.e. 12.12.2006 but not considered the date of possession of flat received by the assessee on 10.20.2007. If for sake of academic discussion the basis of possession of the immovable property is taken then also the assessee succeeds as the date of sale of land would be 06.12.2007 and purchase of flat would be 10.02.2007. Assessee has rightly claimed the deduction u/s 54F of the Act for purchase of residential flat on 10.02.2007 which is within one year from the date of sale of the land on 28.12.2007( when the total payment for sale of land was received) and since we have held the claim of section 54 F of the Act for deduction against Long Term Capital Gain as valid, the impugned addition of not utilizing the deposit in Capital Gain Account Scheme will not stand for and therefore, the addition made by the Ld. Assessing Officer stands deleted - Decided in favour of assessee.

  ---

• 2021 (10) TMI 1190
  Penalty u/s 271AAA(2) - Proof of admission of undisclosed income u/s 132(4) - primary onus - onus is on the Revenue to raise appropriate questions towards manner of deriving undisclosed income and substantiation thereof - HELD THAT:- As the factual position discernable from the record, it is manifest that the assessee has not failed to specify the manner of deriving undisclosed income perse in the absence of any question directed towards the assessee/deponent of the statement in this regard. The substantiation of the manner of deriving undisclosed income naturally has not been called into question by the Revenue. Assessee has replied to the queries raised while recording the statement as called for. The Revenue does not appear to have quizzed the assessee for satisfying the manner in which the purported undisclosed income has been derived. The income considered as undisclosed income under s. 132(4) of the Act was duly incorporated in the return filed pursuant to search. Therefore, the Revenue, in our view, now cannot plead deficiency on the part of the assessee to specify the manner which has not been called into quest ion at the time of search or even at the stage of the assessment. AO or CIT(A) has not pointed out any query which remained unreplied or evaded in the course of search or post search investigation. Therefore, looking from any angle, it is difficult to endorse the action of the Revenue - Decided in favour of assessee.

  ---

• 2021 (10) TMI 1189
  Revision u/s 263 by CIT - AO has not examined the large commission expenses and low net profit and there is a mismatch of interest paid to the related persons u/s 40A(2)(b) - HELD THAT:- We find that the claim was allowed by the Hon ble Tribunal in the earlier assessment year and the miscellaneous application filed by the revenue is dismissed. Whereas in respect of twin conditions of (i) Erroneous and (ii) Prejudicial to the interest of the revenue. We find the revenue is disputing of the Assessment order. Whereas, the assessee has discharged the burden by submitting the information and requisite details as called for by issue of statutory notice u/s 142(1) of the Act along with the questioner which cannot be overlooked. Since the information was available with the A.O in the course of the assessment, the A.O. has considered the facts, submissions and evidences filed and took a possible view. In the assessment proceedings the assessee has responded to the clarifications/ queries raised by the A.O. and after verification and satisfaction of claims, A.O has passed the order U/sec 143(3) - AO order passed u/sec 143(3) of the Act does not satisfy the twin conditions of erroneous and prejudicial to the interest of revenue and Accordingly, the revision order passed by the Ld.Pr.CIT is quashed and allow the grounds of appeal in favour of the assessee.

  ---

• 2021 (10) TMI 1188
  Addition on account of 10% of GP rate on the total turnover - CIT-A deleted the addition - HELD THAT:- The agreement with the parties, the affidavits, confirmation and appellant letter filed before the AO the appellant s letter for personal presence of the parties lifted goods are part of the records lying before us. AO observed that these documents were not produced before us though the same was in fact produced during the original assessment. CIT(A) found no basis to make this addition. Since the assessee has discharged its onus by producing the entire set of documents/evidence as mentioned hereinabove and in the absence of any adverse evidence relied upon by the AO. CIT(A) finally deleted the addition which according to us is of no ambiguity so as to warrant interference and hence, this ground of appeal preferred by the Revenue is found to be devoid of any merit and thus, dismissed. Unexplained investment - HELD THAT:- As total income of the assessee. However, there was an arithmetic mistake in calculating Rs. 1800000/- which should have been 1702500/- (2102500 400000). CIT(A) during the appellate proceeding went through the cash flow statement prepared on the basis of the copies of seized material taking into account the opening cash balance, bank withdrawals which is also made available before us being part of the Paper Book. Apart from that in the remand report dated 27.10.2010 available at page 10 to 15 of the PB so filed before us. The Ld. AO admitted such facts and the documentary evidences filed in its explanation of the sources of funds by the assessee and hence, the Ld. CIT(A) deleted both the additions. According to us, there is no ambiguity in making such decision made by the Ld. CIT(A). Hence, the said is hereby confirmed. This ground of appeal preferred by Revenue fails. Cash sale of agricultural equipment - HELD THAT:- CIT(A) while allowing the appeal alongwith this ground of appeal relied on the basis of the documents, facts and the remand report and further observed that the cash flow cannot be suspected in the absence of any adverse evidence relied upon by the Ld. AO which according to us is without any ambiguity so as to warrant interference. This ground of appeal is allowed. Lifting the goods from the Custom Authorities - HELD THAT:- AO has not mentioned anything except that this purchase was not accounted for without any evidence at all. In spite of having all seized material and the documents of Customs Authorities the AO has not verified the same. Neither has given any adverse comment on the audited profit and loss account. CIT(A) has categorically mentioned that all above grounds are being discussed for the source of funds for lifting the goods from Customs and the appellant has already shown purchase in profit and loss account at Rs. 20260309/- In that view of the matter, the conclusion made by the AO that the said sales had not been reflected in the books of accounts of the assessee is without any basis and application of GP rate on the presumed sales outside the books of account leading to addition has been rightly found to be unsustainable in the eye of law by the Ld. CIT(A). Addition on account of specularity profit earned from sale of shares - HELD THAT:- Case of the assessee is this that these were forwarded transactions, profit and loss is determined when the transaction gets finality otherwise carried forward with notional profit/loss and charges are debited by broker as badlaThe bills and the conciliation with Sh. Pradeep Bhalla Company has also been perused by us - CIT(A) in his order has deleted the addition on the basis of remand report and the facts that these were speculative transactions and this year these were carried forward and got finality in subsequent year i.e. AY 1993-94, he has referred the Ld. CIT(A) order for AY 1993-94. We do not find any ambiguity in such observation and decision made by the Ld. CIT(A) and hence, the same is hereby confirmed. This ground of Revenue is thus, dismissed. Unexplained cash deposits in bank - HELD THAT:- As perused the cash flow statement available at page 36 of the Paper Book filed before us which reflects that there were sufficient cash available as on 30.04.1991 and also the sufficient explanation was made by the appellant. Hence, the Ld. CIT(A) deleted such addition. Hence, according to us the Ld. CIT(A) has rightly deleted the same. In that view of the matter, ground preferred by the Revenue is found to be devoid of any merit and hence dismissed. Addition on account of closing stock - HELD THAT:- CIT(A) deleted the addition on the basis of facts, documents and remand report from the AO on the ground that the appellant has included this quantity while calculating the value of closing stock which is proper and thus, confirmed. This ground of appeal preferred by the Revenue fails. Addition on account of GP rate at 20% - HELD THAT:- CIT(A) deleted the addition on the basis that the sales as per audited profit and loss account is much more than the sales as per Sales Tax Department because the exempted sales are not included in sales tax returns. Therefore, the estimation is not correct. Regarding GP of 20%, the Ld. CIT(A) mentioned that despite logical explanation the estimation of turnover at 4.50 crore and 20% GP without bringing on record any sound reasoning for doing the same. There was no reason to reject the actual sale of Rs. 44011886/- and GP of 11.15% as of against the Ld. CIT(A) which according to us is without any ambiguity so us to warrant interference and hence, this ground of appeal preferred by the Revenue is found to be devoid of any merit and thus, dismissed. Addition of notional interest on loan outstanding - HELD THAT:- CIT(A) while deleted notional addition took into consideration this particular aspect of the matter that the Ld. AO has not given any weightage to the circumstances detailed by the assessee that the interest had to be weived to secure the principle. No document was further found during the search to suggest that the assessee had received the interest amount outside the books of account as of the observation made by the Ld. CIT(A) while deleting such addition is according to us just and proper and we hereby confirm the same. The ground of appeal filed by the Revenue fails. Addition on estimate basis - Addition on the basis of the voucher containing payment of Visa charges by Vandana Goyal from whose residence the same has been seized - HELD THAT:- As the voucher which was seized from the residence of Ms. Vandana Goyal was at Rs. 20858/- being the Visa charges of our travelling and thus, the same was rightly deleted by the Ld. CIT(A). The same is thus, hereby confirmed. This ground of appeal preferred by the Revenue, therefore, fails. Addition on account of creditors - HELD THAT:- Ld. CIT(A) deleted the addition while doing so. He has relied upon the judgment passed in the matter of Sugauli Sugar Works Ltd.,[ 1999 (2) TMI 5 - SUPREME COURT] . According to us, there is no ambiguity in such order passed by the Ld. CIT(A). Hence, we confirm the same. - Revenue appeal dismissed. Unexplained deposit to the bank account - addition was made rejecting the cash flow based upon the documents including sales of agricultural euqipments - HELD THAT:- CIT(A) while deleting the addition mentioned that the appellant has shown total sales of Rs. 11935611/- of agricultural equipment during the year 1992 and the AO cannot reject the cash flow on the basis of cash sale of agricultural equipments at Rs. 813000/- in the month of February, 1992. The reasons so recorded while deleting the addition by the Ld. CIT(A) seems to be adequate and hence, the same is confirmed. This ground of appeal preferred by Revenue is found to be devoid of any merit and thus, dismissed. Addition on account of interest at 18% of loans and advances - HELD THAT:- The perusal or explanation given by the assessee shows that amounts outstanding as advance represents the transaction of sale by the assessee to the said concern and the amount outstanding is actually on account of the realization to be made of the sales amount. The confirmation filed by the assessee confirming the detailed transaction of purchases, part payment made as been recorded. The above said amount therefore, cannot be treated as advance free of interest. Addition based on difference of balances - HELD THAT:- It appears that the Ld. CIT(A) deleted the addition on the basis of the reconciliation filed by the assessee before the AO and before him as well without any ambiguity so as to warrant interference. Hence, the appeal preferred by the Revenue is found to be devoid of any merit and thus, dismissed.

  ---

• Customs

• 2021 (10) TMI 1187
  Imposition of Redemption Fine and Penalty - import of Copper Sulphate Pentahydrate Industrial grade (powder) - insecticide goods or not - requirement of importing the goods from designated ports as per the Ministry of Agriculture and Farmers Welfare Notification dt. 22/12/2017, which is violated in this case - HELD THAT:- The Revenue has nowhere doubted the bona fides of the appellant. There is a Bill of Entry wherein the goods is described, there are other documents like contract with foreign supplier, Bill of Lading, etc. which when examined/considered, could throw light in deciding what was imported, but nothing is placed on record - The revenue therefore could not have proceeded without carrying out this exercise since it is the direction of Hon ble High court. Strangely and without placing anything on record, the Order-in-Original has proceeded to confiscate and offer redemption fine only for the reasons that the appellant had violated the port restriction. Port restrictions would apply if the cargo imported is per se insecticide. Levy of penalty u/s 112(a) of Customs Act - HELD THAT:- Penalty under Section 112(a) could be fastened only if the facts point out to the possible commission or omission as described therein, but when there is miserable failure in considering/examining as what was actually imported, to jump the gun alleging port restrictions is clearly arbitrary and unjustified. Appeal allowed - decided in favor of appellant.

  ---

• 2021 (10) TMI 1186
  Revocation of Customs Broker License - forfeiture of security deposit - levy of penalty - import of used rubber tyres without a cut in bead wire - restricted goods - misdeclaration of goods - HELD THAT:- The appellant (Customs Broker) had visited the Delhi address of the importer. Merely because he did not visit the factory at Jaipur, Rajasthan, it is held by the Commissioner that there is violation of Regulation 10(n) of CBLR, 2018. In fact, the address declared in the bills of entry and bill of lading is that of the Delhi address and the said address is a proper one and not fake one. On verification, the department has come to understand that there is no factory at Rajasthan address as declared in the IEC, Aadhar and GSTIN. When these are documents issued by the Governmental authorities, the Customs Broker cannot be burdened with responsibility of verifying the correctness of such address. There is no violation which is so grave for imposing such a harsh punishment of revocation of license. Taking note of the fact that the appellant has visited the Delhi address of the importer and such address being not fake, we are of the considered opinion that the imposition of penalty is not justified. The department has failed to establish that appellant has violated Regulation 10(n) of CBLR, 2018 - Appeal allowed.

  ---

• Insolvency & Bankruptcy

• 2021 (10) TMI 1185
  Seeking approval of Resolution Plan - mandatory requirements of Section 30(2) of IBC, met or not - HELD THAT:- The Resolution Plan should conform to all such requirements which may be specified by the IBBI. A statement to this effect has been made by the RP in the Revised Form H. The resolution plan fulfills all the requirements of Regulation 38 and 39 of the CIRP Regulations. A perusal of Regulation 38 would clearly show that by virtue of mandatory contents of resolution plan as discussed, in relation to Section 30 and Section 31 of the Code, the requirement of Regulation 38 also stands fulfilled. Even the requirement of Regulation 39 has been satisfied, as the RP has submitted that the resolution plan of Resolution applicant, as approved by the Committee of Creditors, to this Tribunal along with the compliance certificate in Revised Form H, as per the requirements of Regulation 39(4) of the CIRP Regulations meets all the requirements of the Code and the CIRP Regulations and that the resolution plan has been duly approved by the Committee of Creditors. The resolution plan as approved by the COC satisfies all the requirements of the Code and Regulations made thereunder - application allowed.

  ---

• 2021 (10) TMI 1184
  Maintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its dues - Financial Creditors - existence of debt and default or not - time limitation - HELD THAT:- There are force in the submissions made on behalf of the petitioner, since the respondent-corporate debtor failed to show any valid proof that the debt due and payable to the petitioner in his individual capacity is paid to him in his individual capacity. The facts of the case further shows that the CP is filed within the period of limitation. The present petition being complete and having established the default in payment of the financial Debt for the default amount being above Rs. 1,00,000/-, the petition is admitted in terms of Section 7(5) of the IBC and accordingly, moratorium is declared in terms of Section 14 of the Code. Application allowed.

  ---

• 2021 (10) TMI 1183
  Seeking approval of Resolution Plan - mandatory requirements of Section 30(2) of IBC, met or not - HELD THAT:- The Resolution Plan should conform to all such requirements which may be specified by the IBBI. A statement to this effect has been made by the RP in the Revised Form H. The resolution plan fulfills all the requirements of Regulation 38 and 39 of the CIRP Regulations. A perusal of Regulation 38 would clearly show that by virtue of mandatory contents of resolution plan as discussed, in relation to Section 30 and Section 31 of the Code, the requirement of Regulation 38 also stands fulfilled. Even the requirement of Regulation 39 has been satisfied, as the RP has submitted that the resolution plan of Resolution applicant, as approved by the Committee of Creditors, to this Tribunal along with the compliance certificate in Revised Form H, as per the requirements of Regulation 39(4) of the CIRP Regulations meets all the requirements of the Code and the CIRP Regulations and that the resolution plan has been duly approved by the Committee of Creditors. The resolution plan as approved by the COC satisfies all the requirements of the Code and Regulations made thereunder - application allowed.

  ---

• 2021 (10) TMI 1182
  Seeking dissolution of the Corporate Debtor - sections 54(1) of the Insolvency Bankruptcy Code, 2016 r/w Regulation 45(3) IBBI (Liquidation Process) Regulations, 2016 - HELD THAT:- After completion of sale of assets by ARCIL, a letter dated 05.09.2019 was sent to ARCIL by the liquidator requesting for submission of asset sale report as required under Regulation 36 of the regulations along with the documents relating to the sale of assets. By the said letter, ARCIL was requested to transfer the amount of insolvency resolution process cost and liquidation cost incurred by the IRP, RP and Liquidator from the sale proceeds of the assets before applying the same towards recovery of debts. ARCIL deposited the amount of Rs. 13,08,403/- in the account of Kokama International Private Limited. (In Liquidation) on 12.12.2019 and the balance amount was adjusted against the recovery of its secured debt by ARCIL - the entire cost of insolvency resolution process and liquidation process was met by ARCIL as the company did not have any funds to meet the said costs. The Liquidator on the request made by ARCIL by letter dated 23.12.2019 reimbursed the said cost to ARCIL from the account of Kokama International Private Limited (In Liquidation). Kokama International Private Limited, the Corporate Debtor, is hereby dissolved with immediate effect - application allowed.

  ---

• 2021 (10) TMI 1181
  Waiving/relaxing the compliances as stipulated in detail in Annexure-3 - Section 29 and Section 39 of the Code and Regulations 27, 36(1), 36A, 36B, 37, 38 and 39 of Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) Regulation, 2016 - treatment of claims of the existing operational creditors - Payment to Operational Creditors (Existing) - Section 25 (2) (c), (g), (h) (i) of the Act of 2016 and Regulation 27 of the Regulations of 2016 - Section 29 of the Code and Regulation 36(1) of Regulations of 2016-Submission of Information Memorandum (IM) to CoC - Section 31 of the Code and Regulations 36A, 36B, 37, 38 and 39. Payment to Operational Creditors (Existing) - HELD THAT:- As the treatment of operational creditors is entirely different under the Act of 2016 and regulations thereunder, and as such there is no provision to clear the existing operational creditors during CIRP, appropriate directions are required on this aspect - the RP is directed to look into hiring new suppliers or service providers, if needed, for the purpose of completion of the project as directed by this Authority vide order dated 25.11.2020 and the cost of the same shall be included in CIRP cost. Further, the treatment of the existing operational creditors be done according to Section 53 of the Code. Section 25 (2) (c), (g), (h) (i) of the Act of 2016 and Regulation 27 of the Regulations of 2016 - HELD THAT:- Since it is a case of Reverse CIRP, the same is not required as there would be no occasion for the Project going into liquidation. Hence, the RP is seeking the direction that the appointment of valuer and CoC to evaluate any resolution plan as being required to be done may kindly be waived - As per the seventh status cum progress report, the erstwhile director of the Corporate Debtor Mr. Mahendra Kalla had shown interest in financing the project as independent financers. In furtherance to this, the financing plan submitted by him in the 4th CoC meeting dated 26.02.2021 was agreed upon by the members of the CoC. It is also stated that Mr. Kalla has deposited Rs. 21,00,000/- for the purpose of construction of Project CRK. In view of these developments, appointment of registered valuers for the purpose of valuation of the project and need for CoC to evaluate Resolution Plan have become redundant and thus, the RP is granted waiver from complying with these provisions. Section 29 of the Code and Regulation 36(1) of Regulations of 2016-Submission of Information Memorandum (IM) to CoC - HELD THAT:- The relevant information with respect to the Project CRK shall be collated and provided by the RP as was directed vide order dated 25.11.2020. Since, the RP is not required to prepare the IM, there is no need to obtain NDA from the Allottees/Home buyers/their Authorized Representative. In view of the same, the RP is granted waiver from complying with these provisions. Section 31 of the Code and Regulations 36A, 36B, 37, 38 and 39 - HELD THAT:- Since this is a case of reverse CIRP where this Authority has already directed the CIRP to get the project completed on priority basis, repay the loan of Financial Creditor and handover the possession of flats to respective allottees and homebuyers and make efforts to sell the flats which are not booked. For the same, the RP has been directed to obtain finances from 3 mechanisms i.e., promoters or Financial Creditor or 3rd party private lender. Therefore, the RP is not required to perform the above functions and so this requirement may be waived - In the present case, vide order dated 25.11.2020, this Authority had directed the RP to complete the project on priority basis through existing promoters acting in the capacity of independent financiers and not promoters or Financial Creditor or 3rd party private lender to ensure that CIRP reaches success. And it is seen that erstwhile director of the Corporate Debtor has come forward as an independent financier for the purpose of completion of the project CRK. In view of this, there is no requirement for inviting EOI for resolution plan and subsequent provisions in respect of contents of resolution and approval thereof become redundant. Application disposed off.

  ---

• 2021 (10) TMI 1180
  Maintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its dues - Operational Creditors - existence of debt and dispute or not - Service of demand notice - HELD THAT:- The Bench notes that the Operational Creditor had supplied Furnishing Fabrics which the Corporate Debtor had duly received. It is also observed that the contentions raised by the Corporate Debtor with respect to discrepancy and incorrect debt amount are not supported by any documentary evidence. The Bench further notes that the Corporate Debtor vide its reply has also admitted that it was facing working capital issues, however, it is still committed to pay its outstanding debts legally payable after necessary adjustments which amounts to admission of debt and default by Corporate Debtor. Further, the Corporate Debtor also failed to reply to the Demand Notice within statutory period and has not raised any disputes before the filing of Reply to the present application. Therefore, no credence can be given to the contentions raised by the Corporate Debtor in the reply filed in this Company Petition. There are no valid grounds warranting the rejection of the above Company Petition as the debt and default are clearly established and the debt is also within limitation. The Operational Creditor has also suggested the name of proposed Interim Resolution Professional in part-3 of the Petition along with his consent letter in Form-2. Thus, the present Company Petition satisfies all the necessary requirements for admission. Petition admitted - moratorium declared.

  ---

• 2021 (10) TMI 1179
  Seeking initiation of liquidation proceedings against the Corporate Debtor - Section 33 of the Insolvency and Bankruptcy Code, 2016 - HELD THAT:- In the present case, the Application under Section 9 of the Code was admitted on 30.01.2020 and the period of 180 days was ending on 28.07.2020. It is noted that the CoC resolved to liquidate the Corporate Debtor on 04.08.2020 and as a consequence thereof, the instant application is filed by the RP on 21.08.2020. As per Notification No. IBBI/2020-21/GN/REG059 dated 20.04.2020, the period of lockdown is excluded for the purpose of calculating the timelines in CIR Process. Hence, after considering exclusion of lockdown period till 30.06.2020, the present application is filed within the prescribed period. In view thereof the Application under consideration is taken up under Section 33(2) of the Code. Assessment of Sale as a going concern - Regulation 39C of CIRP Regulations, 2016 - HELD THAT:- The RP apprised the CoC in its 4th meeting about Regulation 39C of CIRP Regulations, 2016. The members of CoC discussed and resolved to sell the Corporate Debtor as a going concern, as first option, or sell the business(s) of the Corporate Debtor as a going concern, as second option, before exploring other options as per Regulation 32 32A of IBBI (Liquidation Process) Regulations, 2016 and Regulation 39C of CIRP Regulations, 2016, if an order of liquidation is passed by the Adjudicating Authority. In view of the satisfaction of the conditions provided under Section 33 of the Code, the Corporate Debtor, M/s. Kishori Lal Sudesh Kumar Metals Private Limited is directed to be liquidated in the manner as laid down in Chapter III of the Code - Application allowed.

  ---

• 2021 (10) TMI 1178
  Maintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its dues - Financial Creditors/Homebuyers - existence of debt and dispute or not - HELD THAT:- In order to attract the provisions of IBC, a homebuyer must qualify as an Allotee under the Section 2 (d) of the RERA Act. As the Wing E itself was not complete and registered, thus, the provision of RERA Act shall not apply to the Petitioner in this case as was held by Hon ble Bombay High Court s in MACROTECH DEVELOPERS LIMITED (EARLIER KNOWN AS LODHA DEVELOPERS LTD.) VERSUS THE STATE OF MAHARASHTRA, SANJAY PHULWARIA, PAROMITA PHULWARIA [ 2021 (3) TMI 1266 - BOMBAY HIGH COURT] where it was held that it is apparent that the Act cannot have any retrospective operation and will only apply to those projects which have been completed and registered either prior to commencement of the Act or in the case of ongoing projects, the project or a phase thereof have been completed and received the occupancy certificate/part occupancy certificate within the window of three months from the date of commencement of Section (3) of the Act. The petitioner has failed to provide substantial proof of his intent to take possession of the flat. Merely, showing receipts of the transaction amount could not be considered as a surety that the person shall necessarily take possession of the Flat/Apartment, even if that person is considered as an allotee. The relief as sought by the Petitioner under the provisions of the Indian Contract Act, 1872 are to be presented in front of appropriate Authority as it falls out of the scope of this court - Petition under section 7 of the Insolvency and Bankruptcy Code, 2016 for initiating Corporate Insolvency Resolution Process (CIRP) against Akshar Shanti Realtors Private Limited, the Respondent, is Rejected.

  ---

• PMLA

• 2021 (10) TMI 1177
  Seeking grant of regular bail - Money Laundering - secret banking - acts of cheating and forgery in Netherlands by transferring of money of other persons through Hawala operations and earned commissions in the shape of cash - Section 45 of PMLA Act - HELD THAT:- Section 45 (1) (ii) is akin to Section 37 of the NDPS Act, wherein the Court, while granting bail, has to form an opinion. In a case under the NDPS Act, it is easy for an accused who has been released on bail to repeat such offence, however, in a case under the PMLA like the present case, it is not easy for an accused to commit the offence again while on bail while staying in India - there was no request on behalf of the Netherlands authorities to register a case under Section 44/45 or 65 of the PMLA as at the first instance, a mutual legal assistance was called in 2017 and it is not the case of the ED that by way of any further correspondence, it was communicated to corresponding authorities in Netherlands that the petitioner, who is a Dutch National, is being prosecuted in India, for which he has already been convicted by the Courts at Netherlands. It is well settled principles of law that when the investigation is complete and charge sheet is filed in the Court, conclusion of trial is likely to take a long time, a person/accused like the present petitioner, who is aged about 63 years old, can be released on bail, subject to his furnishing bail/surety bonds and with a condition that his passport shall remain deposited with the Court/Prosecuting Agency and he will not leave the country without seeking prior permission of the Court. It is held that the petitioner qualifies the test under Section 45 of the Act and therefore, the present petition is allowed.

  ---

• 2021 (10) TMI 1176
  Freezing of petitioner s Bank Account - allegations of corruption and money laundering were levelled - diversion of funds - reasons to believe - procedure to be followed by the ED when letters of request are received under Section 60 of the Act from a contracting state - requirement to provide reasons to believe while passing orders under Section 17 of the PMLA - procedure to be followed by the ED while forwarding the reasons to believe and the application under Section 17(4) of the PMLA - requirement to transmit all documents - procedure to be followed by the Adjudicating Authority, upon receipt of the application under Section 17(4) of the PMLA - level of satisfaction to be recorded by the Adjudicating Authority prior to issuance of show cause notice under section 8(1) of the PMLA - requirement to supply Relied Upon Documents while issuing SCN - procedure to be followed for providing inspection of records, and for giving a reasonable hearing to the parties, prior to passing of orders by the Adjudicating Authority under the PMLA. Procedure to be followed upon receiving letters of requests from a contracting state, under Section 60 of the PMLA - HELD THAT:- Under Section 60 of the PMLA, the Director, ED upon being forwarded a letter of request by the Central Government, has to direct an authority under the PMLA (person authorized) to take steps necessary for tracing and identifying the property, of which freezing/seizure is sought. The person authorized has wide powers, including to inquire, investigate and survey under 60(4) of the Act. However, Section 60 (6) of the Act specifically provides that the provisions contained in Chapter V of the Act for surveys, searches and seizures would apply to all letters of request received from a contracting state. The requisite safeguards contained in the provisions of Chapters III and V of the Act, for the purpose of attachment, confiscation, search, freezing/seizure etc., would undoubtedly apply even in respect of requests received from contracting states under Section 60 of the Act. Thus, requests from contracting states cannot be treated at a higher threshold - the ED/ Adjudicating Authority, would have to adhere to all the provisions in respect of recording the reasons to believe , supplying the Relied Upon Documents etc., as is required to be done in the case of domestic enquiries, investigations, surveys, searches and seizures under the provisions of the PMLA, and the Rules and Regulations. Procedure to be followed while passing orders of search and seizure under Section 17 of the PMLA, when letters of request are received under Section 60 of the PMLA - HELD THAT:- The specific procedure that is contemplated under the Act, in respect of investigations, seizures and freezing of assets/property/ bank accounts, ought to be strictly and scrupulously followed, in the manner prescribed under the Act. The material in possession would mean and include all material in possession, in respect of the investigation, which is to be forwarded by the ED to the AA, irrespective of whether the same have been referred to in the reasons to believe or not - On the basis of these reasons to believe and the material in possession of the ED, the ED has to then move an Application under Section 17(4) of the PMLA before the Adjudicating Authority, for retention of the record or the property seized, or for continuation of the freezing order, as applicable. Procedure to be followed by the Adjudicating Authority, upon receipt of an Application under Section 17(4) of the PMLA from the ED - HELD THAT:- As the hearing before the Adjudicating Authority is not merely a procedural hearing, but an adjudicatory hearing, the Adjudicating Authority has to, as per Section 8(2) of the PMLA, first consider the reply to the show cause notice filed by the defendants; secondly, hear all the parties in a meaningful manner; and thirdly peruse all the relevant material placed on record before it, and only then record a finding confirming the search or seizure/ confiscation/ freezing, after reaching a conclusion that the defendant(s) is involved in the offence of money laundering under Section 3 of the Act, or is in possession of proceeds of crime - It would not be permissible for the complainant-ED to show any documents or material to the Adjudicating Authority outside of the hearing being given, or behind the back of the parties concerned. The hearing has to also be transparent and in the presence of the parties concerned. Unilateral hearings in the absence of the opposing party would not be permissible before the AA. If the Adjudicating Authority comes to the conclusion that the party(s) concerned is involved in money laundering, an order would have to be passed in writing under Section 8(3) of the Act - The order passed by the Adjudicating Authority would then be communicated to all the parties concerned. Thereafter, remedies can be availed of by the parties concerned, in accordance with law. Procedure to be followed for inspection of records - HELD THAT:- he provisions relating to inspection and fees for inspection and copying, are in respect of records which are beyond the Relied Upon Documents which may be part of `material in possession . Inspection of such documents can only be given to the party concerned and not to any third parties. Strict confidentiality ought to be maintained. No fee can be charged for supplying the Relied Upon Documents by the Adjudicating Authority directly, or through the ED. What is the level of satisfaction to be recorded by the Adjudicating Authority prior to issuance of show cause notice under section 8(1) of the PMLA? - HELD THAT:- The Adjudicating Authority cannot mechanically go by the reasons recorded by the ED, and has to have separate and independent grounds to believe that such an offence has been committed. The fact that the Adjudicating Authority is again required to have reason to believe as per the provisions of the Act shows that there is a two-tier process which is to be followed prior to the issuance of the show cause notice, namely- satisfaction by the ED and thereafter, independent satisfaction by the Adjudicating Authority. Whether while issuing the show cause notice, all the Relied Upon Documents have to be supplied to the parties concerned? - HELD THAT:- A conjoint reading of Section 8(1) of the PMLA and Regulation 13(2) of the Adjudicating Authority (Procedure) Regulations, 2013, leaves no doubt that the Adjudicating Authority is duty bound to serve all the documents, that it has relied upon i.e., the Relied Upon Documents (RUDs) , while coming to its reason to believe to the party concerned, in a bound paper book. The said service of documents can be effected through the ED, and the Adjudicating Authority has to ensure that the said service has been effected. A simple service of the show cause notice, without the RUDs would not be sufficient. The 30-day period notice would naturally have to be thus counted from the date when the complete RUDs are supplied to the parties concerned/ Defendants, as no effective opportunity to reply would be possible unless all the RUDs are received. What is the procedure to be followed for providing inspection of records, and for giving a reasonable hearing to the parties, prior to passing of orders by the Adjudicating Authority under the PMLA? - HELD THAT:- The Adjudicating Authority has to, as per Section 8(2) of the PMLA, first consider the reply to the show cause notice filed by the defendants; secondly, hear all the parties in a meaningful manner; and thirdly peruse all the relevant material placed on record before it, and only then record a finding confirming the search or seizure/ confiscation/ freezing, after reaching a conclusion that the defendant(s) is involved in the offence of money laundering under Section 3 of the Act, or is in possession of proceeds of crime. It would not be permissible for the complainant-ED to show any documents or material to the Adjudicating Authority outside of the hearing being given, or behind the back of the parties concerned. The hearing has to also be transparent and in the presence of the parties concerned. Unilateral hearings in the absence of the opposing party would not be permissible before the AA. The impugned order under Section 17(1A) of the PMLA in all these petitions, as also the orders passed by the Adjudicating Authority under Section 8 of the PMLA dated 28th December 2020, are set aside - Petition allowed.

  ---

• 2021 (10) TMI 1165
  Seeking concession of pre-arrest bail - Hawala/underground banking and laundering of direct or indirect proceeds of crime - offences punishable under the provisions of Sections 467/471/120-B/108-A of the IPC - HELD THAT:- This court finds it rather surprising that no offence pertaining to the provisions of Sections 420 specifically, of the IPC, has been even alleged to have been committed in the FIR, even though Hawala transactions/ underground banking are alleged to have been transacted as per the FIR itself, which prime facie (at least for the purpose of this petition seeking the extra-ordinary relief of pre-arrest bail), would seem to amount to cheating. In the face of the allegations made in the FIR and the contents of the affidavit filed on behalf of the respondent-State, impossible to accept that no offence of cheating is even alleged to have been committed - Whether or not any such Hawala transactions amounting to cheating eventually are proved, naturally would be a matter of evidence gathered and eventually submitted to the trial court if it comes to that stage; yet, to repeat, as regards this petition filed under the provisions of Section 438 of the Cr.P.C., there are no ground to admit the petitioner to anticipatory bail with the aforesaid allegations made in the FIR itself, as also in the reply filed on behalf of the respondent-State. As regards all evidence being available by way of documents in the form of a power of attorney, the deed of assets and liabilities, and the loan transactions, though this court was swayed by that contention at first blush yet, with the learned Senior Deputy Advocate General, Punjab, having pointed out that Hawala / underground banking transactions have been time and again alleged to have been committed by Shivlal Pabbi in collusion with the petitioner, and the modus operandi of such transactions needs to be disclosed by the petitioner, which may only be possible by way of custodial interrogation and not under the protection of even an interim bail in his favour. Petition dismissed.

  ---

• Service Tax

• 2021 (10) TMI 1175
  Denial of partial refund - Works Contract Service - Sponsorship Service - denial of the cenvat credit on works contract service on the ground that the cenvat credit claimed related to the service tax paid on construction of commercial buildings and civil works that are specifically excluded in the definition of input services as defined under Rule 2(l) of the CENVAT Credit Rules, 2004 - HELD THAT:- The work undertook by the appellant was only in the nature of modernisation/renovation/repairs by which no new structure or complex has come into existence and accordingly, the denial cannot sustain. Denial of cenvat credit on the sponsorship services is made alleging that the cenvat credit availed on this input service had no nexus with the output service exported - HELD THAT:- This Bench in the case of SAMSUNG R AND D INSTITUTE INDIA BANGALORE PVT. LTD. VERSUS COMMISSIONER OF CENTRAL TAX, BENGALURU EAST [ 2021 (3) TMI 1002 - CESTAT BANGALORE] wherein a reference is drawn to the letter of the CBEC dt. 16/03/2012 that has done away with the nexus test and hence denial for want of nexus cannot sustain. Moreover, it has also been held in the above order that the Department having not questioned the cenvat credit availed by the appellant at the initial stage, the same could not be questioned when the claim for refund was made - the denial of cenvat credit on sponsorship services cannot sustain. It is deemed proper to remit this issue in these two appeals to the file of adjudicating authority before whom the appellant shall furnish the challan copies for the satisfaction of the Officer and upon being satisfied, the adjudicating authority shall thereafter follow the above ratio without insisting for nexus and issue the refund - appeal allowed by way of remand.

  ---

• 2021 (10) TMI 1174
  Levy of service tax - Recruitment Services - Office Services - activity of arranging or facilitating recruitment of student in India - services naturally bundled in the ordinary course of business or not - HELD THAT:- It is undisputed that the appellant has an agreement only with IDP Australia. The appellant recruits or facilitates students in India, but does not get any remuneration from Australian universities. For the students who are recruited or admitted by the university in Foreign Country, recommended by appellant in India, IDP Australia gets paid by the Australian/Foreign universities. A share of that commission is given to the appellant by IDP Australia. This scheme of arrangement clearly shows that the IDP Australia is providing services to the foreign universities and is receiving consideration for the same. Recruitment of students in India - HELD THAT:- IDP Australia has created the appellant as a fully owned subsidiary, and has sub- contracted this work to the appellant. Nothing has been brought on record in the show cause notice or in the order to show that the appellant has a direct contract with the foreign universities. There is nothing on record to show that the appellant is liasioning or acting as intermediary between the foreign universities and IDP Australia. All that is evident from the records is that the appellant is providing the services which have been sub-contracted to it by M/s IDP Australia. As a sub contractor, it is receiving commission from the main contractor for its services. The main contractor, IDP Australia, in turn, is receiving commission from the foreign universities who pay a percentage of the tuition fee to IDP Australia - Revenue has not established that the appellant is acting as an intermediary between M/s IDP Australia and the foreign universities, as alleged or held in the impugned order and the show cause notice. Appeal allowed - decided in favor of appellant.

  ---

• 2021 (10) TMI 1173
  Refund of service tax paid on Ocean Freight - constitutional validity of such levy - period April 2017 to June 2017 - HELD THAT:- It is a clear case where the service tax has been held to be unconstitutional hence, the tax which is paid would amount to the one paid under mistake of law. In a similar situation, the jurisdictional Hon ble High Court of Karnataka in one of its decisions in the case of COMMISSIONER OF CENTRAL EXCISE (APPEALS), BANGALORE VERSUS KVR CONSTRUCTION [ 2012 (7) TMI 22 - KARNATAKA HIGH COURT] where it was held that once it is not payable in law there was no authority for the department to retain such amount. By any stretch of imagination, it will not amount to duty of excise to attract Section 11B. Therefore, it is outside the purview of Section 11B of the Act. There are no justification in the reasons adopted for rejection of the refund claim by the lower authorities and hence, the impugned order is not sustainable in the eye of law - appeal allowed - decided in favor of appellant.

  ---

• 2021 (10) TMI 1172
  Refund of service tax paid - appellant had exported goods during the said period without payment of duty but they were also not in a position to use the CENVAT credit of service tax liability - N/N. 27/2012-CE (NT) dated 18.06.2012 - period October 2016 to December 2016 - HELD THAT:- The jurisdictional Hon ble High Court of Karnataka in one of its decisions in the case of COMMISSIONER OF CENTRAL EXCISE (APPEALS), BANGALORE VERSUS KVR CONSTRUCTION [ 2012 (7) TMI 22 - KARNATAKA HIGH COURT] where it was held that once it is not payable in law there was no authority for the department to retain such amount. By any stretch of imagination, it will not amount to duty of excise to attract Section 11B. Therefore, it is outside the purview of Section 11B of the Act. There are no justification in the reasons adopted for rejection of the refund claim by the lower authorities and hence the impugned order is not sustainable in the eye of law - appeal allowed - decided in favor of appellant.

  ---

• 2021 (10) TMI 1171
  Levy of penalty u/s 78 of FA - Non-payment of service tax - services received from abroad, but service tax not paid - Online Information Database Access and Retrieval service - Consulting Engineer services - demand of service tax on Manpower Recruitment or Supply Agency Service - Management, Maintenance and Repair service - reverse charge mechanism - Section 66A of the Finance Act, 1994 - HELD THAT:- The question as to whether service tax has to be paid under reverse charge mechanism prior to the introduction of Section 66A in the Finance Act, 1994 was debated before various forums. In the case of INDIAN NATIONAL SHIPOWNERS ASSOCIATION VERSUS UNION OF INDIA [ 2008 (12) TMI 41 - BOMBAY HIGH COURT] , the Hon ble Bombay High Court held that only with effect from 19.04.2006, service recipients are liable to service tax under reverse charge mechanism. It is also to be noted that even if the appellant pays service tax, they would be eligible for the credit and the situation is entirely revenue-neutral. The appellant has paid service tax along with interest - Taking into consideration all these aspects, it is opined that the penalties cannot sustain and the same require to be set aside - penalties set aside. Demand of service tax - Manpower Recruitment or Supply Agency Service - HELD THAT:- The parent company has deputed its employees to work in the appellant s factory for doing after-sales work and other related works. It is seen in para 2.3 of the agreement that the payment made by the appellant to the parent company is nothing but part of the salary. We do not find any payment of consideration towards rendering of Manpower Recruitment or Supply Agency Service. The appellant company and the parent company being of same group, the secondment employees cannot be said to have been recruited by the parent company to the appellant company. Once the employees are deputed to the appellant, the appellant would enter into individual contract for employment with such employees. A part of the salary that is to be paid to these employees is paid to the parent company in foreign currency for payment to their families. The said amount is not a consideration for services of man power recruitment - the payment made to the foreign company which has been subjected to service tax under Manpower Recruitment or Supply Agency Service cannot sustain - demand set aside. Demand under Management, Maintenance and Repair service - HELD THAT:- From the agreement, it can be seen that agreement is entered between parties for marketing, sales promotion and products support service activities undertaken by KIPL for Komatsu Construction and Mining Equipment sold in Indian market by the foreign company - since the essential character of the agreement is marketing and sales promotion, the activity has to be classified under Business Auxiliary Service . In the case of BAS, as the recipient is situated outside India, such services are to be treated as Export of Service - the demand under Management, Maintenance and Repair Service cannot sustain. The impugned order is modified to the extent of setting aside demands under the category of Manpower Recruitment or Supply Agency Service , Management, Maintenance and Repair Service - demands under Consultancy Engineering Service and Online Database Access and Retrieval Services are upheld along with interest. However, penalties imposed under these services are set aside - Appeal allowed in part.

  ---

• 2021 (10) TMI 1170
  Refund of CENVAT Credit - applicability of time limitation - Section 11B of the Central Excise Act,1944 - claim for quarter October-December 2016 was filed on 05.01.2018 and in respect to the quarter January-March-2017 it was filed on 27.03.2018 - Department s contention is that since from the specified date the appellant filed the refund claim after one year, therefore, the refund is time barred - N/N. 14/2016-CE (N.T.) dated 01st March, 2016 - HELD THAT:- The appellant in respect of the refund claim for the quarter October-December-2016 has filed on 05.01.2018 even though it was sent by post on 02.01.2018. In respect of refund claim for the quarter January-March-2017 it was filed on 27.03.2018. Since the condition in Para 2 of the Notification No. 14/2016-CE (N.T.) is that the assessee is required to file refund claim under Rule 5 not more than one in a particular quarter, the assesssee is barred to file refund claim more than one in a particular quarter, therefore, the period of one year should be reckoned from the end of the quarter for which the refund is sought for - In the present case for the quarter October-December- 2016 the one year period expired on 31st December, 2017. However, the refund was filed on 05.01.2018 ,therefore, it is clearly beyond one year hence this refund amounting to Rs. 1,25,449/- for the quarter October-December-2016 is clearly time barred, hence, the rejection of the same is maintained. Refund claim amounting to Rs. 1,45,736/- pertaining to quarter January-March-2017 - HELD THAT:- Claim was filed within one year from end of the quarter i.e. 27.03.2018 is held within time. Accordingly, the refund of Rs. Rs. 1,45,736/- is not time barred. Appeal allowed in part.

  ---

• Central Excise

• 2021 (10) TMI 1169
  CENVAT Credit - demand based on statements only and is not supported by any documentary evidence - reliability of statements - section 9D of Central Excise Act, 1944 - HELD THAT:- The case of the department is merely based on the statements given by G. Baskaran, proprietor of M/s. Sri Amman Steels and A. Veluchamy of M/s. Kamaraj Steels. These persons have not been examined under sec. 9D of the Central Excise Act, 1944 and therefore their statements cannot be admitted or relied in evidence. The Hon ble High Court of Punjab and Haryana in the case of M/S G-TECH INDUSTRIES VERSUS UNION OF INDIA AND ANOTHER [ 2016 (6) TMI 957 - PUNJAB HARYANA HIGH COURT] has held that the procedure under section 9D of Central Excise Act, 1944 has to be followed in adjudication proceedings. If the procedure of examining the witnesses is not done, the statement becomes irrelevant and no reliance can be placed on such statements. The content of the document (lab test report) has to be proved by primary evidence i.e., document itself. Document when reduced in writing are considered to be best evidence and is placed on a higher footing than the oral evidence. The very object of documenting something is to perpetuate the memory of what has been written down so as to furnish prove of itself. If the department relies upon the difference in the chemical composition of the raw materials used by the appellant and the goods cleared by the manufacturer as waste from their factory to be different, then they have to produce both these lab test reports. The difference is comprehended by the department on the basis of the statement of Shri P. Periyannan which is not admissible in law. None of these persons have been examined at the time of adjudication and only the statements are relied to confirm the demand. There are no hesitation to conclude that the department has miserably failed to establish the allegations raised in the Show Cause Notice - demand cannot sustain - appeal allowed.

  ---

• CST, VAT & Sales Tax

• 2021 (10) TMI 1168
  Refund claim by carry forward of the same to the next tax period - transitional ITC to the electronic credit ledger - Section 5 (3) and Sections 6 and 8 of the CST Act, 1956 - HELD THAT:- It is an undisputed case between the parties that the application for refund alongwith interest filed by the Petitioner is pending consideration with the Respondents, despite a reminder application dated 23.07.2021. It is incumbent upon the Respondents to take a decision on the application for refund. The concerned Respondent(s) are directed to decide the claim of the Petitioner for refund for the relevant period, in accordance with law and also keeping in mind the principle of unjust enrichment - petition disposed off.

  ---

• 2021 (10) TMI 1167
  Reversal of ITC - the assessment are sought to be re-opened and the ITC availed by the dealers are directed to be reversed, when a mismatch occurs - whether the instructions given by the first respondent through his letter in turn has been acted upon by the second respondent, by giving any direction to the third respondent? - HELD THAT:- If such an instruction has already been given, it is the duty of the Assessing Officer to revisit the assessment for the two assessment years, and in this regard, if any further inputs or documents are required to verify the alleged mismatch, summons can be issued to the petitioner to get those documents and if any such summon is issued, it is open to the petitioner to make response to the said summons and accordingly, the exercise of revisiting the assessment order can be completed by the third respondent. There shall be a direction to the second respondent that, if the second respondent has not acted upon by giving any suitable direction to the third respondent in respect of the petitioner s case for the assessment years, an instruction can immediately be given to the third respondent, who on receipt of such instructions or already received the instructions, shall act upon by revisiting the assessment for the respective years and accordingly, complete the reassessment process - Petition disposed off.

  ---

• Indian Laws

• 2021 (10) TMI 1166
  Applicability of RBI circular No. RBI/2009-10/231 dated 24th November, 2009 - opening and operation of accounts and settlement of payments for electronic payment transactions involving intermediaries and the same applies to the Petitioner - e-commerce entity - transaction between natural persons or not - intent of petitioner - HELD THAT:- Admittedly, herein the transaction is not between two natural persons. Petitioner operates e-commerce entity to provide information on digital network and acts as a facilitator between buyer and seller. Petitioner does not own the product and sell the goods to the customer directly. Since Petitioner is not following inventory based model, it has no control over the transaction between two parties i.e. buyer and seller. Petitioner simply, receives and stores the information on behalf of the seller and buyer and acts as a facilitator. In the order issuing process, the learned Magistrate has clearly understood that it was not conventional transaction and human contact is minimal. The allegations do not constitute an offence of cheating, nor the allegations disclosed the fraudulent intention of the Petitioner, when Complainant placed an order of the product in question. The Petitioner being a mere facilitator, Complainants allegations that he was induced to buy a product with intention to cheat him, is wholly absent. There is no material on record to even suggest that the Petitioner had a direct involvement and inducing the Complainant to place an order with intention, not to deliver it, even after receiving the consideration for the same. Thus, neither the complaint, nor inquiry report submitted by the Investigating Officer constitute the offence of cheating against the Petitioner. In the case in hand, the allegations do not imply or suggest that any point of time, the Petitioner induced the Complainant to part with property (consideration for a product) with a dishonest intention, not to deliver the same. On the contrary, facts of the case show that the Complainant volunteered to purchase the product through the e-commerce market platform of the Petitioner from the seller. Thus, the ingredients to constitute offence of the cheating are wholly absent. The learned Magistrate failed in appreciating the facts of the case and thereby committed an error in concluding that prima-facie case of cheating has been made out. Petition allowed.

  ---