TMI Tax Updates - e-Newsletter
October 31, 2023

Case Laws in this Newsletter:

GST Income Tax Customs Corporate Laws Securities / SEBI Insolvency & Bankruptcy PMLA Service Tax Central Excise Indian Laws

Articles

1. Difference Between PAN Card and TAN Number

   By: Ishita Ramani

2. Services of Printing Question Papers for Examinations to Educational Institutions is exempt from GST

   By: Bimal jain

3. Automatic and hybrid generation of status holder certificate by DGFT

   By: Vivek Jalan

4. LOOK OUT CIRCULAR IN VIOLATION OF THE PROVISONS OF ‘FEMA’

   By: DR.MARIAPPAN GOVINDARAJAN

5. Sikkim HC to Decide on Rule 31A of the CGST Rules; Next Hearing on December 05, 2023

   By: Bimal jain

News

1. Union Finance Minister Smt. Nirmala Sitharaman inaugurates the first Global Conference on Cooperation in Enforcement Matters (GCCEM) in New Delhi

Notifications

Companies Law

1. G.S.R. 802(E) - dated 27-10-2023 - Co. Law

Companies (Prospectus and Allotment of Securities) Second Amendment Rules, 2023

Customs

2. 62/2023 - dated 28-10-2023 - Cus

Exempts export duty on Onions w.e.f. 29.10.2023 - Seeks to amend notification No. 27/2011-Customs, dated the 1st March, 2011.

3. 61/2023 - dated 28-10-2023 - Cus

Effective rate of export duty on onion - Notification prescribing rate as [40%] rescinded.

DGFT

4. 42/2023 - dated 28-10-2023 - FTP

Imposition of Minimum Export Price on export of Onions

LLP

5. G.S.R. 803(E) - dated 27-10-2023 - LLP

Limited Liability Partnership (Third Amendment) Rules, 2023.

Highlights / Catch Notes

GST

• High Court Quashes GST Cancellation: Authorities Failed to Properly Investigate Alleged Fraud and Misstatements.

  Case-Laws - HC : Cancellation of GST registration of petitioner - allegation of fraud, wilful misstatement or suppression of facts - In spite of the petitioner’s submission that the complete details of purchases and sales can be verified at any point of time, the 2nd respondent without resorting to such logical and legal exercise, simply carried away by the recommendations of the Inspecting Authority - Order of cancellation quashed - HC
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• Company Challenges Summons Validity; Seeks Show Cause Notice u/s 73 for GST Dispute; High Court Issues Directions.

  Case-Laws - HC : Determination of differential amount of GST - validity of summons and enquiry proceedings - petitioner-company has expressed its intention to contest the proceedings claiming that the issue involving interpretation of law. - Petitioner sought to issue SCN u/s 73 before raising any demand. - Accordingly, directions issued - HC
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Income Tax

• High Court Deletes Penalty u/s 271(1)(c) in Transfer Pricing Case Due to Debatable Base Erosion Theory Issue.

  Case-Laws - HC : Penalty u/s. 271(1)(c) - Transfer pricing adjustment - Debatable issue - Base Erosion Theory - Reading a particular paragraph of the observations of the AO’s order reproduced by the CIT(A) itself would indicate that there were two views possible and that the issue was debatable. - Penalty was rightly deleted - HC
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• Court Rules No Deductions for Purchases Made Without Account Payee Cheques u/s 40A(3) for This Assessment Year.

  Case-Laws - HC : Addition u/s 40A(3) - purchases made otherwise than by account payee cheque - Genuineness of expenses - Even if the petitioner’s/assessee’s case fell within the ambit of the 1977 circular, the petitioner/assessee could not have been allowed deductions on the subject payments made by the petitioner/assessee as the rule under which leeway was claimed did not exist for the AY in question. - HC
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• AO Cannot Use Section 147 for Unauthorized Review; "Change of Opinion" Prevents Misuse in Reassessment Process.

  Case-Laws - HC : Reopening of assessment u/s 147 - reason to believe - Assessing Officer has no power to review; he has the power to re-assess. But re-assessment has to be based on fulfillment of certain pre-condition and if the concept of “change of opinion” is removed, as contended on behalf of the Department, then, in the garb of re-opening the assessment, review would take place. One must treat the concept of “change of opinion” as an in-built test to check abuse of power by the Assessing Officer. - HC
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• Non-compete compensation for 10-year period deemed capital receipt; not taxable under current regulations.

  Case-Laws - HC : Nature of receipt - non- compete fee - capital or revenue receipt - Clearly, for the period in which the non-compete agreement was to operate, which in this case was 10 years, the assessee’s source of income had been clamped and, therefore, compensation received by him could only be treated as capital receipt. - Not taxable - HC
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• Assessee Granted Immunity from Penalty u/s 270AA After Revising Return and Offering Income for Taxation.

  Case-Laws - AT : Penalty u/s 270A - under-reporting of income - taxability of interest - Immunity from imposition of penalty u/s 270AA - due to ongoing litigation about the taxability of the said income and misconception of law, the assessee claimed it as exempt. Nonetheless, the fact remains that the assessee filed revised return, offered the said income to tax during the course of assessment proceedings itself. - No penalty - AT
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• Assessee Successfully Contests Addition u/s 68 and Section 115BBE; Loan Repayment Details Prove Crucial.

  Case-Laws - AT : Addition u/s 68 - taxation u/s 115BBE - the assessee vehemently argued that the assessee has already repaid the entire loan amount of 14 lenders, the details of whom were furnished by assessee in a chart - There is no allegation of assessing officer that any of such lenders/ creditors are part of syndicate of accommodation entry provider. - Additions deleted - AT
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• Reassessment u/s 147 Overturned Due to Lack of Specificity in Recorded Reasons for Unexplained Credit.

  Case-Laws - AT : Reassessment of assessment u/s 147 - Reason to believe - unexplained credit - In the reasons recorded, it is nowhere mentioned as to who had given bogus entries/transactions to the assessee or to whom the assessee had given bogus entries or undertaken alleged transactions. It is also nowhere mentioned as to on which dates and through which mode and entity/companies the bogus entries and transactions were made by the assessee. - Reassessment order quashed - AT
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• Housing Project Tax Deduction Confirmed Valid by CIT(A) u/s 80(IB)(10) Based on Initial Approval Date.

  Case-Laws - AT : Deduction u/s 80(IB)(10) in respect of POR project - CIT(A) has observed that in view of the provisions of Section 80(IB)(10) of the Act, when the approval of the Housing Project is obtained more than once, such Housing Project shall be deemed to have been approved on the date on which the building plan of such Housing Project is first approved by local authorities - Order of CIT(A) allowed the claim is correct - AT
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• Assessee Firm's Net Profit Estimation Stands; Revenue Authorities Can't Challenge Business Expenditure Decisions.

  Case-Laws - AT : Estimation of Net Profit before remuneration to Partners - The discretion exercised about how much remuneration shall be paid to the partners is upon the discretion of the assessee firm cannot be basis to doubt the net profit itself. It is a settled position of law that revenue cannot sit into the armchair of the businessman and question the reasonableness of expenditure. - AT
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• Pr. CIT cannot revise assessment u/s 263 if Project Completion Method is consistently applied for income computation.

  Case-Laws - AT : Revision u/s 263 - Computation of income from construction and service contracts u/s 43CB - When the assessee is consistently following the Project Completion Method which is not prohibited by law the acceptance of the same by the AO cannot be held as erroneous decision on the part of the AO and consequently the Pr. CIT cannot invoke the provisions of section 263 of the Act on a claim which is bona fide and a possible view not prohibited by law. - AT
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• Court to Reassess Land Sale's Capital Gains and "Watan Land" Status u/s 2(47) of Income Tax Act.

  Case-Laws - AT : Accrual of Capital gain - sale of land or not? - real owner - transfer u/s 2(47) concluded of capital asset or not? - Assessee pleaded before the AO that it was a “Watan Land” hence there will be no cost of acquisition and hence no capital gain - Matter remanded back for de-novo adjudication - AT
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• Income from IT support services in India is not taxed separately from software license income under FTS rules.

  Case-Laws - AT : Income taxable in India - receipts on account of support and maintenance services to its customers in India - Fees for Technical Services (‘FTS’) - the income from IT Support services, even if viewed independent of software license income, is not chargeable to tax. - AT
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Customs

• Quicklime Import Classification Rejected: Fails Purity Test, Lacks Required Calcium Oxide Content Under Sub-heading 2825.

  Case-Laws - AT : Classification of imported goods - Quicklime - As per the test report of samples, the description of the goods as ‘white lumps of irregular shapes & sizes along with waste powder - in terms of the HSN explanatory notes, both on account of presence of specified material making it not in pure state and the composition of calcium oxide not upto the requisite 98% making it not a product of high degree, would not enable the imported goods to be classified under sub-heading 2825. - AT
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DGFT

• Onion Exports Unrestricted: Minimum Price Set, Export Duty Now Zero.

  Notifications : Minimum Export Price on export of Onions imposed - Otherwise export is 'Free' - Further export duty on onions reduced to NIL
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Indian Laws

• Exploring Cheque Dishonor Conviction: Burden of Proof Shift u/s 138 of Negotiable Instruments Act.

  Case-Laws - HC : Dishonour of Cheque - validity of convicting and sentencing the revision petitioner - The law has crystallized that once the complainant establishes the concoction of the five ingredients under Section 138 of the N.I.Act, then the reverse onus of proof shifts to the accused to set up a probable defence. If he discharges the onus of proof and casts a doubt about the existence of a debt, then the prosecution has to fail. - HC
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SEBI

• Insider Trading Violation: Appellant Used Undisclosed Price-Sensitive Info, Breaching SEBI Act Section 12A and PIT Regulation 4(1.

  Case-Laws - AT : Insider trading in the scrip of the Company - Appellant was in possession of this price sensitive information and had traded in the scrip during the period in question. In our opinion, obtaining necessary pre clearance and making requisite disclosures were not enough to show that his trades were not motivated by UPSI - Appellant had violated Section 12A(d) and (e) of the SEBI Act, 1992 and Regulation 4(1) of the PIT Regulations. - AT
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Service Tax

• Appellant must pay service tax on guarantee commission to Karnataka Govt; demands beyond limitation period are void.

  Case-Laws - AT : Demand of service tax on guarantee commission under reverse charge mechanism - the appellant is liable to discharge service tax on the Guarantee commission paid to Government of Karnataka during the period 01.07.2012 to 31.03.2016 for providing unconditional and irrevocable guarantee in raising funds from the debt market. - However, demand beyond the normal period of limitation set aside - AT
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Central Excise

• Corrugated Boxes and Laminated Paper Entitled to Duty Exemption Under Heading 48239019; Demand Denial Lacks Merit.

  Case-Laws - AT : Classification of goods - Corrugated Boxes and Laminated Paper - Benefit of exemption from duty - These goods are correctly classifiable under heading 48239019 the benefit of exemption under Notification will be admissible to the appellant. Thus there are no merits in the demand made by denying the benefit of said exemption notification - AT
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Case Laws:

• GST

• 2023 (10) TMI 1292
  Cancellation of GST registration of petitioner - cancellation on the ground that Registration has been obtained by means of fraud, wilful misstatement or suppression of facts - HELD THAT:- Though the show cause notice is vague, the petitioner seems to have submitted its reply dated 24.03.2023 with requisite particulars to the best of its ability. It clearly stated that to maintain proper supply chain and to have better control and operational efficiency on cost as well as convenience of operations, it applied for GST registration in A.P. by obtaining lease of part of the property owned by its parent company in Kuppam, Andhra Pradesh. The petitioner mentioned that all the TMT purchases of the petitioner are from its parent company and sales were spread over to different States. The observations of the 2nd respondent would reveal that mainly basing on the fact that the registration of the petitioner and its parent company emanate from same premises, the 2nd respondent, without verifying the records to know whether the petitioner involved in issuing and obtaining the fake invoices and doing fake business to avoid tax, came to the conclusion that the place of business shown by the petitioner is not suited for the present business activities and hence, recommended for cancelation - it cannot be comprehended, even if the place of business of the petitioner for argument sake is not conducive for its business, how the said fact can be treated as sufficient to conclude that the petitioner obtained registration by committing fraud or wilful misstatement or suppression of facts. In spite of the petitioner s submission that the complete details of purchases and sales can be verified at any point of time, the 2nd respondent without resorting to such logical and legal exercise, simply carried away by the recommendations of the Inspecting Authority i.e., Deputy Assistant Commissioner who on a conjuncture suspected that the taxpayer may be engaged in bill trading without proper receipt and supply of goods, for which there is no proper basis. Therefore, the impugned registration cancellation order is not sustainable in the eye of law. The cancellation order dated 20.04.2023 passed by 2nd respondent and the appellate order dated 07.07.2023 passed by 1st respondent are set aside with a direction to the respondent authorities to restore the GST registration of the petitioner within one (1) week from the date of receipt of a copy of this order - Petition allowed.

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• 2023 (10) TMI 1291
  Levy of additional tax liability for execution of subsisting Government contracts either awarded in the pre-GST regime or in the post GST regime without updating the Schedule of Rates (SOR) incorporating the applicable GST while preparing Bill of Quantities (BOQ) for inviting the bids. HELD THAT:- Considering the submissions of the parties this writ petition is disposed of by giving liberty to the petitioner to file appropriate representation in the aforesaid regard as referred in preceding paragraph of this order, before the Additional Chief Secretary, Finance Department, Government of West Bengal within four weeks from date. On receipt of such representation the Additional Chief Secretary, Finance Department shall take a final decision within four months from the date of receipt of such representation after consulting with all other relevant departments concerned. Petition disposed off.

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• 2023 (10) TMI 1290
  Maintainability of petition - appealable forum not available - non availability of alternative remedy - HELD THAT:- The matter shall appear for final hearing in the monthly list of December, 2023. Statute requires that for filing appeal before the first appellate authority against the order in original petitioner is to make pre-deposit of 10% of the tax and in case petitioner wants to challenge the order of the first appellate authority before the Tribunal, petitioner/assessee will have to make a pre-deposit of additional 20% of the remaining disputed tax. But, in this case, petitioner submits that the respondent authority has recovered more than the aforesaid amount which are required to be paid by pre-deposit before the first appellate authority and the second appellate authority and recovered even before the expiry of the statutory period of time to file appeal before the Tribunal. Considering the facts and circumstances of the case, respondent authority concerned is directed to refund the excess amount of pre-deposit within two weeks from the date of communication of this order, subject to compliance of any other formalities which are required under the law.

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• 2023 (10) TMI 1289
  Condonation of delay in filing appeal - appeal of the petitioner has been dismissed on the ground of limitation by taking the date of order under challenge as the date of communication - HELD THAT:- The appeal preferred by the petitioner on 13/14.04.2023 was within limitation as the date of communication of the order was 22.03.2023, when the petitioner for the first time became aware of the order dated 03.12.2021, but the respondent no. 2 arbitrarily dismissed the appeal as barred by time - Matter requires consideration. List as fresh on 11.09.2023. Both the appeals to be heard together.

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• 2023 (10) TMI 1288
  Taxable Supply or not - determination of differential amount of GST - validity of summons and enquiry proceedings - petitioner-company has expressed its intention to contest the proceedings claiming that the issue involving interpretation of law. - Petitioner sought to issue SCN u/s 73 before raising any demand. - providing complete turnkey solutions from concept to commissioning and maintenance of the electrification works and other civil works to its customers. - HELD THAT:- From the tenor of the reply filed on behalf of the respondents, it appears that still the inquiry is going on and final adjudication as per Section 73 of the CGST Act has not been done till date. This writ petition is disposed off while directing the respondents not to insist the petitioner-company to pay the amount of Rs.5,51,49,553/-, as indicated in the impugned notices, till final adjudication is taken place under Section 73 of the CGST Act.

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• Income Tax

• 2023 (10) TMI 1287
  Condonation of delay - ITAT dismissed the appeals on the ground that there is a delay of 246 days and there is no explanation for condoning the delay - HELD THAT:- As noticed that the order of the Commissioner of Income Tax (Appeals) dated 21.02.2013 was communicated to the Appellant only on 18.12.2013. Thereafter, the Appellant immediately obtained a certified copy of the order passed by CIT(A) on 30.12.2013 and preferred an appeal on 06.01.2014. In the facts and circumstances of the case we deem it appropriate to condone the delay. Considering the amount involved in the appeals, we are also of the opinion that the appellant must have an opportunity of contesting the appeals before the Tribunal. We set aside the order passed by the Income Tax Appellate Tribunal [ 2018 (2) TMI 2106 - ITAT JAIPUR] followed by decisions of the High Court [ 2018 (8) TMI 2136 - RAJASTHAN HIGH COURT] [ 2018 (8) TMI 2135 - RAJASTHAN HIGH COURT] and restore the matters back on the file of the Income Tax Appellate Tribunal for consideration of the matters on merits. This will be subject to the Appellant s paying an amount of Rs. 25,000/ towards cost to the respondent.

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• 2023 (10) TMI 1286
  Penalty u/s. 271(1)(c) - Reference to Explanation no. 7 while initiating penalty were made or not - application of arm s length principles which resulted in the erosion of taxes payable in India to the extent of 24% - Base Erosion Theory was adopted and the application of arm s length principles for making TP adjustment was not proper - Divergence of opinion between the Koltaka Bench and the Pune Bench of the Tribunal - Assessee had charged additional fees from its Indian AES in order to comply with Arm s Length Standards, the additional fees would have been taxed in India in the hands of the appellant @ 10% on gross basis, while at the same time, the said additional fees would have been allowed or deducted in the hands of the payers - HELD THAT:- What is evident from the discussion herein above is that the CIT(A) did not accept the arguments on base erosion since the arguments were considered and dealt with in length by the ITAT Kolkatta Special Bench in the case. According to the CIT(A) even if the assessee was charging lower fees for technical services to its Indian AEs and transfer pricing is proposed in the hands of the assessee, no deduction could be claimed by Indian AEs. Reading a particular paragraph of the observations of the AO s order reproduced by the CIT(A) itself would indicate that there were two views possible and that the issue was debatable. Therefore even if the deemed provision on the basis of Explanation 7 is pressed into service, then also there can be a case based on good faith and it cannot be termed as concealment. What is evident is that the AO has found that the view of the ITAT in Cummins Inc [ 2016 (7) TMI 1689 - ITAT PUNE] on facts may not apply. Even though, a Mumbai Bench decision in the case of 3I INFOTECH LTD. [ 2010 (7) TMI 843 - ITAT MUMBAI] was on the subject of base erosion but the AO did not consider it appropriate as the Ahmedabad Bench had relied upon the Special Bench order of Kolkatta. These findings itself suggest that there are in fact more than two opinions on the subject of base erosion. In the case of Toyota Kirloskar Motor (P) Ltd. V. Union of India [ 2019 (6) TMI 932 - KARNATAKA HIGH COURT] relied upon by Shri Soparkar, Explanation 7 of Section 271(1)(C) was under consideration where the Court held that the Explanation cannot be applied blindly in a routine manner to levy penalty on the additions made in the absence of any material to establish the concealing of income or furnishing inaccurate particulars. Moreover, they are independent and distinct from the assessment proceedings. Also decided in VERIZON INDIA PVT. LTD. [ 2016 (8) TMI 1287 - DELHI HIGH COURT] in the absence of any overt act, which disclosed conscious and material suppression, invocation of Explanation 7 in a blanket manner could not only be injurious to the assessee but ultimately would be contrary to the purpose for which it was engrafted in the statute. It might lead to a rather peculiar situation where the assessees who might otherwise accept such determination may be forced to litigate further to escape the clutches of Explanation 7. What is therefore evident from the above is that provisions of Section 271(1)(C) and Explanation 7 is clearly not applicable. Also merely because the appeal of the assessee was admitted on the issue of quantum, the fact that the `Revenue s appeal ipso-facto requires to be admitted, is not necessary. Penalty need to be deleted - Decided in favour of assessee.

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• 2023 (10) TMI 1285
  Addition u/s 40A(3) - purchases made otherwise than by account payee cheque - HELD THAT:- There are undated confirmations that bear identical language. This brought the genuineness of the transactions into serious doubt. According to us, even if we were to accept that the reason given in the confirmation letters was correct, that is, the appellant/assessee was a new entrant in the business, we believe, to allay concerns of the suppliers i.e., the above-mentioned concerns, payments could have been made through bank drafts or other modes, whereby, banking channels were used for the subject payments. We find that the Tribunal has returned with a finding of fact that these confirmations were produced for the first time before the CIT(A). The grounds of appeal preferred before us show that there is nothing stated that would indicate that the appellant/assessee has averred that the said observation was perverse. However, as indicated hereinabove, even if we were to assume that these confirmation letters were produced before the AO, it would still not help the cause of the assessee. Clearly, payments made by the assessee to the concerns violated Section 40A(3) as they were not made through an account payee cheque drawn on a bank, account payee bank draft or through the use of electronic clearing system through a bank account, and therefore, to fall within the ambit of the 1977 circular, the appellant/assessee was required to establish the genuineness of the transactions. The appellant/assessee having failed to do so, led to the deduction being rightly disallowed for the subject payments. Even if the petitioner s/assessee s case fell within the ambit of the 1977 circular, the petitioner/assessee could not have been allowed deductions on the subject payments made by the petitioner/assessee as the rule under which leeway was claimed did not exist for the AY in question. Decided against assessee.

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• 2023 (10) TMI 1284
  Reopening of assessment u/s 147 - reason to believe - lump sum compensation receipts - HELD THAT:- As during the course of assessment proceedings, the petitioner had filed letters - also furnished the orders of the Court and related documents such as memorandum of understanding, entered into between the petitioner and the Ratna developers, ledger, account of the lump-sum compensation and the bank statement showing that the payment was made with regard to the lump sum compensation. AO at the time of original assessment proceedings after satisfying himself about the correctness of the lump-sum compensation had passed an assessment order under section 143(3) of the Act? - there was no reason for the author of the notice u/s 148 to have reason to believe or come to a conclusion that the income had escaped assessment of the year under consideration. Reading of the annual report and the auditor s report indicates that in note 19 of other expenses and entry of lump-sum compensation was made. Even in response to the notice under Section 143(2) of the Act, a specific response was given under the headlump- sum compensation, producing the orders, the Court and relating documents to justify the lump-sum compensation paid by the company. Whereas the letter would indicate that a reference was made to memorandum of understanding between Ratna Bhumi Developers Private Limited and Ratna Developers along with bank statements earmarking the payments made to Ratna Developers for the compensation - during the entire scrutiny assessment, the question of the debit of an amount of Rs. 135.00 lakhs was gone into. In fact, the reasons recorded would indicate the fact that the very records were sought to be claimed as the basis of information for reopening. Reasons recorded indicate that there was no new tangible material or information or fresh evidence which came into the possession of the assessing officer and the entire basis of the reasons to believe was founded on the original assessment proceedings. Having built an opinion on the basis of the original assessment records which did not call for any clarifications and having accepted the same, it was not open for the Assessing Officer to review and recall that opinion and take a different stand based on the same set of facts and having accepted the view after scrutiny, as held by the Supreme Court in the decision in case of Kelvinator of India Ltd. [ 2010 (1) TMI 11 - SUPREME COURT] . Assessing Officer has no power to review; he has the power to re-assess. But re-assessment has to be based on fulfillment of certain pre-condition and if the concept of change of opinion is removed, as contended on behalf of the Department, then, in the garb of re-opening the assessment, review would take place. One must treat the concept of change of opinion as an in-built test to check abuse of power by the Assessing Officer. Hence, after 1st April, 1989, Assessing Officer has power to re-open, provided there is tangible material to come to the conclusion that there is escapement of income from assessment. Reasons must have a live link with the formation of the belief. Apparently, the twin condition i.e. existence of new tangible material and failure on the part of the assessee to disclose all material facts (truly and fully), does not exist. Thus, jurisdiction under Section 148 cannot be exercised. Decided in favour of assessee.

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• 2023 (10) TMI 1283
  Deduction qua bad debts acquired from predecessor-in-interest on acquisition of its commercial vehicle division in a scheme of demerger - whether the successor-in-interest i.e., the respondent/assessee, could have written off the debts which were already turned bad? - HELD THAT:- According to us, this issue is no longer res integra, given the factual matrix arising in the instant matter and in view of the judgment T. Veerabhadra Rao [ 1985 (7) TMI 2 - SUPREME COURT] . This view has also found resonance with a judgment rendered in CIT v. Times Business Solution Ltd [ 2013 (4) TMI 370 - DELHI HIGH COURT] . Having regard to the factual position and the legal principles enunciated in the judgments referred to hereinabove, we are of the opinion that no interference is called for with the impugned order. Disallowance concerning bad debts was correctly deleted - no substantial question of law.

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• 2023 (10) TMI 1282
  Nature of receipt - non- compete fee - capital or revenue receipt - assessee had been restrained both directly and indirectly from undertaking any business which would compete with the business of WSIL - as per CIT(A) non- compete fee was a camouflage for payment of money or transfer of business - HELD THAT:- According to us, a bare perusal of what is recorded by the CIT( A) of his order would show that the consideration was paid against various agreements, which included the non-compete agreements. A plain reading of the extract embedded in the aforementioned proceeding order does not convey that the assessee had conceded, as is sought to be portrayed before us, that the non-compete agreements were sham agreements and the consideration was artificially bifurcated into that which were paid for various assets [both fixed and movable] and transfer of IPR rights. There is, in fact, no elucidation of the note said to have been submitted by the authorized representative of the assessee. Tribunal, in our view, has applied the correct test, which is that there was no material on record for the CIT(A) to conclude that non- compete fee was a camouflage for payment of money or transfer of business. Tribunal, in brief, is seeking to convey is that because the assessee had executed a non-compete agreement with WSIL, the conversation the CIT(A) had with the assessee could not be used to vary, add or subtract from the obligations contained in the said agreement. Assessee had been restrained both directly and indirectly from undertaking any business which would compete with the business of WSIL. Clearly, for the period in which the non-compete agreement was to operate, which in this case was 10 years, the assessee s source of income had been clamped and, therefore, compensation received by him could only be treated as capital receipt. - Decided in favour of assessee.

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• 2023 (10) TMI 1281
  Reopening of completed assessment - petitioner was not eligible for exemption u/s 10 AA being profits not derived from any export from its unit of Special Economic Zone - HELD THAT:- As in coming to the conclusion that the petitioner was not entitled or not eligible for exemption u/s 10AA and that the assessee had wrongly claimed the exemption, what is evident from reading the reasons and the order disposing the objections is that the author of these communications is the very same Officer who in response to a notice u/s 142 having been satisfied with the explanation given by the petitioner vide its communication dated 11.12.2019 passed an assessment order, accepting the explanation tendered by the petitioner in the communication of 11.12.2019. This case can be no better example of a case where an Officer at the drop of the hat has sought to change his opinion which is contrary to the decision of the Supreme Court in the case of CIT Vs. Kelvinator of India Ltd [ 2010 (1) TMI 11 - SUPREME COURT ] Thus the petition is allowed. The impugned notice and the order disposing of objections are quashed and set aside. Decided in favour of asssessee.

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• 2023 (10) TMI 1280
  Levy of fringe benefit tax (FBT) on expenditure claimed concerning advertisement - Assessee claimed that it may not be able to produce all bills, as the record was voluminous and maintained in different branches - CIT(A) had arrived at a solution, by giving assessee benefit to the extent that the bills were produced and balance amount [ 50%] was disallowed - HELD THAT:- Even though the Tribunal has given complete benefit of the expenditure claimed by assessee in terms of 115WB read with Section 115WC of the Income Tax Act, 1961 [in short, the Act ], the respondent/assessee would be quite satisfied if the order of the CIT(A) is sustained instead. As revenue, says that this may perhaps be the best outcome, given the fact that this is the matter which pertains to AY 2008-09 and even if this Court were to remand the matter to the AO, it will be difficult for the respondent/assessee to produce the record. Since substantial number of bills were produced by the respondent/assessee qua which no defect was found, this may be a reasonable outcome in the present appeal. We tend to agree with the submissions made by both parties impugned order is set aside, and instead the order passed by the CIT(A) is restored.

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• 2023 (10) TMI 1279
  Estimation of income - bogus purchases - CIT(A) determined the disallowance @ 4.5% of the alleged purchase instead of 12.5% determined by the AO - HELD THAT:- We find that the order of the Ld. CIT(A) is cogent based on the facts and placing reliance on the various judgments of Vijay Protein Ltd. [ 1996 (1) TMI 144 - ITAT AHMEDABAD-C ] and N.K. Proteins Ltd. [ 2003 (1) TMI 228 - ITAT AHMEDABAD-C ], Presdient Industries [ 1999 (4) TMI 8 - GUJARAT HIGH COURT ] and Balchand Ajit Kumar [ 2003 (4) TMI 76 - MADHYA PRADESH HIGH COURT ] We decline in interfere with the order of the Ld. CIT(A). Appeal of the Assessee is dismissed.

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• 2023 (10) TMI 1278
  Rectification u/s 154 of the intimation issued u/s 143(1)(a) - Deduction u/s 80P(2)(a)(i) denied - doctrine of merger - HELD THAT:- Application as per the mandate of sub-section (1A) of Section 154 of the Act was in itself not maintainable for the reason, that as per the doctrine of merger, after the intimation issued u/s 143(1)(a), dated 07.06.2019, had been subjected to appeal before the CIT(Appeals), then, the right of the assessee to seek rectification u/s 154 before the A.O was confined to only such matter/matters other than that which had been considered and decided by the CIT(Appeals). As the issue in the present case, i.e., the entitlement of the assessee for claim of deduction u/s 80P(2)(a)(i) had already been considered and decided by the CIT(Appeals), therefore, the application thereafter filed by the assessee society u/s. 154, on the said count itself was not maintainable. Accordingly, the order passed by the A.O. declining the assessee s request for rectification vide his order u/s. 154 is approved in terms of our aforesaid observations.

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• 2023 (10) TMI 1277
  Reopening of assessment u/s 147 - reasons to believe - unaccounted cash purchases - Non issue of valid notice u/s. 143(2) - HELD THAT:- We concur with the view taken by the CIT(Appeals) that the same clearly reveals non-application of mind on the part of the A.O who had initiated proceedings for making fishing and roving inquiries which cannot be justified to be drawn in the garb of proceedings u/s. 147 of the Act. Apart from that, as the A.O had neither in the reasons to believe nor in the assessment order as well as in the course of proceedings before the CIT(A) placed on record any material/evidence which would evidence that the assessee had made the impugned unaccounted cash purchases from/through Shri Ramesh Kundanani therefore, as observed by the CIT(Appeals) and, rightly so, it can safely or in fact inescapably be inferred that there was no tangible material available with the A.O, on the basis of which, he could have arrived at a belief that the income of the assessee chargeable to tax had escaped assessment. We concur with the view taken by the CIT(Appeals) that as the A.O had neither in the reasons to believe or in the body of the assessment order or in the course of the proceedings before the CIT(Appeals) placed on record any material/ evidence which would reveal that he had any tangible material available before him to arrive at a bonafide believe that income of the assessee chargeable to tax had escaped assessment, therefore, in absence of any such tangible material justifying the formation of bonafide belief, the very jurisdiction assumed by him u/s. 147 of the Act cannot be sustained. No infirmity in the view taken by the CIT(Appeals), who had rightly observed that in the absence of any tangible material that would have justified the formation of a bonafide belief on the part of the A.O that the income of the assessee chargeable to tax had escaped assessment, the assumption of jurisdiction by the A.O u/s. 147 of the Act was devoid and bereft of any force of law. Admittedly, the notice u/s. 143(2) of the Act could have been issued to the assessee by 30.09.2016. As observed by us hereinabove, the Ld. DR, on being confronted with the aforesaid claim of the assessee s counsel, could not rebut the same. As the impugned assessment in the case of the assessee had been framed in the absence of any valid notice u/s. 143(2) of the Act, which is the foundation for passing a valid assessment order, we find substance in the claim of the Ld. AR that the impugned order passed by the A.O u/s. 147 r.w.s. 143(3) of the Act dated 28.10.2016 could not be sustained on the said count itself and was liable to be struck down - Appeal of assessee allowed.

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• 2023 (10) TMI 1276
  Penalty u/s 270A - under-reporting of income - taxability of interest - Immunity from imposition of penalty u/s 270AA - assessee was unaware that interest income earned by is not exempt till assessment in its case for AY 2013-14 was completed wherein the same was disallowed and assessee opted for DTVSV Scheme for 3 years to wind up the tax liability - HELD THAT:- It is an admitted position that in its original return in its Income Expenditure Account the assessee disclosed that during the year it earned interest income and miscellaneous/other incomes and complete details thereof were brought on record. On the face of these facts it cannot be alleged that the assessee is guilty of underreporting and/or misreporting of income. It is not the case of the Revenue that anything more than what was declared by the assessee was found by the Revenue. The case of the assessee all along has been that it was under bonafide belief that the impugned interest and miscellaneous income was exempt from tax on ground of principle of mutuality and therefore in its original return it claimed the same as exempt. As soon as the assessee became aware that the said income is taxable, it opted for DTVSV Scheme and revised its return offering the said income to tax and paid tax which has not been disputed by the Revenue. It may be emphasised that the fact of earning the impugned interest and miscellaneous income has duly been disclosed in its accounts and in the original return with full details. However, due to ongoing litigation about the taxability of the said income and misconception of law, the assessee claimed it as exempt. Nonetheless, the fact remains that the assessee filed revised return, offered the said income to tax during the course of assessment proceedings itself. As following the decisions in Prem Brothers Infrastructure LLP [ 2022 (6) TMI 130 - DELHI HIGH COURT ] and Alrameez Construction (P) Ltd. [ 2023 (8) TMI 371 - ITAT MUMBAI ] we hold that the impugned penalty is not exigible which we hereby vacate. Decided in favour of assessee.

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• 2023 (10) TMI 1275
  Validity of reassessment proceedings - non-filing of the return of income and cash deposits made in the bank account - HELD THAT:- If the assessee had exempted income, the same had to be claimed in the return of income either in the earlier years or in the current AY. Whether the sources of cash deposits are subjected to tax or exempted from tax, the same must be reflected in the return of income in the year of receipt. If the assessee had past savings, the same will be known from the earlier returns of income. In fact, the assessee himself had admitted before the AO that in the earlier years, he had meager incomes. So, he can t take a hypothetical stance and say that he may be having the savings or exempted incomes to make cash deposits in the bank account. Further, there must be a source of information in front of the AO before recording the reasons to believe that there is an escapement of income. Though the assessee had not fulfilled the conditions to obtain the reasons recorded such as not filing the return in response to the notice issued u/s 148. To be fair and showing unbiased nature of action, the AO had supplied the reasons for the reopening suo moto. As seen from the reasons narrated, it appears that there is no presumption or assumption against the assessee in reopening the case. When the twin situations are fulfilled viz. not filing the return of income and huge cash deposits which are disproportionate to the amounts of income admitted in the returns of earlier years; I find this is the sufficient reason to reopen the case u/s 147. The admission of meager incomes in the earlier AY returns certainly forms a basis for belief that there is an escapement of income in the assessee s case. Therefore, the ground of appeal raised on the reopening of the case without having proper reasons is considered as not having merits, thus dismissed. Cash deposits - as argued entire credit entries in the bank statement should not be treated as income of the assessee and it would be appropriate to note the background of the assessee`s case - We note that the peak credit in the bank account during the year is considered for making such additions. It is a measure to ensure that any unexplained credits during the year are taken into account. Therefore, respectfully following the decisions of ITAT Surat Bench [ 2018 (7) TMI 2326 - ITAT SURAT] ,[ 2018 (10) TMI 2012 - ITAT SURAT] and Ahmedabad Bench [ 2014 (5) TMI 1101 - ITAT AHMEDABAD] ,[ 2013 (6) TMI 522 - ITAT AHMEDABAD] [ 2013 (3) TMI 713 - ITAT AHMEDABAD] we direct the Assessing Officer to make addition in the hands of assessee to the partly - Assessee ground partly allowed.

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• 2023 (10) TMI 1274
  Addition u/s 68 - unexplained credit - onus to prove genuineness and creditworthiness - Addition of advanced paid on the ground that the assessee has not furnished any agreement with the parties and only copy of ledger was furnished, which do not justify the payment of huge amount without any registered document - HELD THAT:- AO wrongly invoked the provision of section 68, when such amount was not credited in the books of account of assessee, rather it was a clear case of advance. Such investments are shown in the assets side of the balance sheet. The real issue before the AO was, if the advance or investment made by the assessee are from the known sources or from unexplained sources. We find that before CIT(A) the assessee filed detailed written submissions, which are not recorded here for the sake of brevity. We further find that the CIT(A) on appreciation of such submissions recorded that source of advance to Rameshwaram developers was from the loan availed by the assessee. CIT(A) appreciated the fact that once, entire loan was added u/s 68, the application of fund by way of investment cannot be added again, which is otherwise double additions - stand of the assessee right from the beginning is that the assessee made advance for purchase of land for development. The land was ultimately transferred in favour of assessee in assessment year 2019- 20 purchases by way of two sale deeds on 02.07.2018 vide document No.11863 respectively, copy of such sale deed is available on record. All the payment for purchase of land was made by way of account payee cheques. AO has not brought adverse material on record to doubt the transaction of land which was in consequence of the advance payment of the land. Hence, no infirmity or illegality in the order of CIT(A) in deleting the addition which is affirmed. Decided against revenue. Addition u/s 68 - taxation u/s 115BBE - issuing show cause notice the assessee failed prove genuineness and creditworthiness of loan amount - HELD THAT:- We find that the assessee has already furnished all details in the comprehensive sheet mentioned; the name of the lender, PAN, amount of loan, repayment of loan, interest paid and Tax Deducted at Source (TDS in short) and the closing balance as on 31.03.2018 and complete pdf folder consisting of duly signed of confirmation of ITR, relevant bank statement of the depositors was furnished, even on furnishing such details, the Assessing Officer has not made any enquiry of his own either issuing notice under section 133(6) or 131 of the Act. The assessee has discharged its onus. The Assessing Officer without making any independent verification or enquiry prepared to make huge addition in Crores of rupees, which he clearly tantamount to travesty of justice. While making submissions before us, the ld AR for the assessee vehemently argued that the assessee has already repaid the entire loan amount of 14 lenders, the details of whom were furnished by assessee in a chart, showing the amount, date of repayment and the details of banks of lenders. Such facts were not disputed before us. We also find that the assessee furnished all such details of the lenders/ depositors. There is no allegation of assessing officer that any of such lenders/ creditors are part of syndicate of accommodation entry provider. There is no evidence that credit/ advance in the books of assessee was result of some circular transactions. As decided in Ayachi Chandrashekhar Narsangji [ 2013 (12) TMI 372 - GUJARAT HIGH COURT] held that when loan amount has been repaid by the assessee in the immediately next year and the department has accepted the repayment of such loan without proving it, no addition can u/s 68 can be made. No justification in making the addition of unsecured loan amount as unexplained credit u/s 68 by assessing officer and confirmed by ld CIT(A) - Decided in favour of assessee.

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• 2023 (10) TMI 1273
  Rejection of the request for adjournment non intimated to assessee - HELD THAT:- As stated by the AR and, rightly so, the failure on the part of the CIT(A) to intimate to the assessee the rejection of his request for adjournment had clearly divested him of an opportunity to defend his case by placing on record whatever material/submissions he had as on the date on which the appeal was fixed for hearing. Reason that in case the rejection of the request for adjournment would have been intimated to the assessee, then he might have participated in the proceedings on the stipulated date of hearing, i.e., on 18.07.2023 and defended his case with whatever material that was available to him. As the CIT(A) had proceeded with and disposed off the appeal at the back of the assessee, concur with the claim of the AR that the latter had remained divested of his right to defend his case before the first appellate authority. Matter, in all fairness and the interest of justice, requires to be restored to the file of the CIT(Appeals) with a direction to him to re-adjudicate the same after affording a reasonable opportunity of being heard to the assessee.

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• 2023 (10) TMI 1272
  Reassessment of assessment u/s 147 - Reason to believe - unexplained credit - As per AO bogus entries or transactions were given or taken by the assessee - HELD THAT:- We are unable to see any details of the company/entity through which the assessee received alleged accommodation entry, date of transaction, nature of transaction viz as to whether it was share application money or unsecured loan or any other kind of bogus transaction and from which entity or company the assessee received alleged entry or undertaken transaction. From the reasons it is also clear that the AO had proceeded to initiate reassessment proceedings u/s. 147 of the Act and to issue notices u/s. 148 without any examination, verification or evaluation of the facts and documentary evidence and report received from the officer/competent authority of search/survey operation during which alleged documentary evidence found and seized from Jain Brothers. In the reasons recorded, it is nowhere mentioned as to who had given bogus entries/transactions to the assessee or to whom the assessee had given bogus entries or undertaken alleged transactions. It is also nowhere mentioned as to on which dates and through which mode and entity/companies the bogus entries and transactions were made by the assessee. AO has vaguely referred to certain documentary evidences including a list of 195 companies found and seized during search/survey operation on Jain Brothers to allege that the assessee company (listed at S.No. 139) was involved in giving and taking bogus entries/transactions during the relevant financial year. The AO did not mention the details of transactions that represented unexplained income of the assessee company. Decided in favour of assessee.

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• 2023 (10) TMI 1271
  Deduction u/s 80(IB)(10) in respect of POR project - whether granted deduction can be withdrawn in the subsequent years, without pointing out to any change in facts? - HELD THAT:- When the deduction under Section 80(IB)(10) of the Act was allowed to the assessee in the initial assessment year i.e. A.Y. 2012-13, then unless the said deduction is withdrawn, deduction u/s 80(IB)(10) cannot be withdrawn on identical set of facts. Secondly, on the facts placed on record before us, and letter issued by GUDA, it is seen that the GUDA has in all the letters issued on various dates, maintained its position that in-principal approval in respect of POR Project was granted to the assessee on 30.30.2007. While allowing deduction u/s 80(IB)(10) in respect of POR residency, CIT(A) has taken note of this fact while allowing the assessee s appeal. During the course of arguments before us, the Ld. D.R. has not brought forth any substantive evidence to dispute or disprove the factual findings made by the CIT(A) on this issue, which are to the effect that the approval with respect to POR Project was granted to the assessee on 30.03.2007. CIT(A) has also observed that in view of the provisions of Section 80(IB)(10) of the Act, when the approval of the Housing Project is obtained more than once, such Housing Project shall be deemed to have been approved on the date on which the building plan of such Housing Project is first approved by local authorities, which in the present case is 30.03.2007. Accordingly CIT(A) has not erred in holding that the assessee was eligible for deduction u/s 80(IB)(10) with respect to POR Project. PMC Project - BU Permission was obtained in respect of only 349 Units out of a total of 376 Units - entire project was not approved within five years from the end of the Financial Year in which project was approved - HELD THAT:- , we are of the considered view that the assessee is eligible to claim deduction under Section 80-IB(10) of the Act with respect to those blocks, where BU Permission was obtained since the same were separate and distinguishable from those blocks for which BU Permission was not obtained. Accordingly, in our considered view the fact that assessee could not obtain BU Permission with respect to 27 Units comprising of three blocks, out of total of 276 Units, and had obtained BU Permission with respect to 349 Units, the assessee cannot be denied claim of deduction under Section 80-IB(10) with respect to the entire PMC Project. The assessee, in our considered view is eligible for claim of deduction under Section 80-IB(10) of the Act with respect to those Units for which BU Permission has been obtained.

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• 2023 (10) TMI 1270
  Credit of TCS - intimation u/s 143(1) denying credit - TCS collected by the Excise Department of State of M.P. in respect of the purchase of liquor due to nonappearance in the PAN account of the assessee company but reflected in the accounts of the individual license holders who are directors and associates of the assessee company - HELD THAT:- Prima facie it is manifest from the record that actual transactions of purchases and sales of liquor have been carried out by the assessee company on the basis of the license granted in the name of the individual who have associated with the assessee company. This practice is otherwise prevailing and accepted by the concerned authorities of the State Government that after obtaining the license by the individuals they are usually forming association or partnership firm or a company to pool their resources as well as to avoid competition among themselves. Though the licenses are given by the Excise Department to the individuals as per the policy of the Government however, if the actual business of purchase and sale of liquor is conducted by a Corporate entity formed by the individual license holders and corresponding income from the said business is also offered to tax by the said business entity and not by the individual license holders then the credit of advance tax collected from the transactions of purchase has to be allowed in the hands of the company which is the actual purchaser/buyer and also offering the income from the said business activity to tax. It is very pertinent and relevant for allowing the credit of TCS as who is actually subjected to the TCS on purchase of liquor from Excise Department and also accounting the transactions and consequential income offered to tax. Whether the individual in whose name license is issued has claimed any credit of the said amount of TCS or not ? - Credit of the tax deducted at source/tax collected at source be given to the de-facto prayer/recipient of the amount which is subjected to the collection/deduction of tax as in whose hands the corresponding income is going to be assessed. The only rider to this principle is that there should not be any double claim of credit. Accordingly if the assessee produces the record as well as undertaking/indemnity bond from the license holders that they have not claimed or not going to claim the credit of the said amount of TCS then the credit of the TCS on the transactions of purchase of liquor actually carried out by the assessee by using the license issued in name of the individuals shall be allowed to the assessee. Since the relevant facts regarding the purchase, sales of liquor by the assessee and consequential income offered to tax by the assessee as well as the undertaking/indemnity from the individual license holders are required to be produced and verified/examined therefore, the matter is set aside to the record of the AO for limited purpose of examining the factual aspect of carrying out the transactions of purchase and sales and corresponding income offered to tax by the assessee as well as production of the undertaking/indemnity on behalf of the individual license holders for not claiming the credit of the said amount of TCS. The AO shall allow the claim of credit of TCS subject to verification of the above record and facts. Appeal of assessee is allowed for statistical purposes.

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• 2023 (10) TMI 1269
  Estimation of Net Profit before remuneration at 5.206% - rejection of books of accounts of the assessee u/s 145(3) - AO alleged that the assessee has lowered his profits by manipulating its books of accounts by deflating partners remuneration and inflating other expenses to artificially compensate for the income surrendered by the assessee on account of survey done in the month of October 2014. HELD THAT:- There is no error in the findings of Ld. CIT(A) that the books of accounts were rejected without cogent reasons. There is no allegation of change of any accounting practice by the assessee. There was no enquiry about the transactions reported in financials to corroborate there was any significant irregularity which made books inaccurate. It is a settled law held that in the absence of any material pointing towards falsehood of the books of accounts and no particular defect or discrepancy being pointed in the books of accounts, resort could not be made to rejecting the books of accounts by invoking Sec. 145(3), specially where same were duly audited by a statutory auditor. It is a settled law, that merely because the Net Profit has declined, the AO cannot resort to rejecting the books of accounts. The discretion exercised about how much remuneration shall be paid to the partners is upon the discretion of the assessee firm cannot be basis to doubt the net profit itself. It is a settled position of law that revenue cannot sit into the armchair of the businessman and question the reasonableness of expenditure. We are of considered view that ad-hoc addition of Net Profit has not been sustained by Ld. CIT(A) on the basis of additional evidences before it. Prudent approach is needed to examine the explanation given by an assessee for decline in profits and statistical examination of financial of past years alone cannot be basis of gearing up the Net Profit. Ld. CIT(A) has appreciated the transactions leading to lower Net profit and accepted explanation of assessee for fall in Net Profit while Ld. AO had examined the issue only on statistical parameters, which is not sustainable. The grounds raised by Revenue have no substance. The appeal of Revenue is dismissed.

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• 2023 (10) TMI 1268
  Net prior period expenses - addition made as assessee has not proved that the same was crystallized during the year under consideration - HELD THAT:- The tribunal in earlier years has accepted the method adopted by the assessee where the liability of the work/services rendered in earlier year was allowed when the same was crystallized on receipt of the bill in the current assessment year. The Tribunal has also held that the Revenue has to adopt consistent approach and allow the expenditure which was crystallized during the year under consideration. By respectfully following the above conclusion we direct the ld. A.O. to allow the claim of the assessee as per the findings of the Tribunal mentioned hereinabove [ 2021 (2) TMI 733 - ITAT MUMBAI ] Appeal filed by the assessee is allowed.

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• 2023 (10) TMI 1267
  Delayed employees contribution to ESIC / PF - addition u/s 36(1)(va) on account of late contribution - HELD THAT:- Matter is already decided by Supreme Court in the case of Checkmate Services P. Ltd. v/s. Commissioner of Income Tax-1 [ 2022 (10) TMI 617 - SUPREME COURT] against Assessee. Also in the case of Pr. CIT v. Suzlon Energy Ltd. [ 2020 (2) TMI 792 - GUJARAT HIGH COURT] held that where assessee had not deposited employees contributions towards PF and ESI within prescribed period in law and Assessing Officer by invoking provisions of section 36(1)(va) read with section 2(24)(x) made addition of aforesaid amount to income of assessee, impugned addition made to income of assessee was justified. Decided against assessee.

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• 2023 (10) TMI 1266
  Calculation of deduction u/s 36(1)(viii) - quantum of total revenue from the operations[denominator] - reduction of interest on income tax refund from numerator (i.e. business income) as well as denominator (i.e. total revenue from operations) while calculating deduction - HELD THAT:- According to the assessee the amount of interest on income tax refund should be reduced from the total revenue from the operations also as same is not derived from the operations of the assessee bank. We agree with the arguments of assessee because interest on income-tax refund is not part of the business activity of the assessee and therefore, same cannot be form part of the total revenue from the operations also therefore, same should be excluded for the purpose of quantum of total revenue from the operations. We find that the Tribunal [ 2020 (4) TMI 13 - ITAT MUMBAI] has also directed the Assessing Officer to exclude the interest on income tax refund both from the profits and gains of the business as well as total revenue from the operations. We accordingly set aside the finding of the lower authorities and direct the AO to reduce the quantum of interest of income-tax refund from the total revenue from operations and thereafter compute the deduction u/s 36(1)(viii) of the Act accordingly. The grounds of appeal of the assessee are accordingly allowed.

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• 2023 (10) TMI 1265
  Revision u/s 263 - scope of limited scrutiny - as per CIT AO s order as held as erroneous so far as prejudicial to the interest of the revenue on the ground that the AO has not examined applicability of the Percentage Completion Method - Computation of income from construction and service contracts u/s 43CB - HELD THAT:- It is pertinent to note that the method of accounting was not subject matter of limited scrutiny taken up through CASS. Percentage Completion Method has been made compulsory for the real estate business vide amendment by Finance Act 2018 whereby section 43CB was introduced w.e.f. 01.04.2017. Prior to the said amendment it was not mandatory for the real estate business to apply Percentage Completion Method as for the year under consideration the newly inserted section 43CB is not applicable Having held that the provision of section 43CB are not applicable for the year under consideration the question arises is whether the AO can go beyond the subject matter of limited scrutiny while passing the assessment order. The answer to this question is certainly not without converting the limited scrutiny into complete scrutiny. Therefore, in case the AO proceeded within the scope of limited scrutiny and not taken up any issue beyond the scope of limited scrutiny the same can be held to be erroneous for lack of inquiry. It is not open to the AO take up any issue which is not subject matter of the limited scrutiny until and unless the limited scrutiny is controverted into complete scrutiny. Hence not conducting an inquiry on the issue beyond subject matter of limited scrutiny would not be considered as lack of inquiry on the part of the AO so as to render the order of the AO erroneous so far as prejudicial to the interest of revenue. When the assessee is consistently following the Project Completion Method which is not prohibited by law the acceptance of the same by the AO cannot be held as erroneous decision on the part of the AO and consequently the Pr. CIT cannot invoke the provisions of section 263 of the Act on a claim which is bona fide and a possible view not prohibited by law. Accordingly, in the facts and circumstances of the case and following the decision of Ashoka Hitech Builders (P.) Ltd. [ 2018 (8) TMI 440 - ITAT INDORE] we hold that the impugned order passed u/s 263 of the Act is not sustainable in law and liable to be set aside. Decided in favour of assessee.

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• 2023 (10) TMI 1264
  Accrual of Capital gain - sale of land or not? - real owner - transfer u/s 2(47) concluded of capital asset or not? - Assessee pleaded before the AO that it was a Watan Land hence there will be no cost of acquisition and hence no capital gain - assessee also pleaded before AO, that no possession has been handed over, only 10% of the total consideration has been received by the assessee and land has been acquired by the Government - AR submitted that Government of Maharashtra has passed an order vide which Government of Maharashtra held that land belongs to CIDCO HELD THAT:- As on perusal of the Sale deed it is observed that said Sale Deed there is 7/12 extract duly signed by TALATHI i.e. revenue officer which shows the Assessee as Owner of the impugned Land. Thus, as per the said 7/12 extract the Assessee seems to be owner of the Land on 31/07/2008. CIDCO has been shown under the other rights. In these facts, CIT(A) s findings that assessee was not the owner of the land at the time of sale is factually incorrect and this fact needs further investigation. It is also a fact mentioned in the Revenue Minister s Order dated 24/11/2008 that the impugned land was Watan Land . Assessee has filed copy of Sanad granting Watan to the assessee. AO and Ld. CIT(A) has not mentioned about the Sanad granting Watan to the assessee. This aspect has not been considered by the AO and Ld. CIT(A) in the order while deciding the issue of Cost of acquisition for Long Term capital Gain. Also pleaded before us that the possession of the impugned land was never handed over to the purchaser Mr. Kukreja. AO in the Assessment Order has mentioned that Possession of the land was transferred over to Kukrejas. Subsequently the AO in the remand report submitted to the Ld. CIT(A) admitted that the possession of the impugned land was with the CIDCO. Thus, there are major factual errors in the Assessment Order and ld. CIT(A) s order. Assessment Order is set aside to the Assessing Officer for denovo adjudication after considering all the submission of the assessee and after making necessary inquiries if required. Grounds of appeal raised by the Assessee are allowed for Statistical Purpose.

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• 2023 (10) TMI 1263
  Undisclosed income - Difference between income as per financials and income as per Form 26AS - CIT(A) deleted the addition - only grievance of the Revenue was that when the additional evidence in the form of reconciliation sheet has been taken on record, provisions contained under rule 46A of IT Rules need to be complied with by providing opportunity of being heard to the assessee - HELD THAT:- We are of the considered view that the assessee has brought on record reconciliation of the account as extracted by the AO of the assessment order but before the Ld. CIT(A) the assessee has filed comprehensive explanation and reconciliation to decide the issue in question. When the Ld. CIT(A) has coterminous power there was no need to call for the remand report from the AO moreover the issue was pertaining to reconciliation of the account only which stood reconciled as duly explained in the impugned order by the Ld. CIT(A). Decided against revenue.

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• 2023 (10) TMI 1262
  Income taxable in India - receipts on account of support and maintenance services to its customers in India - Fees for Technical Services ( FTS ) under the Act and also India-Singapore DTAA - DRP has arrived at the conclusion of taxability of IT Support service charges as FTS by distinguishing the earlier years tribunal orders - HELD THAT:- As decided in own case [ 2023 (1) TMI 1304 - ITAT PUNE] DRP in the earlier orders did not draw any such distinction and held the entire amount as chargeable to tax as royalty in the light of the decision in Samsung [ 2011 (10) TMI 195 - KARNATAKA HIGH COURT] - When the matter came up before the Tribunal, the decision inENGINEERING ANALYSIS [ 2021 (3) TMI 138 - SUPREME COURT] had been delivered by then, based on which the decision of the AO, treating the composite amount as royalty, was reversed. When neither the AO nor the DRP had treated the two streams of income as separate from each other, having different connotation in terms of the DTAA, there could have been no question of the Tribunal setting up a new case. Be that as it may, we have eloquently discussed the issue above and reached the conclusion that the income from IT Support services, even if viewed independent of software license income, is not chargeable to tax. Decided in favour of assessee.

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• Customs

• 2023 (10) TMI 1261
  Suspension of Customs Broker License - handling large number of containers which would be arriving at the port everyday. The petitioner contended that around more than 360 employees are employed by the petitioner for carrying out its cargo handling services and therefore, a serious prejudice would be caused if the impugned order to the extent it suspends the licence of the petitioner is allowed to operate. HELD THAT:- Having perused the record it would be appropriate for the petitioner to avail the remedy of an appeal, so that the rival contentions of the parties on the aspects of facts and law can be adjudicated before the Tribunal. Since the petitioner is a running concern employing more than 350 employees and handling large number of consignments day-in day-out, if the suspension order is not stayed certainly a prejudice would be caused to the petitioner who is dealing with the cargo belonging to third parties, further the petitioner has also more than 360 employees. Petitioner is permitted to approach the Tribunal in an Appeal to assail the order dated 20 October 2023 passed by the Commissioner of Customs. Let the Appeal be filed along with the stay application within a period of two weeks from the date of uploading the present order - Petition disposed off.

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• 2023 (10) TMI 1260
  Classification of imported goods - Quicklime - to be classifiable under Customs Tariff Item 2522 10 00 as claimed by the appellants; or, is it classifiable under Customs Tariff Item 2825 90 90 as contended by the Department? - HELD THAT:- From careful examination of the tariff entries of chapter heading 2522 2825, it reveals that it is not the case that the goods covered under CTH 2522 and CTH 2825 represent contending classification for applying GIR 3 as made out by Revenue. This is for the reason that quick lime cannot be referred to as containing wholly or partly of goods of CTH 2522 and CTH 2825. There is clear exclusion of calcium oxide and hydroxide of CTH 2825 from the scope of CTH 2522, and only separate chemical elements or separate chemically defined compounds are covered under the scope of CTH 2825. n the present case, the facts reveal that the imported goods are quicklime. There is no case of mixture of different material or substance to merit application of GIR 2 or 3. Thus, the Revenue s argument for classification of quick lime under heading 2825 as it occurs last among other classification under heading 2522 is not legally sustainable - there is no case for application of Rule 3 of GIR in this case. In view of the above, the imported goods are appropriately classifiable under CTH 2522 10 00. From the above HSN explanatory notes it could be concluded that lime stone being a mineral product is calcined to produce quicklime . Further, when lime stone is subjected to the process of low temperature of calcination then hydraulic lime is produced. These two products would remain classifiable under Chapter heading 2522. However, when the lime stone is subjected to high temperature calcination ranging as high as 1340 C, dissociation of limestone happens i.e., a general chemical process in which molecules (or ionic compounds such as salts, or complexes) gets separated or split into other things such as atoms, ions, or radicals, usually in a reversible manner. In simple words, it can be said that the mineral product quicklime when subjected to high temperature calcination becomes calcium oxide by eliminating carbon-dioxide (CO2) and such calcium oxide is not covered under Chapter 25, as these are chemical products classifiable under heading 2825. From the test reports of samples of imported goods, which are relied upon documents in the adjudication proceedings, we find that the chemical test conducted by the Central Revenue Control Laboratory (CRCL), Jawaharlal Nehru Custom House, on the samples of imported goods and its report dated 18.04.2018 indicate that the description of the goods as white lumps of irregular shapes sizes along with waste powder - in terms of the HSN explanatory notes, both on account of presence of specified material making it not in pure state and the composition of calcium oxide not upto the requisite 98% making it not a product of high degree, would not enable the imported goods to be classified under sub-heading 2825. The imported goods quicklime would be appropriately classifiable under Customs Tariff Item 2522 10 00 and not as other under the Customs Tariff Item 2825 90 90, as claimed by Revenue - the impugned order passed by the learned Commissioner (Appeals) dated 05.04.2021 cannot stand for judicial scrutiny by confirming the classification under the Customs Tariff Item 2825 90 90 in respect of the impugned goods and thus, the same is liable to be set aside. The confirmation of demands and penalties imposed on the appellants in the impugned orders are set aside - Appeal allowed in favour of appellant.

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• Corporate Laws

• 2023 (10) TMI 1259
  Seeking transfer of winding up proceedings to National Company Law Tribunal (NCLT) - HELD THAT:- The said issue of transfer of pending cases has also been considered by this Court in Citicorp International Limited v. Shiv-Vani Oil Gas Exploration Services Limited [ 2023 (7) TMI 1188 - DELHI HIGH COURT ] wherein the Court relying on the decision of the Supreme Court in ACTION ISPAT AND POWER PVT. LTD. VERSUS SHYAM METALICS AND ENERGY LTD. [ 2020 (12) TMI 535 - SUPREME COURT ] has held that It is only where the winding up proceedings have reached a stage where it would be irreversible, making it impossible to set the clock back that the Company Court must proceed with the winding up, instead of transferring the proceedings to the NCLT to now be decided in accordance with the provisions of the Code. A conjoint reading of Rule 5 of the notification dated 7th December, 2016 along with the aforementioned judgment would show that in cases where the petition is not at an advanced stage, the matter is to be transferred to the NCLT. Considering the fact that the winding up proceedings are at a nascent stage and only initial publication/citation was done in the newspapers, this Court is of the opinion that the matter cannot proceed before two fora - IBC being a statute which is meant to encourage revival of the company, it is deemed appropriate to transfer the present petition to NCLT, Allahabad Bench, Prayagraj. Petition disposed off.

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• Securities / SEBI

• 2023 (10) TMI 1258
  Insider trading in the scrip of the Company - corporate announcement regarding an update on the real estate operation of the Company - penalty of Rs. 10 lakhs u/s15G(i) of the SEBI Act imposed - allegation levelled against the appellant [Vice Chairman and Managing Director of the Company and also a Member of the Audit Committee] was that the Company made corporate announcement regarding an update on the real estate operation of the Company for third quarter on the Bombay Stock Exchange and the National Stock Exchange of India Limited - corporate announcement revealed that the Company during its second quarter had achieved a new sales volume which was up by 5.6% as compared to the preceding quarter - appellant as urged that the real estate operational data was not a price sensitive information - HELD THAT:- Corporate announcement regarding update on the real estate operation of the Company was a price sensitive information. UPSI has been defined under Regulation 2(1)(n) which means any information that is not generally available and which upon becoming generally available is likely the materially affect the price of the securities. In the instant case, the real estate operational update were part of the financial results for the quarter ended 30.09.2017. It was a price sensitive information and upon announcement it had a material impact in as much as the price of the scrip increased. Appellant was in possession of this price sensitive information and had traded in the scrip during the period in question. In our opinion, obtaining necessary pre clearance and making requisite disclosures were not enough to show that his trades were not motivated by UPSI. Regulation 4 of the PIT Regulations prohibits any insider from trading in securities while in possession of UPSI. The proviso to Regulation 4 of the PIT Regulations gives a window to the insider to prove his innocence by demonstrating the circumstances under which he has traded. In the instant case, the appellant is an insider and, therefore, it was upon him to prove that the trades were not motivated by UPSI. We find that no plausible explanation has been given in this regard. Appellant had traded in the scrip of the Company while in possession of UPSI and had violated Section 12A(d) and (e) of the SEBI Act, 1992 and Regulation 4(1) of the PIT Regulations. No error in the impugned order. Appeal fails.

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• Insolvency & Bankruptcy

• 2023 (10) TMI 1257
  Rejection of application of the Liquidator - recoveries of customs duties - invocation of the Bank Guarantee(BG) allowed, during the moratorium period in force under section 14 of IBC - It was held by NCLAT that The appeal is devoid of merit and does not deserve to be admitted at the initial stage itself. HELD THAT:- The appeal is accordingly dismissed.

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• 2023 (10) TMI 1256
  Initiation of CIRP - NCLT admitted the application - Operational Creditors - serious pre-existing disputes between the Corporate Debtor and the Operational Creditor on account of discrepancies in invoices, and levy of bogus charges and overcharging - operational debt exceeds the threshold limit and is an undisputed debt or not - NCLAT held that There are no illegality in the impugned order of the Adjudicating Authority admitting the Section 9 application. HELD THAT:- There are no reason to interfere with the order of the National Company Law Appellate Tribunal since no substantial question of law is involved in the appeal. The appeal is accordingly dismissed.

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• PMLA

• 2023 (10) TMI 1255
  Seeking grant of bail - accused detained without trial - Money Laundering - Criminal Conspiracy - misappropriation of huge funds of Social Welfare Department - siphoning off of the funds from the bank account of Social Welfare Department - HELD THAT:- The record shows that the accused has been in judicial custody as noted in the interim order in connection with the case since 21.04.2018, that is, for 5 years 5 months 26 days. On the other hand, further proceedings in the case has been stayed by order, dated 21.05.2019, which is still in force resulting in non-commencement of trial of the case. The accused has been apparently detained without trial, which cannot indefinitely be allowed to continue without assurance of effective speedy justice to him, who has already undergone one-half of the maximum period of imprisonment specified for the offences. Thus, it appears that the accused has been deprived of the right to liberty and access to speedy justice and trial enshrined under Article 21 of the Constitution of India and right to liberty of bail under Section 436-A Cr.P.C. It is provided that the accused petitioner namely, Mohet Hojai shall be released on bail of Rs.50,000/- with 02 sureties of like amount to the satisfaction of the learned Special Judge, Assam, Guwahati, subject to the conditions imposed - application allowed.

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• Service Tax

• 2023 (10) TMI 1254
  Recovery of service tax alongwith interest and penalty - failure to discharge tax on guarantee commission under reverse charge mechanism - non-declaration of the said guarantee commission in the periodical ST-3 returns filed - period prior to 01.04.2016 - invocation of extended period of limitation - penalties - HELD THAT:- There are no merit in the argument of the appellant, in as much as reading the definition of service and support service in juxtaposition, it is clear that the said definition of support service is exhaustive and takes in its fold all activities of infrastructural, operational, administrative, logistic, marketing or any other support of any kind comprising functions that entities carry out in ordinary course of operations themselves but may obtain as services by outsourcing from others for any reason whatsoever and shall include advertisement and promotion, construction or works contract etc. - the appellant is liable to discharge service tax on the Guarantee commission paid to Government of Karnataka during the period 01.07.2012 to 31.03.2016 for providing unconditional and irrevocable guarantee in raising funds from the debt market. Extended period of limitation - HELD THAT:- The extended period of limitation could be invoked only when evidence collected lead to an inference that there has been fraud, collusion, suppression, misdeclaration or contravention of any of the provisions with intent to evade payment of duty. In the present case, the Department has failed to place on record evidence indicating that there has been intention not to discharge service tax on the guarantee commission even though the appellant has been aware of the legal position that service tax is payable on guarantee commission paid to the State government of Karnataka for providing irrevocable guarantee in raising funds from debt market. Moreover, the appellant is a public sector undertaking and in the absence of specific evidence to support that there has been intentional evasion of service tax, extended period cannot be invoked merely on finding the failure on their part to discharge service tax. The demand is confirmed for the normal period of limitation with interest. Penalties imposed are set aside - Appeal disposed off.

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• Central Excise

• 2023 (10) TMI 1253
  Denial of benefit of exemption - determination of the correct classification of goods manufactured by the appellant-1 - Corrugated Boxes and Laminated Paper - It is the claim of the appellant that their goods are more appropriately classifiable under heading 4823 which do not fall within the negative list of the specified goods as per area based exemption notification claimed by them. HELD THAT:- In the present case under consideration appellants are clearing the laminated paper obtained by fusion of the paper and BOPP in rolls to be used for the wrapping of the photocopy paper. Marks and printings on the paper cleared, make it evident that the paper is used for wrapping of the photocopying paper as it states the name of the of supplier as Century Pulp and Paper , name of product as copier paper , further there is marking on the wrapper COPIER MACHINE FRIENDLY . From these marking and other indications on the laminated paper cleared by the appellant it is quite evident that the product is cleared for wrapping of the photocopying paper. From perusal of entry at heading 48114900 (reproduced earlier in the quote from impugned order) it is observed that the said entry is preceded by a single dash entry Gummed or adhesive paper and paper board and a double dash entry self adhesive . All the gummed and adhesive paper and paper board, which are not of self adhesive nature will get classified under this heading. For getting classified under this heading the basic character which needs to be established is that the paper is Gummed or Adhesive paper. It is found that the product in dispute is neither gummed or adhesive paper and hence the classification under this heading gets ruled out. There are no merits in the said observation as the he has failed to notice that the preceding three dash entry do not specify any such condition and preceding single dash entry is other thus the requirement of cut to shape and size as stated in 4823, would be applicable to the goods classifiable in all the headings prior to 4823.90 and not to the entries falling under this heading and subheading in this category. These goods are correctly classifiable under heading 48239019 the benefit of exemption under Notification will be admissible to the appellant. Thus there are no merits in the demand made by denying the benefit of said exemption notification - Thus demand of duty and interest and the penalties imposed on both the appellants are set aside. Appeal allowed.

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• 2023 (10) TMI 1252
  Clandestine removal - Principles of natural justice - non-service of SCN - appellant was the manufacturer of any excisable goods in the factory or not - casting/ forging (commonly known as Dhalai ) of LPG stove valve of brass and bar of brass (Saria) - levy of penalty u/r 26 of CER - HELD THAT:- It is evident that the appellant was not available to receive the hearing notice at the known address of their/ his residence or factory premises. Therefore the service of hearing notices was effected by way of pasting the same at residential and factory premises under proper panchnama. That being so appellant cannot complain about non receipt of show cause notice or the hearing notice. He chose to abstain from the proceedings by not responding to the notices given. For the above reason the principles of natural justice have been sufficiently complied with and the appellant cannot claim any violation of the same. From the facts as admitted by the appellant and other in their statement recorded under Section 14 of the Central Excise Act, 1944 it is quite evident that factory at Gali No 15 Krishna Vihar Phase 1, Sevadham, Loni Gaziabad, is a factory jointly owned by the Appellant and his younger brother, without entering into any formal partnership. The factory has not been given any name nor has been registered with any of the government departments either centre or state. The entire activities undertaken in the factory were done clandestinely and no formal records were maintained about the operation. Appellant has not challenged any of the findings recorded by the Commissioner in the impugned order. When the appellant has in his statement recorded under section 14 while giving the details of working of the unit have admitted that he was actively involved in the working of the unit the grounds taken in the appeal which are in nature of alibi do not merit any consideration - His active involvement in the clandestine activities is an admitted fact and penalty imposed on him under Rule 26 is total justified. There are no merits in this appeal - appeal dismissed.

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• 2023 (10) TMI 1251
  Recovery of credit of duty paid on inputs precluding entitlement to the benefit of notification no. 30/2004-CE dated 9th July 2004 - manufacture of several articles of wool and of polyester - recovery pertaining to entitlement to notification no. 30/2004-CE dated 9th July 2009 which was sought to be interpreted as intended only for assessees who lacked specified facility which to the appellant could not claim - refusal to entertain application of refund of Rs. 1,19,37,987 remitted as deposit for July 2004 to February 2009 during pendency of dispute. Recovery of credit of duty paid on inputs precluding entitlement to the benefit of notification no. 30/2004-CE dated 9th July 2004 - HELD THAT:- It is not open to the authority empowered under section 11B of Central Excise Act, 1944 to dispose off a claim for refund on grounds of such being premature in any circumstance whatsoever. As the competent authority has not considered the eligibility for refund except at the threshold, it would only be appropriate to restore the claim before the original authority for fresh disposal. Dis-entitlement of the appellant to benefit of notification no. 30/2004-CE dated 7th July 2004 for non-compliance with the substantive condition of eligibility owing to which demand of Rs. 22,07,315 was confirmed in relation to availment of exemption for the period from September 2008 to February 2009 - HELD THAT:- The remand order of the Tribunal is specific as is the report of the jurisdictional central excise authorities. However, the order of the original authority that was before the first appellate authority to culminate in the impugned order predates the remand ordered by the Tribunal and the defence thereof was not before the original, or first appellate, authority. Eligibility to benefit of notification no. 30/2004-CE dated 9th July 2004 owing to reversal of credit - HELD THAT:- The factual aspects of eligibility both by reversal of CENVAT credit as well as existence of facility for manufacture of staple fibre in the light of decisions of the Tribunal have not been examined by the lower authorities. With the claim for refund restored to the original authority and with these two aspects having to be examined afresh, the issues would have to be go back for re-adjudication. Accordingly, the impugned order is set aside and all the disputes restored to the original authority for a fresh determination.

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• 2023 (10) TMI 1250
  Refund in lieu of transfer to successor credit account - rejection of claim for monetization of accumulated CENVAT credit - HELD THAT:- It is on record that several disputes relating to the retrospective application of the debarring, as well as other connected issues, are pending in writ proceedings before the Hon ble Supreme Court. Though the decision of the Tribunal in Mylan Laboratories Ltd [ 2020 (3) TMI 837 - CESTAT HYDERABAD] has rejected the claim for refund of unutilized cess from ineligibility after substitution of the existing tax regime with the new levy, there are several other decisions which have allowed refund of this very cess. On perusal of the said decisions, viz., that of the Tribunal in Schlumberger Asia Services Ltd [ 2021 (5) TMI 954 - CESTAT CHANDIGARH] and in re International Seaport Dredging Pvt Ltd [ 2022 (6) TMI 822 - CESTAT CHENNAI] it is seen to pertain to monetization of the cess - It would appear that the decision of the Tribunal in re Mylan Laboratories Ltd did not have the benefit of judicial determination that prompted subsequent decisions of the Tribunal. The matter is remanded back to the original authority for re-determination of eligibility in accordance with settled law on refund of accumulated CENVAT credit considering the peculiarities of the facts and circumstances therein.

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• Indian Laws

• 2023 (10) TMI 1249
  Dishonour of Cheque - insufficient funds - existence of legally enforceable debt or not - Presumption of innocence in favour of accused - acquittal of accused under Sec 255 (1) of Code of Criminal Procedure - HELD THAT:- This Court reminds itself of its scope and powers in deciding an appeal against an order of acquittal. It is well-settled in a host of judicial pronouncements that the Appellate Court should be slow and watchful in interfering with an order of acquittal. It is only when the conclusions arrived at by the Trial Court is manifestly erroneous and palpably perverse, the Appellate Court should take a contrary view. It is more because an order of acquittal has the presumption of innocence in favour of the accused. In the instant case, the complainant has alleged that the accused had issued Ext P6 cheque in his favour in discharge of a legally enforceable debt. The cheque, on presentation to the bank for encashment, got dishonoured due to insufficient funds and despite receipt of the demand notice, the accused failed to pay the cheque amount. Hence, the accused committed the above offence - Indisputably, the complaint has been filed by the complainant ( Mathew K.Cherian represented by his power of attorney holder PW1) in his individual capacity. PW1 has not testified that the accused had any business transaction with the complainant in his individual capacity. Therefore, the learned Magistrate, on an appreciation of the oral testimonies of PW1 and DW1 and the materials on record, came to the legitimate conclusion that Ext P6 cheque was not issued towards a legally enforceable debt in favour of the complainant. In the case on hand, in addition to the finding that there was no business transaction between the complainant and the accused as alleged in the complaint, there is also no specific assertion as to the competence and knowledge of PW1 as regards the alleged transaction between the complainant and the accused. Thus, the learned Magistrate has rightly concluded that Ext P6 cheque was not issued towards a legally enforceable debt. On a re-appreciation of the materials on record, this Court is of the definite view that there is no error or illegality in the impugned judgment passed by the learned Magistrate holding the accused not guilty for the offence under Sec.138 of the N.I Act - appeal dismissed.

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• 2023 (10) TMI 1248
  Dishonour of Cheque - existence of legally enforceable debt - benefit of doubt to accused or not - presumption of consideration under Secs.118(a) and 139 of the N.I Act - HELD THAT:- In the case on hand, the complainant s case is that, Ext.P8 cheque was issued by the accused in discharge of a legally enforceable debt and the cheque got dishonoured when presented for collection and the accused failed to pay the demanded amount, despite receipt of the statutory lawyer notice - The accused denied the allegation and has raised a defence that he has no business transaction with the complainant. Instead, Ext.P8 cheque was issued by him to DW1 to purchase computers. It was misutilising the cheque, the complainant filed the false complaint. The courts below, after a threadbare analysis of the materials placed on record, have concurrently concluded that the accused had failed to shift the reverse onus of proof cast on his shoulders under Section 139 of the N.I. Act. Accordingly, the courts below found the accused guilty, and convicted and sentenced him for the above offence - There are no error, illegality or irregularity in the conclusion arrived at by the courts below. Thus, the conviction imposed by the courts below is confirmed. In DAMODAR S. PRABHU VERSUS SAYED BABALAL H. [ 2010 (5) TMI 380 - SUPREME COURT ] the Hon ble Supreme Court held that unlike other forms of crime, the punishment under Section 138 of the N.I. Act is not a means for seeking retribution, but is a means to ensure payment of money. Complainant s interest lies primarily in recovering the money rather than seeing the drawer getting incarcerated. In an offence under Section 138 of the N.I. Act, the compensatory aspect of the remedy should be given priority over the punitive aspect. Thus lenient view as regards substantive sentence can be taken, by sentencing the revision petitioner to undergo imprisonment for one day(till the rising of the Court) and pay compensation for the cheque amount, which would do complete justice to both sides - revision petition is dismissed.

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• 2023 (10) TMI 1247
  Dishonour of Cheque - validity of convicting and sentencing the revision petitioner - insufficiency of funds - discharge of onus to prove existence of debt - It is submitted that, prosecution has miserably failed to establish the ingredients of Section 138 of the N.I.Act - HELD THAT:- It is trite that the revisional powers of this Court under Sections 397 to 401 of the Cr.P.C. is to be sparingly exercised and in cases of exceptional rarity. Unless there is manifest error, illegality or an apparent misreading of the records, this Court shall not interfere with the findings of fact rendered by the fact finding courts. Merely because a different view is possible, the revisional Court shall not substitute the views of the Trial/Appellate Courts. The law has crystallized that once the complainant establishes the concoction of the five ingredients under Section 138 of the N.I.Act, then the reverse onus of proof shifts to the accused to set up a probable defence. If he discharges the onus of proof and casts a doubt about the existence of a debt, then the prosecution has to fail. Thus, both Courts have failed to advert and discuss the oral testimonies of PW1 and DW1. Instead, the Courts have only discussed about Exts.P1 to P10 documents and concluded that the revision petitioner has not discharged the reverse onus of proof under Section 139 of the N.I. Act - there is no discussion regarding Ext.D1 reply notice, the statement of the revision petitioner u/s 313 of the Cr.P.C. and the testimonies of the defense witnesses and documents. The courts below have misread the materials on record and have perfunctorily concluded that the revision petitioner has committed the offence u/s 138 of N.I. Act, which is improper, irregular and illegal, and warrants interference by this Court - revision petition is allowed.

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