TMI Tax Updates - e-Newsletter
November 16, 2021

Case Laws in this Newsletter:

GST Income Tax Customs Corporate Laws Insolvency & Bankruptcy Law of Competition Service Tax Central Excise CST, VAT & Sales Tax Indian Laws

Articles

1. PENALTY IS IMPOSABLE ON ‘SEZ’ UNIT FOR NON FULFILMENT OF EXPORT OBLIGATION AND NET FOREIGN EXCHANGE

   By: DR.MARIAPPAN GOVINDARAJAN

News

1. CGST Officials unearth input tax credit fraud of around ₹ 34 crore involving 7 firms

2. Income Tax Department conducts searches in Gurugram

3. INDIA’S FOREIGN TRADE: OCTOBER 2021

4. INDIA, ADB SIGN $61 MILLION LOAN TO IMPROVE URBAN SERVICES IN AGARTALA CITY

5. FY 2021-22: Rising Industrial growth, Restrained Inflation and Strong Services Revival

6. IITF to show India is "Back in Business" - Shri Goyal

7. Taxpayers’ Lounge of Income Tax Department set up at IITF, 2021

8. Inauguration of Customs clearance work on all 7 days of a week including public holidays at Garhi Harsaru

Notifications

GST - States

1. 1364 – F.T. - dated 9-11-2021 - West Bengal SGST

Seeks to amend notification No. 1125-F.T. dated 28.06.2017 regarding the rate of Intellectual property rights

Circulars / Instructions / Orders

DGFT

1. Trade Notice No. 24/2021-22 - dated 15-11-2021

Extension of Date for Mandatory electronic filing of Non-Preferential Certificate of Origin (CoO) through the Common Digital Platform to 31st Jan 2022

Highlights / Catch Notes

Income Tax

• Tribunal Clarifies Section 69: Flexibility in "Assessed" Term; Section 158BB Requires Computation, Not Assessment of Undisclosed Income.

  Case-Laws - HC : Unexplained investments u/s 69- Tribunal deleted the addition - The term assessed being flexible, it bears very comprehensive meaning. Therefore, under Section 158BB of the Act, the Assessing Authority has to compute the undisclosed income falling within the block period, is not expected to assess the undisclosed income. Even in the event of undisclosed income, if the books are not available or the books are destroyed or there is suppression of actual sales, taking into consideration the totality of the circumstances, it is open to the Assessing Authority to estimate the income of the assessee. - HC
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• Tax Refund Denied Due to Income Mismatch; AO's Actions u/s 139(9) Deemed Improper for Skipping Correction Step.

  Case-Laws - AT : Invalid return - Rejection of refund - mismatch in the figures of income returned and as reported in Form 26AS - Technically speaking, the AO has not passed an order u/s 237 but only u/s 139(9) of the Act. We have noticed above that firstly, the AO could not have treated the return as invalid u/s 139(9) of the Act because of mismatch between the figure of income shown in the return and that in Form 26AS and secondly, if at all he did so on a wrong footing, he ought to have issued notice u/s 142(1)(i) of the Act for enabling the assessee to file its return so that a regular assessment could take place determining the correct amount of income and the consequential tax/refund. - AT
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• PCIT's failure u/s 263: Lacked independent action, denied taxpayer rights to confront new SEBI evidence.

  Case-Laws - AT : Revision u/s 263 by CIT - PCIT could not merely sit solely in the capacity of a revisional authority qua the new material but was required to perform the task of AO in tandem and discharge quasi-judicial function independently. - PCIT has failed to do so. Neither the purported evidence collected from SEBI were confronted nor the cross examination of adversarial statement was provided. The opportunity contemplated under S. 263 is thus rendered illusory and merely an empty formality resulting in miscarriage of justice in contravention of expresses intendment of law. - AT
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• Income Tax Commissioner Revises AO's Order Due to Lack of Investigation in Portfolio Loss Case u/s 263.

  Case-Laws - AT : Revision u/s 263 by CIT- AO is first an investigating officer thereafter he is an adjudicator but here in this case, the AO remained silent, but, he ought to have exercised his duty properly. We find substance in the submissions made by the ld. DR. The arguments of the AR is rejected in regard to show cause notice and finding of the Pr. CIT is different because the issues are the loss on assigned portfolio. and the Pr. CIT has rightly exercised his jurisdiction vested u/s 263 and set aside the order of AO - AT
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• Deferred Brokerage Expenses Must Be Fully Claimed in Relevant Year; Spreading Over Multiple Years Not Allowed.

  Case-Laws - AT : Deferred brokerage expenditure - Addition made as assessee has not debited such expenditure in its P & L Act. - the expenditure incurred on brokerage is to be allowed in full in the impugned assessment year, as deferral of the same over a number of years for income tax purposes is not sustainable - AT
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Customs

• Transfer of funds among Indian importers doesn't make them 'related persons' under Customs Act, 1962 & Valuation Rules.

  Case-Laws - AT : Valuation of imported goods - Related person - Merely because there were transfer of funds in India amongst three importers will not make them related persons in terms of Rule 2(2) of CVR,2007. The concept of related person under the Customs Act, 1962 is applicable only with regard to imported goods. The transfer of funds from one entity to another entity in India cannot have any bearing on the concept of related person with regard to the provisions of the Customs Act and Valuation Rules made there under - all the three importers cannot be treated as related persons. - AT
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• Import Duty Case: No Misstatement or Suppression Found; Extended Limitation Period Conditions Not Met.

  Case-Laws - AT : Extended period of limitation - Demand of differential duty alongwith ineterst and penalty - The Assessing Officer would have checked and asked for the RSP of the motor vehicle parts before clearing the parts for home consumption. The appellant had, therefore, wilfully not declared the RSP of the imported goods with an intent to evade payment of appropriate customs duty on the imported goods. - There is no mis-statement or suppression of facts by the appellant. The basic ingredients for invoking the extended period of limitation do not, therefore, stand satisfied - AT
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• Bangladesh's Origin Certificates Accepted for Concessional Duty; No Forgery or Challenges Found in SAFTA Trade Agreement.

  Case-Laws - AT : Concessional rate of duty - country of origin of goods - The Country of Origin Certificates are conclusive evidence since these are issued by the Designated Committee of Bangladesh i.e. Export Promotion Bureau, and in absence of any material on record to show that these were forged or its genuineness questioned by DRI or Indian Customs, these Country of Origin Certificates should be considered as substantive and conclusive evidence - also there are no evidence on record of any overseas enquiry with the Bangladeshi supplier or confirmation with Bangladesh Customs or Bangladeshi Authority, and therefore the SAFTA Certificate cannot be unilaterally rejected. - AT
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• Central Government's Decision Against Anti-Dumping Duty Overruled; Reconsideration Ordered on Authority's Recommendation.

  Case-Laws - AT : Non-Levy of Anti-Dumping Duty - It is not possible to sustain the decision taken by the Central Government, contained in the Office Memorandum, not to impose anti- dumping duty despite a recommendation having been made by the designated authority for imposition of anti-dumping duty. The matter would, therefore, have to be remitted to the Central Government to take a fresh decision on the recommendation made by the designated authority. - AT
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Indian Laws

• Court Upholds Cheque Dishonor Case; No Fraud or Misrepresentation Claimed, Complaint Format Challenge Rejected.

  Case-Laws - SC : Dishonor of Cheque - One of the most material aspects is that the signatures on the cheques were not denied. Neither was it explained by way of an alternative story as to why the duly signed cheques were handed over to the Company. There was no plea of any fraud or misrepresentation. It does, thus, appear that faced with the aforesaid position, the respondent only sought to take a technical plea arising from the format of the complaint to evade his liability. There was no requirement of a loan agreement to be executed separately as any alternative nature of transaction was never stated. - the complaint was properly instituted - SC
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• High Court Upholds Error in Arbitrator's Judgment on Stridhana Jewelry, Confirms Overreach u/s 34 of Arbitration Act.

  Case-Laws - SC : Grant of Interim award - stridhana property of Respondent No. 1 or not - Section 34 of the Arbitration and Conciliation Act, 1996 - The Arbitrator has committed a jurisdictional error by travelling beyond the terms of reference. Further, the Arbitrator has committed an error in permitting the Appellants to retain the jewellery - the Arbitrator had to decide the entitlement of all the seven parties to equal shares in the event of finding that the jewellery is not stridhana property - the conclusion of the High Court is approved by upholding the impugned judgment. - SC
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• High Court Affirms Conviction for Cheque Dishonor u/s 138 of the Negotiable Instruments Act; No Legal Errors Found.

  Case-Laws - HC : Dishonor of Cheque - In the case on hand, the accused did not even step into the witness box. Under such circumstances, in view of the material evidence available on record, coupled with the statutory presumption, this Court is of the considered opinion that there is no legal infirmity or capriciousness or perversity in recording the findings by the learned Magistrate that the accused is guilty of the offence punishable under Section 138 of the N.I. Act - HC
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• High Court Overturns Acquittal in Cheque Dishonor Case; Accused Failed to Prove Defense u/s 139 NI Act.

  Case-Laws - HC : Dishonor of cheque - acquittal of the accused - legally enforceable debt or not - It appears that the accused is attempting to divert the attention of this Court by filing irrelevant document - there are no hesitation to hold that the accused has miserably failed to probabilise the suggestive case and in view of the fact that the private complainant has successfully satisfied the necessary ingredients under Section 139 of the Negotiable Instruments Act and on the failure of the accused to probabilise the suggestive case, it is found that the order of acquittal passed by the Lower Appellate Court is erroneous - HC
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IBC

• Court Prioritizes Corporate Survival Over Promoter Group; No Fraud Found in Audit at Consortium Meeting, Feb 2021.

  Case-Laws - HC : Non-viability of the financial arrangement between the Corporate Creditors and the Corporate Debtor - This Court is not at all unmindful of the primacy of the IBC proceedings. This Court is also not at all unmindful of the fact that the survival of the corporate entity, viz. the Appellant No.1/the Company, as distinguished from its Promoter Group, shall be given due and deep consideration under the IBC. At the same time this Court must record the fact that a select Audit placed before the said Consortium Meeting dated 17th February, 2021, did not suspect the Appellant No.1/the Company of any mala fide financial action. - HC
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• Order Approving Resolution Plan for Corporate Debtor Is Final; No Recall or Review Permitted in Insolvency Cases.

  Case-Laws - AT : Consideration of new/undecided claims, after implementation of Resolution plan - There is no legal provision that allows it to recall or review its order approving the resolution plan for the corporate debtor. Moreover, once the Resolution Plan has been approved and implemented, any new/undecided claims cannot be considered - AT
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• Resolution Professional Ensures Claim Parity for Secured and Unsecured Creditors in CIRP, Emphasizing Fairness and Consistency.

  Case-Laws - Tri : CIRP proceedings - on the basis of parity being deployed by the RP in admitting claims of both category of financial creditors, there remains no reason to be aggrieved. It is a settled principle that one cannot approbate and reprobate at the same time. Thus, in case the interest element is to be excluded in computation of the claim amount of unsecured financial creditors, the same needs to be excluded from the claim amount of secured financial creditors as well. - Tri
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Service Tax

• Court Allows Adjustment of Excess Pre-Deposit from SCN-1 Against SCN-2 under SVLDRS Benefits.

  Case-Laws - HC : SVLDRS - whether the excess disputed amount deposited by the petitioner by way of pre-deposit in respect of the first show-cause notice (SCN-1) can be adjusted towards the amount payable by the petitioner in respect of the second show-cause notice (SCN-2) under the SVLDRS. - The contention of the respondents that two separate show-cause notices cannot be clubbed together for the purpose of SVLDRS cannot be accepted especially when the respondents have given the benefits/relief under the SVLDRS in favour of the petitioner in respect of both the show-cause notices. - HC
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Central Excise

• Job-Worked Goods Valuation: Rule 8 of Central Excise Rules 2000 Inapplicable, Cost Construction Method Preferred.

  Case-Laws - AT : Valuation - Job-worked goods - governed by Rule 8 of Central Excise (Valuation) Rules, 2000 or on cost construction method i.e. cost of raw material plus job charges? - the ingredients of Rule 8 are not satisfied on the part of the appellant, therefore, valuation of job work goods cannot be done under Rule 8. - AT
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VAT

• High Court Upholds Auction of Directors' Property for Unpaid VAT, Emphasizing Directors' Responsibility for Tax Liabilities.

  Case-Laws - HC : Recovery of VAT (Tax) dues - Auction of property - Property was owned by the Directory of the company - Though the Company is the legal entity, the Directors of the Company are the actual functionaries in the Company and therefore, the Directors and the Legal Representatives are liable to pay tax and in the event of failure to pay the same, the Taxation Department is entitled to recover the same by following the procedures as contemplated. - This being the principles to be followed, the petitioner has not established any acceptable legal ground for the purpose of interfering with the auction notice - HC
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Case Laws:

• GST

• 2021 (11) TMI 509
  Seeking directions to allow for rectification and to issue forms as per requisition of statutory forms for fourth quarter of the year 2016-17 read with CST rules - seeking to allow the revision of returns for the same period in accordance with the DVAT Act and Rules - HELD THAT:- The present writ petition along with pending application is disposed of with a direction to the Respondents to release Form-C to the Petitioner within two weeks to enable appropriate corrections to be carried out qua the relevant quarters. The Petitioner shall furnish a surety bond to secure the amounts in issue. Application disposed off.

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• Income Tax

• 2021 (11) TMI 508
  Exemption u/s 11 - cancelling the registration granted to the assessee Trust u/s 12A - Whether Tribunal is not correct in opining that the cancellation of the registration of the assessee by the Commissioner of Income Tax (Exemptions) by exercising jurisdiction under sub-section 3 of Section 12AA was not maintainable thereby wrongly set aside the order of the Commissioner of Income Tax (Exemptions) ? - HELD THAT:- Commissioner had committed a fundamental error in cancelling the registration granted to the assessee Trust under Section 12A of the Act as far back as during the year 1995 by taking note of the activity of the Trust, which according to the assessee was in consonance with Clause 4(A) of the Deed of Trust. At the time when the registration was granted at the first instance by the then Commissioner on 14th December, 1995, the clauses and covenants as contained in the Deed of Trust were examined and the activities of the trust were found to be genuine and after recording satisfaction, registration has been granted. Therefore, such an issue could not have given rise to a cause of action for cancellation of the registration. The Tribunal had followed the decision of Tamil Nadu Cricket Association [ 2013 (12) TMI 833 - MADRAS HIGH COURT] to hold that the issues relating to how the funds of the Trust were employed is not germane for considering the question as to whether the activities were genuinely carried out or not. The learned Senior Standing Counsel for revenue submitted that revenue has not accepted the decision in the case of Tamil Nadu Cricket Association and a Special Leave Petition has been filed before the Hon ble Supreme Court. We are convinced that the reason cited by the Commissioner for cancellation of the registration could not be a ground to do so as it is admittedly an issue which could be dealt with by the AO, during the course of assessment. That apart we find that the Tribunal, which is the final fact finding authority, had examined the entire facts including the conditions contained in the Deed of Trust and recorded a findings in favour of the Assessee Trust. While we exercise jurisdiction u/s 260A of the Income Tax Act we are required to consider as to whether any substantial question of law arises for consideration and not to re-appreciate the factual position. Thus we find that there is no error in the approach of the Tribunal nor the conclusion arrived at by the Tribunal.

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• 2021 (11) TMI 507
  Reopening of assessment u/s 147 - Change of opinion - deductions u/s 57 - HELD THAT:- On account of change of opinion of Assessment Officer about the manner of computation to deductions u/s 57 of the Act, reopening was not justified. The proposition in this judgment squarely applies to the case in hand as well. ITAT has concluded that during the assessment proceeding respondent had furnished actuarial form that showed negative result and the AO had made addition during the original assessment proceeding on account of actuarial surplus. Negative reserve was part of document furnished during the assessment and therefore it cannot be said that there was non disclosure of material facts relevant for assessment. ITAT has also observed that AO while passing assessment order has referred to the actuarial report as on 31/3/2003 and hence it cannot be said that AO has not made any inquiry in respect of negative reserve which has been shown in actuarial report. ITAT has also observed that the assessment order was passed with due application of mind and the AO has not brought any tangible material on record to show that there was any failure on the part of the assessee to disclose fully and truly all material on record necessary for assessment.

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• 2021 (11) TMI 506
  TDS u/s 194J OR 192 - Assessee in default - payments made to consultant doctors - AO s order u/s 201 and 201(1A) of the Act concluding that the consultant doctors of M/s. Hosmat assessee are employees of the company and payment made to them is salary , not fees for professional services , thereby held the assessee as assessee in default and raised the demand of tax - HELD THAT:- Assessment said to have been done in the hands of the in-house consultant doctors treating their income as professional income received from this assessee, the matter requires re consideration by the AO, more particularly in view of the incentive policy adopted by the company as canvassed before this Court by referring to the document now placed on record before this Court inasmuch as in-house consultant doctors . We set aside the order of the Tribunal as well as the Authorities concerned insofar as treating the appellant as assessee in default with respect to the in-house consultant doctors and restore the matter to the Assessing Officer to re-consider the matter in the light of the incentive policy and the return of income filed by the in-house consultant doctors ORDER - The orders of the Assessing Officer, CIT (Appeals) and the Tribunal insofar as treating the appellant as assessee in default with respect to the in-house consultant doctors are set aside - whatever the benefits extended to the assessee in all other aspects, remain undisturbed. The matter is restored to the file of the Assessing Officer to re-consider the matter in the light of the observations made hereinabove and the Assessing Officer shall take expedite decision in accordance with law after providing an opportunity of hearing to the assessee.

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• 2021 (11) TMI 505
  Validity of reopening of assessment - non issuing the notice within the period of limitation under Section 143 (2) - whether curable defect u/s 292BB - HELD THAT:- The infirmities in the manner of service of notice alone would be amenable to under Section 292BB of the Act, but not the complete absence of notice itself. Notice issued beyond the period of limitation partakes the character of absence of notice itself in the eye of law. As such, Section 292BB would not save such a notice dehorse the limitation prescribed. Tribunal has rightly observed that the foundation process of reassessment is under Section 148 of the Act, but such jurisdiction is subject to further compliance as being stipulated in the statute itself and thus, quashed the assessment being invalid. It is a well settled legal principle that issuance of notice beyond period of limitation or absence of notice goes to the root of the matter and is the jurisdiction aspect, not a procedural irregularity and the same is not curable. Failure of the assessing officer in issuing the notice within the period of limitation under Section 143 (2) of the Act which is a notice giving jurisdiction to the assessing officer to frame assessment cannot be condoned by referring to S.292BB of the Act. We find no ground to interfere with the impugned order of the Tribunal. Substantial question of law in favour of the assessee

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• 2021 (11) TMI 504
  Unexplained investments u/s 69- Tribunal deleted the addition - addition based on the extrapolated data - second round of litigation - HELD THAT:- As decided in Gowri Gopal Textile Processing [P.] Ltd.[ 2011 (9) TMI 325 - KARNATAKA HIGH COURT ] while considering the computation of undisclosed income of the block period with reference to Section 158BB, has observed that in the absence of the word Computation defined under the Act, the meaning of the word has to be gathered from the scheme of the Act having regard to its ordinary grammatical meaning. The word assessment is the action of the Assessing Officer for determination of the amount of taxation, the scheme of charge or taxation. The term assessed being flexible, it bears very comprehensive meaning. Therefore, under Section 158BB of the Act, the Assessing Authority has to compute the undisclosed income falling within the block period, is not expected to assess the undisclosed income. Even in the event of undisclosed income, if the books are not available or the books are destroyed or there is suppression of actual sales, taking into consideration the totality of the circumstances, it is open to the Assessing Authority to estimate the income of the assessee. No reasons to differ from this dictum pronounced by the Co-ordinate Bench. The said ruling being squarely applicable to the facts of the present case, we answer the substantial question of law No.1 in favour of the assessee and against the Revenue. Addition of bogus expenditures - undisclosed payment of development charges to M/s. JAIC - Tribunal deleted the addition - HELD THAT:- To establish the factum that assessee said to have been incurred as expenditure towards the development charges, the assessee has placed the material evidence by producing necessary documents as per the profit and loss account of the assessee and profit and loss accounts of the JAIC with break-up figures which were made available before the Authorities as well as the Tribunal. The Tribunal having considered these factual aspects, has allowed the appeal of the assessee rejecting the Revenue s appeal. These issues being related to pure questions of facts, no question of law much less the substantial question of law would arise for determination by this Court in exercising the powers under Section 260A of the Act. - Decided against revenue.

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• 2021 (11) TMI 503
  Invalid return - Denial of refund - mismatch in the figures of income returned and as reported in Form 26AS - Maintainability of appeal against the order u/s 139(9) as appealable u/s 246A - refusal of refund u/s 237 - Treatment of return as invalid u/s 139(9) - difference between the income shown in the return and as shown in Form No. 26AS - whether mismatch in the figures of income returned and as reported in Form 26AS constitutes a defect in the return so as to warrant initiation of proceedings u/s 139(9)? - HELD THAT:- Any order passed under the Act against the assessee, impliedly including an order u/s 139(9) in the circumstances as are obtaining in this case, having the effect of creating liability under the Act which he denies or jeopardizing refund, gets covered within the ambit of clause (a) of section 246A(1). Clause (i) of section 246A(1) of the Act deals with the filing of an appeal before the CIT(A) against an order u/s 237 of the Act. The latter section, in turn, provides that: `If any person satisfies the Assessing Officer that the amount of tax paid by him or on his behalf or treated as paid by him or on his behalf for any assessment year exceeds the amount with which he is properly chargeable under this Act for that year, he shall be entitled to a refund of the excess. Technically speaking, the AO has not passed an order u/s 237 but only u/s 139(9) of the Act. We have noticed above that firstly, the AO could not have treated the return as invalid u/s 139(9) of the Act because of mismatch between the figure of income shown in the return and that in Form 26AS and secondly, if at all he did so on a wrong footing, he ought to have issued notice u/s 142(1)(i) of the Act for enabling the assessee to file its return so that a regular assessment could take place determining the correct amount of income and the consequential tax/refund. Here is a case in which the assessee has been deprived by the DCIT (CPC), Bengaluru of any legal recourse to claim the refund. Considering the intent of section 237 in mind and the unusual circumstances of the case, we hold that the order passed by him is also akin to an order refusing refund u/s 237 making it appealable u/s 246A(1)(i). We, therefore, set aside the impugned order and remit the matter to the file of the ld. CIT(A) for disposing off the appeal on merits as per law after allowing a reasonable opportunity of hearing to the assessee. Appeal is allowed for statistical purposes.

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• 2021 (11) TMI 502
  Addition u/s 36(1)(va) - Belated payments of the Employee s share of PF and ESI - Scope of amendment by Finance Act, 2021, to section 36[1][va] and 43B - HELD THAT:- As decided in M/S SHAKUNTALA AGARBATHI VERSUS THE DY. COMMISSIONER OF INCOME TAX (CPC) , BANGALORE [ 2021 (10) TMI 1196 - ITAT BANGALORE] Admittedly, the assessee has remitted the employees contribution to ESI before the due date for filing of return u/s. 139(1) of the I.T. Act. The Hon ble jurisdictional High Court in the case of Essae Teraoka (P.) Ltd. [ 2014 (3) TMI 386 - KARNATAKA HIGH COURT] has categorically held that the assessee would be entitled to deduction of employees contribution to ESI provided the payment was made prior to the due date of filing of return of income u/s. 139(1). Whether the amendment to section 36(1)(va) and 43B of the I.T. Act by Finance Act, 2021 is clarificatory and declaratory in nature? - Supreme Court in the recent judgment in the case of M.M. Aqua Technologies Limited v. CIT [ 2021 (8) TMI 520 - SUPREME COURT] had held that retrospective provision in a taxing Act which is for the removal of doubts cannot be presumed to be retrospective, if it alters or changes the law as it earlier stood - amendment brought about by the Finance Act, 2021 to section 36(1)(va) and 43B of the I.T. Act, alters the position of law adversely to the assessee. Therefore, such amendment cannot be held to be retrospective in nature. Even otherwise, the amendment has been mentioned to be effective from 01.04.2021 and will apply for and from assessment year 2021-2022 onwards. The amendment to section 36(1)(va) and 43B of the I.T. Act by Finance Act, 2021 is only prospective in nature and not retrospective. The amendment by Finance Act, 2021 to Sec. 36(1)(va) and 43B of the I.T. Act will not have application to relevant assessment year, we direct the A.O. to grant deduction in respect of employees contribution to ESI since the assessee has made payment before the due date of filing of the return of income u/s. 139(1) - Decided in favour of assessee.

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• 2021 (11) TMI 501
  Revision u/s 263 by CIT - whether depreciation is allowable on fixed assets, whose cost have been allowed as application of income ? - HELD THAT:- As in the case of CIT Vs. Rajasthan Gujarat Charitable Foundation, Pune [ 2017 (12) TMI 1067 - SUPREME COURT] held that the depreciation can be treated as application of income even if the expenditure on acquisition of capital asset was treated as application of income. We notice that the Income tax Act has been amended from AY 2015-16 disentitling the assessee to claim depreciation on assets, whose cost has been allowed as application of income. Since the year under consideration is AY 2010-11, the decision rendered by Hon ble Supreme Court is applicable to the facts of the present case. Since the view taken by Ld. CIT(A) is contrary to the binding decision rendered by Hon ble Supreme Court, his view on this issue cannot be sustained. Accordingly, we set aside his order on this issue. Whether repayment of loan is application of income or not? - CIT (Exemptions) has taken the view that if the asset acquired out of loan proceeds had been allowed as application of income, then the repayment of loan cannot be considered as application of income again, as the same will result in double deduction. A.O. has not examined this issue during the course of assessment proceedings - there is merit in initiation of revision proceedings on this issue - CIT(A) has directed the AO not to consider repayment of loan as application of income without giving a finding whether the cost of asset acquired out of loan funds were allowed as application of income or not. Hence his direction given on this issue requires modification. We quash the order of Ld. CIT(Exemptions) with regard to issue relating to depreciation. With regard to issue relating to repayment of loan, we modify the direction of the CIT (Exemptions) and direct the A.O. to examine this claim afresh i.e. if the cost of assets acquired out of loan funds have already been allowed as application of income, then the repayment of loan should not be allowed as application. On the contrary, if the cost of assets purchased out of loan was not allowed as application of income, then the repayment of loan should be allowed as application of income. We modify the directions given by Ld. CIT(Exemptions) accordingly.

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• 2021 (11) TMI 500
  Validity of assessment without hearing the assessee and without looking into the documents/details - Absence of requisite details and proper explanations - HELD THAT:- If the assessee had reasonable cause for not producing the same before the AO, CIT(A) ought to have proceeded as per Rule 46A of the Income Tax Rules, 1962 and adjudicated as to the admissibility of the additional evidence and proceeded further by calling for remand report from the AO if the assessee has made out a case for reasonable cause in not producing the relevant material before the AO and thereafter, decided the issue before him in accordance to law. In this case the AO has made the addition attributing failure on the part of assessee in producing the same [documents/material/explanation]. On appeal the Ld. CIT(A) did not allow the material/explanation called for by the AO on a hyper technical ground i.e., for non-filing of any petition for admission of additional/relevant evidence. It has been brought to my notice that during the appellate proceedings, the Ld. CIT(A) never raised any queries about reason for not filing the material/documents/explanation called for by the AO. The reason for not filing the material during the assessment proceedings were due to mis-placement of the notice u/s.142(1) of the Act, which led to the non-filing of documents/explanation during assessment proceedings. Assessee was prevented by reasonably cause for not presenting the documents/material/explanation before the AO.Appeal of assessee is allowed for statistical purposes.

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• 2021 (11) TMI 499
  Reopening of assessment u/s 147 - bogus purchases - HELD THAT:- As decided in own case [ 2021 (8) TMI 1246 - ITAT HYDERABAD] AO had rightly initiated the impugned re-opening process in all these three cases. Estimation of income on bogus purchases - It depends on facts of each and every case than involving any legal interpretation which could be treated as a valid precedent as per the hon ble jurisdictional high court s decision in CIT Vs. B.R. Constructions [ 1992 (6) TMI 13 - ANDHRA PRADESH HIGH COURT] . Faced with this situation, we deem it appropriate in larger interest of justice that the impugned bogus purchases in all these three year(s) deserve to be restricted to disallowance @ 8% only in the given facts and circumstances with a rider that the same shall not be taken as a precedent in any other case. Necessary computation shall follow as per law.

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• 2021 (11) TMI 498
  Revision u/s 263 by CIT - Addition u/s 68 - verification of loan transactions - HELD THAT:- An independent and new proceeding sets in motion on receipt of new material coming on record post assessment in terms of Explanation 1 to S. 263 of the Act and hence the responsibility of revisional authority towards observance of principles of natural justice, in such situation, would be akin to that of AO. PCIT can not merrily set aside the assessment on the basis of new material coming on record without exerting himself and confronting such material to the Assessee. PCIT is under bounden duty to take into account the perspective of the Assessee on such fresh material and is required to pass a speaking order thereon. PCIT thus could not merely sit solely in the capacity of a revisional authority qua the new material but was required to perform the task of AO in tandem and discharge quasi-judicial function independently. PCIT has failed to do so. Neither the purported evidence collected from SEBI were confronted nor the cross examination of adversarial statement was provided. The opportunity contemplated under S. 263 is thus rendered illusory and merely an empty formality resulting in miscarriage of justice in contravention of expresses intendment of law. Looking from any angle, the directions towards verification of loan transactions are unsustainable in law and deserve to be quashed. The directions no. 1-4 are thus set aside. Applicability of Section 43CA in respect of sale deed alleged to be executed below stamp duty value - We are unable to see any error in the action of the AO to accept the transactions outside the ambit of Section 43CA where the variations in actual consideration qua assessable value for the purposes of stamp duty does not exceed 10%. Consequently, the directions of the PCIT to this extent are thus nullified. However, the difference up to 10% only is saved by the amendments carried out in the Finance Act and therefore, the enquiry directed by the PCIT in respect of transactions covered under Section 43CA where the difference exceeds 10% appear justified. Thus, to this limited extent, the directions of the PCIT to direct enquiries for applicability of S. 43CA for transactions showing breach of safe harbour limit of 10% require to be upheld. It is thus open to the AO to enquire into applicability of S. 43CA where the difference between the stamp duty value and actual consideration exceeds 10% in accordance with the directions of PCIT and in accordance with law. The issue is thus allowed in part. Applicability of Section 40(a)(ia) [wrongly mentioned as Section 40A(3) through inadvertence] in respect of commission payment on purchase of land - It is the case of the Assessee that ledger account of parties namely Leeladhar Sharma and Bajrang Lal Karnany and TDS challan towards commission payments would show that the satisfaction of the PCIT is contrary to the facts on record. It was contended that both Tax audit report and as well as verification of AO vouches the stand of the Assessee. We find that the assessee has adequately demonstrated on facts that the TDS was properly deducted from the commission and other payments pointed out in the order of the PCIT and, therefore, the action of the Assessing Officer cannot be held to be erroneous or in contravention of law. In the absence any default as wrongly perceived by the PCIT, the action of the PCIT, being unjustified, is set aside on this score. Appeal of assessee is partly allowed.

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• 2021 (11) TMI 497
  Levy of penalty u/s 271(1)(c) - scope of debatable issue - disallowance of provision of interest on advances to related parties, disallowance of miscellaneous balances written off and finally belated payment of employees contribution towards PF and ESIC - HELD THAT:- AO did not accept the manner in which the provision was debited to P L account. There was difference of opinion in the stand taken by assessee vis- -vis the Ld. AO in accounting the provision. The assessing officer rejected the treatment of provision. Belated payment of employees contribution, we note that this issue stands settled that in the event the payment is made before the due date of filing of returns under section 139(1) of the act, no disallowance could be made. Under such circumstances this issue is debatable and therefore levy of penalty is unwarranted. Interest advanced to related parties, the Ld. AO disallowed for the reason that, assessee did not elaborate the reasons to substantiate the interest charged at 12% on advances made to intergroup entities. Miscellaneous balances written off, the addition was made as no justification was provided. Hon ble Supreme Court and various High Courts have held that writing off is a commercial decision by a businessman, which cannot be questioned by the authorities, unless it is found to be false or bogus. In present facts, there is no such observation by the Ld. AO. In our view the disallowances, made in the assessment order does not call for levy of penalty. The conditions necessary to support the levy of penalty in respect of the above items does not stand satisfied and therefore deserves to be deleted. - Decided in favour of assessee.

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• 2021 (11) TMI 496
  Reopening of assessment u/s 147 - AO had got information through Investigation Wing that the assessee has received Rs. 1.60 crore from M/s M. M. Engineering Services - HELD THAT:- Assessee had duly filed his return of income and further all the receipts could not be construed as the income of the assessee - when it has been brought to the knowledge of the AO that the information on the basis of which AO had formed belief of escapement of income was in fact a wrong information, then the very belief of the Assessing Officer of escapement of income of the assessee on the basis of such information also ceased to exist. AO, under the circumstances, should have applied his mind afresh to the fresh information brought to his knowledge. If after duly considering the records including the ITR of the assessee, the AO would have been still of the view that there was reason to believe that the income of the assessee has escaped assessment, then under those circumstances, the AO was supposed to record fresh reasons to believe that the income of the assessee has escaped assessment, whereupon, the assessee should have been given an opportunity to file his objections and the Assessing Officer was accordingly supposed to proceed in accordance with law. However, in this case, despite, it was brought to the knowledge of the Assessing Officer that the information on the basis of which he has formed belief of escapement of income of the assessee, was wrong, still the Assessing Officer proceeded to frame the assessment on the basis of the aforesaid wrong information which was basis for formation of his belief. Under these circumstances, it cannot be said that the Assessing Officer has proceeded in accordance with law. Framing of the assessment on the basis of information, which was wrong information to the very knowledge of the Assessing Officer, in our view, cannot be held to be justified, nor the same can be said to be an information to form the belief that the income of the assessee has escaped assessment. The reassessment framed on the basis of such wrong information and wrong belief is not sustainable in the eyes of law and the same is hereby quashed. - Decided in favour of assessee.

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• 2021 (11) TMI 495
  Disallowance of interest u/s 14A - Treatment of interest expenditure with the exempt income from the firm - Identification of how the own funds were utilized by the assessee - Whether assessee has not utilized the borrowed funds for the purpose of investment in shares? - disallowance of interest paid to the assessee s minor children whose income is already clubbed with the income of the assessee u/s 64 - HELD THAT:- Assessee has borrowed certain funds and utilized the same in the firm. In our considered view, the assessee has duly earned the interest income from the firm and also incurred interest expenditure on the funds utilized for the purpose of the business. Therefore, the assessee is eligible to claim the above expenditure independently against the income earned by the assessee. It is important to note that the earning of interest income is restricted by the provision of section 40(b) whereas assessee has to incur interest expenditure as per agreement with the lenders. The source of interest income from the firm is not exempt. Therefore, it is not proper on the part of Assessing Officer to add the difference of interest over and above paid by assessee as expenditure directly related to exempt income. The AO cannot penalize the assessee simply for the reason that assessee cannot claim more than the restricted interest as per section 40(b) of the Act. Otherwise, assessee would have claimed the same interest paid by him to the lenders. Therefore, the interest paid to the firm is not exempt and chargeable to tax. The interest expenses incurred by the assessee is adjustable against the interest income as a separate source of income. It is not proper on the part of AO to treat the interest expenditure with the exempt income from the firm. Therefore, the ground No. 1 raised by the assessee is allowed.

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• 2021 (11) TMI 494
  Revision u/s 263 by CIT- AO has not addressed the issue to the extent it deserves and also there was no relevant enquiries conducted to allow the claim of the assessee company under the head loss on assigned portfolio. - HELD THAT:- AO without applying his mind, failed to make requisite enquiries and without going into the details and without investigating the issue in detail, allowed the claim of the assessee. Therefore, it tantamount to non-application of mind on the part of the AO. Assessee did not furnish the data to verify the working of the loss and also repayment schedule furnished to the assignee bank(s), agreements and also there was no relevant requisite enquiries conducted by the revenue, but allowed the claim of the assessee. The questionnaire issued by the AO and the reply filed by the assessee, which is not in consonance with the questionnaire is erroneous as per law and claim made by the assessee has been allowed by the AO is without justification as per the provisions of the IT Act is prejudicial to the interests of revenue. Before invoking the provisions us/ 263, the twin conditions must be satisfied, namely, the order is erroneous and prejudicial to the interests of the revenue, which are exist in the instant case and, therefore, the Pr. CIT has rightly invoked section 263 and set aside the order of the AO. Therefore, the order passed by the AO is erroneous and prejudicial to the interests of revenue. AO is first an investigating officer thereafter he is an adjudicator but here in this case, the AO remained silent, but, he ought to have exercised his duty properly. We find substance in the submissions made by the ld. DR. The arguments of the AR is rejected in regard to show cause notice and finding of the Pr. CIT is different because the issues are the loss on assigned portfolio. and the Pr. CIT has rightly exercised his jurisdiction vested u/s 263 and set aside the order of AO - Decided against assessee. Addition u/s 14A r.w.r. 8D - HELD THAT:- It is the duty of the assessee to rebut the findings recorded by the AO, but, he failed to do so. The contentions raised by the ld. AR of the assessee in the written submissions with regard to disallowance of Rs. 6,76,30,358/- u/s 8D(i) is not warranted as the disallowance of under rule 8D(ii) has already been made by the AO, on the ground that the said amount of Rs. 6,76,30,358/- was already included in the total interest expenditure of Rs. 307.90 crores, are not acceptable because the disallowance calculated under rule 8D(i) was directly attributable for earning exempt income and during the course of arguments, the AR of the submitted that during the impugned AY no fresh loans have been taken, is also not acceptable. On examination of the cash flow statements, there is a huge negative cash flow from operations during the year, which clearly shows that the own funds have been exhausted and there is increase in loan funds to the extent of Rs. 177,91,92,156/-. It shows that the assessee has used loan funds for making investments during the year of which income is exempt. Disallowance made by the AO under rule 8D(i) of Rs. 6,76,30,358/- is correct and the CIT(A) was not justified in allowing the appeal of the assessee. Therefore, the disallowance made by the AO under rule 8D2(ii) of Rs. 1,11,434/- is hereby deleted.

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• 2021 (11) TMI 493
  Deferred brokerage expenditure - Addition made as assessee has not debited such expenditure in its P L Act. - as per revenue as corresponding income also has not been recoginized as income, thus, the claim of assessee is against the basic principal of matching of revenue with expenditure - CIT-A deleted the addition - HELD THAT:- As decided in own case [ 2021 (7) TMI 577 - ITAT MUMBAI] assessee has incurred expenditure on brokerage expenditure paid for obtaining investments in mutual funds. The investment made in the funds yields income over a period of years, however the said amount of brokerage expenditure incurred is not refundable to the assessee in any circumstances. Undisputedly, the expenditure is wholly and exclusively for the purpose of business. The concept of deferred revenue expenditure is not there in I.T. Act, which is duly supported by the decision of Hon ble Supreme Court in Taporia Tools [ 2015 (3) TMI 853 - SUPREME COURT] . The expenditure cannot also not be categorized in the capital filed on the plea of enduring benefit, as per the ratio of Hon ble Supreme Court in Empire Jute Mills [ 1980 (5) TMI 1 - SUPREME COURT] . Hence, we have no hesitation to hold that in these circumstances and examining the present issue on the anvil of Hon ble Supreme Court decisions as above, the expenditure incurred on brokerage is to be allowed in full in the impugned assessment year, as deferral of the same over a number of years for income tax purposes is not sustainable - Decided in favour of assessee.

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• Customs

• 2021 (11) TMI 492
  Valuation of imported goods - Related person - stocklot of coated/uncoated papers inrolls seized from NPT, godown Alipur, Delhi - rejection of declared value - declaration of lower value - differential duty demand on the basis of Rule 9, of CVR 2007 - HELD THAT:- Neither the Show Cause Notice nor the Order-in-Original rely upon any provision of law under which the documents procured from Belgium Customs have been relied upon against the three importers but the only section under which such documents can be relied upon is Section 139(ii) of the Customs Act,1962. The relied upon documents do not meet the test of Section 139(ii) of the Customs Act, 1962 and hence are not admissible in evidence. Since these documents are neither signed nor authenticated and also full of numerous discrepancies as explained above, no presumption can be raised about its truthfulness - No explanation has been given by the DRI as to if the purported export declaration of higher value was available why corresponding invoices were not provided by the Belgium Customs as export declaration is always prepared on the basis of an invoice. Further, the duty of Rs. 74,640 has been confirmed on the ground that there was a difference in weight to the extent of 8.552 MT in respect of two Bills of Entry both dated 12.9.2014 as the procured invoices showed the actual quantity 447.492 MT where the actual invoices showed the total quantity imported as 438.940 MT. On the issue of inter-relationship between the three importers and the fact that all the three have been treated as related persons on twin grounds. In the first place it has been observed by the Principal Commissioner that Shri Prakash Chand Garg was Director of M/s NPT whereas his sons Shri Vijay Garg and Shri Ashish Garg were Directors of M/s SPPL and M/s SIPPL. He further observed that all three are part of same family and reside at the same residential address. He noted that there had been fund transfers among the three importers during period the financial year 2017-18 and these fund transfers were duly reflected in their financial statements - It has been held that Shri Prakash Chand Garg was one of the Directors in M/s Affluent Enterprises Ltd, Hong Kong and by virtue of that position all the three importers are related persons of M/s Affluent Enterprises Ltd. Further, M/s The Crown Commercial House, Hong Kong which was one of the suppliers to these importers was owned by one Shri Vikash Khatuwala who had a major shareholding in M/s Affluent Enterprises Ltd. Hence by virtue of that position, M/s The Crown Commercial House, Hong Kong was also a related person of these three importers. Merely because there were transfer of funds in India amongst three importers will not make them related persons in terms of Rule 2(2) of CVR,2007. The concept of related person under the Customs Act, 1962 is applicable only with regard to imported goods. The transfer of funds from one entity to another entity in India cannot have any bearing on the concept of related person with regard to the provisions of the Customs Act and Valuation Rules made there under - all the three importers cannot be treated as related persons. In the present case there was no need to redetermine the value as the transaction value under Rule 3(1) was available in view of our detailed findings hereinabove. Though Rule 3(1) is subject to Rule 12 but we find Rule 12 is not applicable to the facts of the present case as there is no credible evidence brought on record to reject the transaction value. We have already held that the documents procured from the Belgium Customs are not admissible in evidence. In this view of the matter, we hold that the transaction value declared by all the three importers were in accordance with Section 14(1) of Customs Act,1962 read with Rule 3(1) of CVR,2007. Further it was for the Principal Commissioner to have rebutted or displaced the detailed evidence which has been discussed by us in the preceding paragraphs which he has chosen to totally overlook and sidetrack. The differential duty demand on all three importers, imposition of penalties on all parties and Redemption Fine on M/s NPT are set aside - Appeal allowed - decided in favor of appellant.

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• 2021 (11) TMI 491
  Extended period of limitation - Demand of differential duty alongwith ineterst and penalty - short paid customs duty - appellant had cleared the said goods without disclosing the retail sale price [RSP] - invocation of provisions of section 28(4) of the Customs Act - suppression of facts or not - HELD THAT:- In the present case, the period involved is from 21.12.2012 to 25.05.2014, but the notice was issued to the appellant on 06.12.2016. It was, therefore, clearly beyond the stipulated period of one year. The show cause notice has, however, invoked the provisions of sub-section (4) of section 28 of the Customs Act and it has been stated that the importer (the appellant) had not disclosed the true facts on the Bills of Entry filed under section 47 of the Customs Act, as it failed to declare that the motor vehicle parts were for trading purposes and not for individual consumption and if this fact was declared on the invoices, the Assessing Officer would have checked and asked for the RSP of the motor vehicle parts before clearing the parts for home consumption. The appellant had, therefore, wilfully not declared the RSP of the imported goods with an intent to evade payment of appropriate customs duty on the imported goods. The provisions of section 11A of the Central Excise Act, which are pari materia to section 28(4) of the Customs Act came up for interpretation before the Supreme Court in PUSHPAM PHARMACEUTICALS COMPANY VERSUS COLLECTOR OF C. EX., BOMBAY [ 1995 (3) TMI 100 - SUPREME COURT] . The Supreme Court observed that section 11A empowers the Department to reopen the proceedings if levy has been short levied or not levied within six months from the relevant date but the proviso carves out an exception and permits the authority to exercise this power within five years from the relevant date in the circumstances mentioned in the proviso, one of it being suppression of facts - It is, therefore, clear that the suppression of facts should be deliberate and in taxation laws it can have only one meaning, namely that the correct information was not disclosed deliberately to escape payment of duty. In EASLAND COMBINES VERSUS COLLECTOR OF C. EX., COIMBATORE [ 2003 (1) TMI 107 - SUPREME COURT] , the Supreme Court observed that for invoking the extended period of limitation, duty should not have been paid because of fraud, collusion, wilful statement, suppression of fact or contravention of any provision. These ingredients postulate a positive act and, therefore, mere failure to pay duty which is not due to fraud, collusion or wilful misstatement or suppression of facts is not sufficient to attract the extended period of limitation. There is no mis-statement or suppression of facts by the appellant. The basic ingredients for invoking the extended period of limitation do not, therefore, stand satisfied - Appeal allowed - decided in favor of appellant.

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• 2021 (11) TMI 490
  Smuggling - Betel Nuts - foreign origin goods or not - reversal of burden of proof - assessment of goods under Section 17 of the Customs Act - HELD THAT:- The goods were undisputedly seized within India at Assam-Mizoram border. The ground for seizure and subsequent confiscation is that the owners/occupants were not able to prove the licit import of the Betel nuts which DRI suspected to be of foreign origin. The GST invoices, E-way bills etc. produced by the appellants were found to be not satisfactory. In respect of some goods, the Customs Act, 1962 reverses the burden of proof and makes it the responsibility of the person from whom the goods are seized or the owner of the goods to prove that they are not smuggled under Section 123. It is clear that even if the goods are of foreign origin, if they have been imported and cleared for home consumption, they cease to be imported goods thereafter and the importer ceases to be the importer. Therefore, no duty can be assessed on such goods under Section 17 of the Customs Act. There is also no responsibility on the importer or on any other person from whom the goods are seized to keep or produce the import documents to establish their legal import once they have been cleared for home consumption. The goods can be used, sold, re-sold, etc. without any duty either on the importer or any subsequent buyer of such goods to keep or produce the import documents. In this case, the goods were clearly seized within India. The burden of proof shifts to the importer or the owner of the goods only when such goods are notified under Section 123 and betel nuts were not notified. The Department has not proved in this case that the goods were smuggled goods. Unless Revenue can establish that the betel nuts have been imported illegally into India, they cannot be confiscated. The impugned order upholding the impugned order of the Adjudicating Authority confiscating the goods on the ground that the appellants were not able to establish that they were not smuggled goods cannot be sustained as the appellants have no such responsibility. The Revenue, on which the burden of proof rests, has not established that the seized betel nuts were smuggled. It is immaterial whether the betel nuts were of foreign origin or not. Appeal allowed - decided in favor of appellant.

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• 2021 (11) TMI 489
  Concessional rate of duty - Benefit of South East Asia Free Trade Agreement (SAFTA) in terms of Notification No.99/2011-CUS dated 09.11.2011 - country of origin of goods - Country of Origin Certificate for the live consignment had been sent back to Bangladesh for rectification - confiscation - penalty - suppression of facts or not - HELD THAT:- The Appellant was not availing any benefit in terms of the Exemption Notification and there was no occasion for confiscation of the live goods as the letter shows that the Country of Origin Certificate for these goods had been sent back to Bangladesh for rectification which was much before the DRI s intervention on 19/22 July 2017. The confiscation and subsequent redemption fine for Bill of Entry No.2321708 dated 05.07.2017 is un-warranted and cannot be sustained. Further, penalty under Section 114A of the Act cannot be sustained in respect of these consignments since there is no case of duty short paid due to collusion, willful misstatement or suppression of facts. The Country of Origin Certificates are conclusive evidence since these are issued by the Designated Committee of Bangladesh i.e. Export Promotion Bureau, and in absence of any material on record to show that these were forged or its genuineness questioned by DRI or Indian Customs, these Country of Origin Certificates should be considered as substantive and conclusive evidence - also there are no evidence on record of any overseas enquiry with the Bangladeshi supplier or confirmation with Bangladesh Customs or Bangladeshi Authority, and therefore the SAFTA Certificate cannot be unilaterally rejected. The past three Bills of Entry, the Proper Officer i.e. Assistant/Deputy Commissioner of Customs, Petrapole LCS had done value loading after due consideration and extended benefit of Exemption Notification on verification of documents like SAFTA Certificates, invoices etc. and thus there are no ingredient of collusion, willful misstatement or suppression of facts and accordingly the penalty imposed under Section 114A of the Act ibid is fit to be set aside. Appeal allowed - decided in favor of appellant.

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• 2021 (11) TMI 488
  Non-Levy of Anti-Dumping Duty - imports of Nonyl Phenol from Chinese Taipei - seeking for issuance of a direction to the Central Government to issue a notification for imposition of anti-dumping duty, based on the recommendation made by the designated authority - HELD THAT:- In JUBILANT INGREVIA LIMITED VERSUS UNION OF INDIA, DESIGNATED AUTHORITY, DIRECTORATE GENERAL OF TRADE REMEDIES, GHW (VIETNAM) CO. LTD., M/S. GHW HOLDING COMPANY HONG KONG, SHENG LONG BIO-TEC INDIA PVT. LTD. AND UTTARA IMPEX PRIVATE LIMITED PUNE [ 2021 (11) TMI 200 - CESTAT NEW DELHI] , the same issues as have been raised in this appeal were raised. The decision taken by the Central Government not to impose anti-dumping duty, despite a recommendations having been made by the designated authority for an imposition of anti-dumping duty, was set aside and the matter was remitted to the Central Government to take a fresh decision on the recommendation made by the designated authority. The matter is remitted to the Central Government to reconsider the recommendation made by the designated authority - Appeal allowed by way of remand.

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• Corporate Laws

• 2021 (11) TMI 487
  Seeking recall of order - reactivation of the Directors Identification Number (DIN) of the writ petitioner - applicant was not impleaded as a party to the writ petition - HELD THAT:- Although the portion of the order under recall, by which the deactivation of the writ petitioner s DIN was set aside, was justified since there was due compliance of the liabilities of the writ petitioner as director of the company-in-question, the latter portion of the order under recall, setting aside the operation of the order dated June 24, 2016 of the ROC, was in contravention of the Circular dated February 10, 2012 and, thus, bad in law. Since the review applicant was not impleaded as a party to the writ petition, there was no opportunity for the said applicant to point out the aforesaid flaw in the order under recall and/or any scope of arguing the question as raised in the review application at the relevant juncture, the portion of the order under recall setting aside the order dated June 24, 2016 is required to be recalled/set aside - Application is allowed, thereby recalling and setting aside the finding that it was beyond the scope of the jurisdiction of the ROC to direct that the documents filed by the directors would not be approved/registered/recorded and thus would not be available in the registry for public viewing and setting aside of the operation of a portion of the order dated June 24, 2016 by the ROC, Kolkata. The deactivation of the DIN of Krishna Kumar Rungta, the writ petitioner, is set aside and such DIN is re-activated - application allowed.

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• Law of Competition

• 2021 (11) TMI 486
  Validity of Requisition Notice to call Extraordinary General Meeting ( EGM ) - Seeking declaration that the refusal to act on the Requisition Notice, is in accordance with law or not - Refusal to act on the Requisition Notice - seeking injunction against Invesco from acting in furtherance of the Requisition Notice in question - HELD THAT:- There are no reason to hold that Indian company law should be in departure from a general, and evidently salutary provision, merely because it has not made this aspect a part of the code. Sometimes, it happens that a company must be saved from its own shareholders, however well-intentioned. If a shareholder resolution is bound to cause a corporate enterprise to run aground on the always treacherous shoals of statutory compliance, there is no conceivable or logical reason to allow such a resolution even to be considered. Shareholder primacy or dominion does not extend to permitting shareholder-driven illegality. A perfectly legal resolution, if carried, may well result in the diminution of the company s profits or business. That is not a court s concern. But the resolution must be legal. The interpretative question is therefore not over the word valid at all but about the matters proposed to be considered at a requisitioned EGM. And the Court is never foreclosed from considering this. Cricket Club of India came at a time well before the slew of regulatory provisions we see today. In particular, there was no distinction or special provisioning for a public listed company. These companies today, with wide shareholder basis, operating in tightly regulated fields must receive distinct considerations. Compliance is not only with the Companies Act. Parallels to the Companies Act controls are to be found elsewhere too. There is also no call to examine the motivations of either side. That is certainly for the general body to take into account. For this reason, it is found that Mr Sibal s endeavour to take me through a compilation of past communications between the two sides to be somewhat distracting, even possibly dangerous - what Invesco seeks today might be perfectly attainable if the substance - and therefore the form - of the proposed resolutions is correctly done. I am only assessing the current form and substance, not the underlying motivations or purposes, nor suggesting that Invesco can never, under any circumstances and no matter what the substance or the form, properly exercise its shareholders rights - The injunction is against Invesco. Indeed, in any anti-suit injunction proceeding, the frame is precisely against the party prosecuting a rival action in another forum, not the forum itself (unless the other forum is hierarchically subordinate). There will be an injunction, restraining Defendants Nos. 1 and 2 (including their employees, agents and anyone acting by, through or under them) from taking any action or step in furtherance of the Requisition Notice dated 11th September 2021, including calling and holding an EGM under Section 100(4) of the Companies Act, 2013 - application disposed off.

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• Corporate Laws

• 2021 (11) TMI 485
  Seeking direction to petitioner to maintain status quo qua the assets of the Respondent No.2, particularly when the RespondentNo.2 has not been admitted into CIRP till now - HELD THAT:- The learned Single Judge has declined to stay the order of the NCLT dated 30.09.2021 granting status quo order, on the ground that the Appellant has already filed an application for vacation of the status quo order, which is pending adjudication before the Tribunal and is listed on a short date i.e. 15.11.2021. Learned Single Judge has also observed that the Tribunal will necessarily consider the Appellant s plea that the impugned order was without jurisdiction. What has also weighed with the learned Single Judge is the Appellant s own case that it has taken possession of the subject properties and merely because it has been directed to maintain status quo, no grave or irreparable loss is caused. There are no infirmity with the observations of the learned Single Judge and the order passed, which is impugned in the present appeal. Learned Senior Counsel does not dispute that the application for vacation of stay is pending adjudication and is listed on 15.11.2021 - appeal dismissed.

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• 2021 (11) TMI 483
  Sanction of Scheme of Amalgamation of Merger by Absorption - Sections 230 to 232 of the Companies Act, 2013 and other relevant provisions of the Companies Act, 2013 and the rules framed there under - HELD THAT:- From the material on record, the Scheme appears to be fair and reasonable and is not violative of any provisions of law and is not contrary to public policy - Since all the requisite statutory compliances have been fulfilled, Company Scheme Petition is made absolute in terms of clauses (a) to (c) of the said Company Scheme Petition. The First Petitioner Company be dissolved without winding up - Application allowed.

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• 2021 (11) TMI 482
  Sanction of Composite Scheme of Amalgamation - Sections 230 to 232 of the read with other applicable provisions Companies Act, 2013 - HELD THAT:- From the material on record and after perusing the clarifications and submissions of the Petitioner Companies to the Reports filed by the Regional Directors, the Scheme appears to be fair and reasonable and is not violative of any provisions of law and is not contrary to public policy - Since all the requisite statutory compliances have been fulfilled, the Company Scheme Petition filed by the Petitioner Companies is made absolute. The Scheme is hereby sanctioned with the Appointed Date as April 1, 2019 - Application allowed.

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• 2021 (11) TMI 481
  Seeking directions to Respondents 1, 2 3 Banks herein, to remove the freeze on the accounts of Applicant Company - siphoning of funds - HELD THAT:- This Tribunal has not passed any order directing defreezing of the accounts of the Applicant as contended by the Learned Counsel for the Applicant/Petitioner Company. At the same time, it is also held that there is sufficient force in the plea of the Learned Counsel for Applicant that the freeze order which is admittedly in vogue, is preventing the Applicant Company from paying the salaries and wages to its staff and workers. There are force in the submissions of the Learned Counsel for the proposed Respondents that if the relief sought for by the applicant in this IA is granted pending consideration of the implead application, the same would result in grave injustice to the proposed respondents. Therefore, this Tribunal is of the opinion that interest of justice require, that an interim arrangement be made pending disposal of this IA. Respondent Banks are hereby directed to de-freeze the following accounts of the Applicant Company enabling the Applicant Company to operate the same subject to condition that the Applicant Company shall draw the amounts that is actually necessary and required to pay the wages and salaries to its duly employed workers and staff and to manage the day to day operations of the Company - application allowed.

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• 2021 (11) TMI 480
  Seeking restoration of the name of the struck off company, in the Register of Companies maintained by ROC, Gujarat (Dadra Nagar Haveli) - Section 252(3) of the Companies Act, 2013 - HELD THAT:- It appears that the land on which the company claims to be owner is not shown in the name of company as per the land record provided by the appellant and the appellant itself admitted that they have failed to file the Financial Statement for F.Y. 2009-10. It is also admitted that company was not in operation or carrying on business when the company was struck off by the ROC, Ahmedabad. However, there is a Special Civil Application is pending before the Hon ble High Court of Gujarat wherein the appellant company is party to the said application. Hence, without restoration of the name of the company the pending matter cannot be pursued by the company. The apprehension shown by the Caveator that the restoration of the name of the company may lead to undue advantage by the company upon the Caveator is without any reason. Even after restoration of the name of the company, if any matter is pending before any forum that would be pursued as per the applicable provisions of law and the order of restoration will not be a hurdle in the pending litigation. The restoration of the name of the company may lead to smooth proceedings of pending litigations by the company, hence, it is just and reasonable to restore the name of the company. The Registrar of Companies, Gujarat (Dadra Nagar Haveli) the respondent herein, is ordered to restore the original status of the Appellant Company as if the name of the Company has not been struck off from the Register of Companies with resultant and consequential actions like changing status of Company from struck off to Active - Application allowed.

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• 2021 (11) TMI 479
  Seeking restoration of the company s name in the Register of Companies maintained by the Registrar of Companies, Jaipur - section 252(1) of the Companies Act, 2013 - HELD THAT:- Upon considering the facts and circumstances and the pleadings of the present appeal, this Bench is of the view that it is a fit case for restoration of the name of the company. This appeal is allowed and the restoration of the appellant-company s name, i. e., Prembhagwan Builders and Developers P. Ltd., in the Register of Companies maintained by the RoC, is hereby ordered, with a direction that the company shall comply with the provisions of the Act - name of company restored.

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• Insolvency & Bankruptcy

• 2021 (11) TMI 478
  Non-viability of the financial arrangement between the Corporate Creditors and the Corporate Debtor - Requirement to wait any further for the appellant No. 1/ the Company to resolve the Review process initiated by the Appellant Company seeking Review by the West Bengal Electricity Regulatory Commission (Commission), of the Tariff Order of the Commission dated the 31st of May 2021 - HELD THAT:- The settlement of the tariff or, the Tariff Order, being a pre-condition towards the restructuring arrangement arrived at in the meeting dated the 17th of February, 2021, with the pronunciation of the Tariff Order by the Commission on the 31st day of May 2021, such pre-condition stood answered. It is not within the domain of R3 and R4 acting as lenders to wait any further beyond the Tariff Order pronounced by the Commission. It is evident that the restructuring exercise arrived at the said Consortium Meeting dated 17th of February, 2021 has not worked out. It is not the domain of the Writ Court to explore whether, following the collapse of the restructuring exercise, R3 and R4 could be prodded to extend further concessions in favour of the Appellant No. 1/ the Company. The issue between the parties is at a stage now when the non-viability of the financial arrangement between the Corporate Creditors and the Corporate Debtor subsumes, arguably if any, the public law element which can be attributed to either the RBI Framework of 2019 or, to the nature of the business of the Appellant No.1/ the Company, i.e. to generate an essential service such as electricity. Admittedly, having regard to the commercial arrangement arrived at between the parties at the said Consortium Meeting dated 17th February, 2021, there is no legal flaw in R3 and R4 taking the next logical step under the IBC. The Tariff Order dated 31st May, 2021 being fundamental to both the Corporate Debtor and the Corporate Creditor, its failure necessitated that the parties re-visit their positions or, at least brief each other of their respective positions, prior to embarking upon exercising their respective legal options. It would be thus open to the parties to keep the Tariff Order dated 31st May, 2021 one last time on the table and, on failure to reach a commonality of perceptions, either of the parties could then proceed with their chosen legal remedies. This Court is not at all unmindful of the primacy of the IBC proceedings. This Court is also not at all unmindful of the fact that the survival of the corporate entity, viz. the Appellant No.1/the Company, as distinguished from its Promoter Group, shall be given due and deep consideration under the IBC. At the same time this Court must record the fact that a select Audit placed before the said Consortium Meeting dated 17th February, 2021, did not suspect the Appellant No.1/the Company of any mala fide financial action. The Commission to adjudicate the Review Petition of the Appellant No.1/the Company on its own merits not later than a period of six weeks from the date of communication of this order - application disposed off.

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• 2021 (11) TMI 477
  Maintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its dues - Operational Creditors - existence of debt and dispute or not - time limitation - HELD THAT:- The effect of Section 18 of the Limitation Act, 1963, is that an acknowledgement of liability in respect of a right made in writing and signed by the Debtor before expiration of the prescribed period for a Suit or Application would result in a fresh period of Limitation being computed from the time when acknowledgement was so signed. It is seen from the Ledger Account reproduced in para 7 read with Annexure-6, that an amount of Rs. 32,27,708/- was due and liable to be paid by the Respondent to the Appellant. It is relevant to note that the part payment was made on 23.05.2017, the email sent by the Corporate Debtor is dated 10.05.2018 and the Application was filed in November, 2019 well within the Limitation period - It is significant to mention at this stage that on 23.02.2019, the Appellant issued a Demand Notice dated 25.02.2019 under Section 8 of the Code which was delivered to the Corporate Debtor on 01.03.2019 but there was no Reply. The part payment made on 17.05.2017 read together with the Ledger Account given by the Corporate Debtor on 10.05.2018 vide email and also the Ledger Account on Annexure A-6, we are of the considered view that the right to sue has accrued. Section 18 of the Limitation Act, 1963 posits that a fresh period of Limitation shall be computed from the date when the party against whom the right is claimed acknowledges its liability - the fresh period of Limitation is required to be computed from the date of acknowledgement of debt by the principal borrower and part payment made on 17.05.2017 read with the Ledger Account and the email dated 10.05.2018 evidences that the Application filed on 2019 is well within the period of Limitation. It is pertinent to mention that the Corporate Debtor has not replied to the Demand Notice issued under Section 8 of the Code. Appeal allowed - decided in favor of appellant.

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• 2021 (11) TMI 476
  Demand of additional debt - quantum and the rate of the additional work was not agreed upon prior to the issue of the Invoice - Operational Debt - pre-existing dispute or not - HELD THAT:- The Ld. Adjudicating Authority have rightly taken note of the facts and also taken note of given finding that there is a pre-existing dispute between the parties. So, based on judgment passed by Hon ble Supreme Court in MOBILOX INNOVATIONS PRIVATE LIMITED VERSUS KIRUSA SOFTWARE PRIVATE LIMITED [ 2017 (9) TMI 1270 - SUPREME COURT] the Ld. Adjudicating Authority has rightly rejected the Application filed by the Appellant under Section 9 of the IBC. There is no illegality committed by the Ld. Adjudicating Authority while passing the impugned order - Appeal dismissed.

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• 2021 (11) TMI 475
  Seeking direction to Respondent to permit the Financial Creditors of the Corporate Debtor to distribute amount from the cash balance available with the Corporate Debtor in the proportion of their respective voting share in the erstwhile CoC - permission to Financial Creditors of the Corporate Debtor to distribute the cash balances available with the Corporate Debtor, other than such cash which the is currently required for the operation of the Corporate Debtor as a going concern - HELD THAT:- This Bench is the view that this application is premature at this juncture. Implementation of approved Resolution Plan failed consequently the Company has been put in the Liquidation, but the company is still working and therefore distribution of its cash balance will derogate the value of company which will meager the possibility of achieving maximization of value of assets. Hence this application is rejected. The Liquidator is directed to submit progress report along with revised list of stakeholders of the Corporate Debtor. Further, Liquidator also directed to take steps towards completion liquidation of the Corporate Debtor in time bound manner then start distribution in one go. Application disposed off.

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• 2021 (11) TMI 474
  Liquidation of the corporate debtor - Applicability of time limitation - section 33 of I B Code - HELD THAT:- It is recalled that the CIRP of the Corporate Debtor was initiated on 14.2.2020 and the decision by the CoC regarding moving for liquidation of Corporate Debtor was taken in its meeting dated16.6.2021. Thus, there is a passage of 16 months from the initiation of CIRP to the decision by CoC to move for liquidation. The Hon ble Apex Court has held in many judgments that proceedings under IBC should be completed in a time-bound manner. Moreover, if any resolution plan is not approved by CoC, the provision of section 33 of IBC has to kick in, with no option but to go for liquidation of the Corporate Debtor. The catena of judgments cited by the Learned Counsel for Appellant, relate to cases where applications were filed under section 12A of the IBC. In the instant case, no application was filed under Section 12A of IBC since there was no OTS that was acceptable to the Respondent No. 2 bank. Hon ble Supreme Court has held in many matters that the decision of the COC, taken in its commercial wisdom, should prevail unless such a decision has some legal infirmity. The impugned order passed by the Adjudicating Authority for liquidation of the corporate debtor, need not be interfered - appeal dismissed.

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• 2021 (11) TMI 473
  Maintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its dues - Financial Credtors - existence of debt and dispute or not - time limitation - Whether the Application/Petition is filed by an Authorised Person? - HELD THAT:- In the instant case, the Application under section 7 of the Code was filed by the Assistant General Manager, who happens to be the principal officer of Respondent number 1 Bank. Accordingly, the said officer is duly authorised through a General Power of Attorney in his favour on 27 September 2011, which is still valid and effective - Under the said Power of Attorney, the said officer of the bank is authorised to grant the loan, execute documents for and on behalf of the bank, recover loans, if necessary and further, entitled to initiate proceedings under the Insolvency and Bankruptcy Code. Additionally, Respondent number 1 Bank has also filed a copy of the permission letter dated 11 June 2018, which categorically allows the bank to file the present Application under section 7 of the Code. Whether the Application/Petition filed u/s 7 of the I B Code is barred by limitation? - HELD THAT:- In the instant case undisputedly, the account of the Corporate Debtor was classified Non-Performing Asset on 01 July 2015. The date of default, as mentioned in Section 7 petition, is 01 July 2015. On perusal of the statement of the account of Corporate Debtor, it appears that the amount of Rs. 5,99,760/- was credited in the account of Corporate Debtor on 30 December 2015. The Appellant claims that this payment was made by a completely unrelated party, i.e. Dynamic Extractors . It is further stated that the said payment by Dynamic Extractors was wrongfully made, and the Appellant returned it. The contention of the Appellant is unsupported by any evidence. The learned Adjudicating Authority has rightly admitted the Application filed under section 7 of the Insolvency and Bankruptcy Code 2016 - Appeal dismissed.

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• 2021 (11) TMI 472
  Consideration of new/undecided claims, after implementation of Resolution plan - HELD THAT:- Once the Resolution Plan has been implemented after approval by the Adjudicating Authority, any claim cannot be considered. Hon ble Supreme Court has held in the matter of COMMITTEE OF CREDITORS OF ESSAR STEEL INDIA LIMITED THROUGH AUTHORISED SIGNATORY VERSUS SATISH KUMAR GUPTA OTHERS [ 2019 (11) TMI 731 - SUPREME COURT ] and also in the matter of JAYPEE KENSINGTON BOULEVARD APARTMENTS WELFARE ASSOCIATION ORS. VERSUS NBCC (INDIA) LTD. ORS. [ 2021 (3) TMI 1143 - SUPREME COURT ] that a Successful Resolution Applicant cannot be faced with undecided claims after the Resolution Plan submitted by him has been approved as this would amount to a hydra head popping up, which would throw into uncertainty amounts payable by a prospective Resolution Applicant who successfully takes over the business of the Corporate Debtor. There is no legal provision that allows it to recall or review its order dated 20.2.2020 approving the resolution plan for the corporate debtor. Moreover, once the Resolution Plan has been approved and implemented, any new/undecided claims cannot be considered as has been held in a number of judgments of the Hon ble Supreme Court - Appeal dismissed.

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• 2021 (11) TMI 471
  Maintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its dues - Financial Creditors - existence of debt and dispute or not - HELD THAT:- The Corporate Debtor has accepted its liability to pay to the Financial Creditor in its reply dated 07.11.2020. The Corporate Debtor has not disputed the loan disbursed and has expressed its inability to pay to the Financial Creditor due to insufficiency of funds. There is no dispute as to loan amount disbursed by the Financial Creditor to the Corporate Debtor. Due to persistent failure on the part of the Corporate Debtor to repay the loan, the Financial Creditor vide letters dated 15.11.2017, 01.12.2017 and 20.12.2017 requested the Corporate Debtor to refund the interest amount - The Financial Creditor has attached copy of Balance sheet of the Corporate Debtor for the Financial Year 2014-2015 which reflects the debt payable to the Financial Creditor. The Financial Creditor has also attached the MOU dated 24.02.2014 and the 2nd MOU dated 19.02.2016 executed between the Financial Creditor and the Corporate Debtor which shows that the amount of loan was disbursed and the Corporate Debtor was also liable to pay an interest on the said loan @ 18% p.a. The nature of Debt is a Financial Debt as defined under section 5 (8) of the Code. It has also been established that there is a Default as defined under section 3(12) of the Code on the part of the Debtor. The two essential ingredients, i.e. existence of debt and default , for admission of a petition under section 7 of the I B Code, have been met in this case - it is found that the Financial Creditor has not received the outstanding Debt from the Corporate Debtor and that the formalities as prescribed under the Code have been completed by the Petitioner. This Petition deserves Admission . Petition admitted - moratorium declared.

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• 2021 (11) TMI 470
  Maintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its dues - Operational Creditors - existence of debt and dispute or not - HELD THAT:- The counsel appearing for the Operational Creditor invited the attention of this bench to the relevant invoices, Demand Notice and track report of service of Demand Notice on the corporate debtor along with other relevant documents which are annexed to the company petition and successfully demonstrated the existence of debt and default. Since the corporate debtor remained ex-parte, the claim of the Operational Creditor remained unchallenged. Upon perusing the material available on record this bench is satisfied that the above company petition fulfills all the necessary requirements for admission Under Section 9 of the Code and is liable to be admitted. Petition admitted - moratorium declared.

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• 2021 (11) TMI 469
  Maintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its dues - Financial Creditors - existence of debt and dispute or not - HELD THAT:- In the present case in hand it is noted that the legal heirs of the Financial Creditor also successor to the Original Financial Creditor now on record. Petitioners vide a notice of demand called upon the Corporate Debtor dated 03.10.2017 to pay to Petitioners. Further it is also noted that money/loan acknowledged by the Corporate Debtor in various financial statements. The contention of the Corporate Debtor that there was understanding that money will be paid after sale of asset only has no substance in it. In the lights of the Hon ble Supreme Court in SWISS RIBBONS PVT. LTD. AND ANR. VERSUS UNION OF INDIA AND ORS. [ 2019 (1) TMI 1508 - SUPREME COURT ] upholding the Constitutional validity of IBC, the position is very clear that unlike Section 9, there is no scope of raising a dispute as far as Section 7 petition is concerned. As soon as a debt and default is proved, the adjudicating authority is bound to admit the petition. The application made by the Financial Creditor is complete in all respects as required by law. It clearly shows that the Corporate Debtor is in default of a debt due and payable, and the default is in excess of minimum amount stipulated under section 4(1) of the IBC. Therefore, the debt and default stands established and there is no reason to deny the admission of the Petition. In view of this, this Adjudicating Authority admits this Petition and orders initiation of CIRP against the Corporate Debtor. Application admitted - moratorium declared.

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• 2021 (11) TMI 468
  Maintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its dues - Operational Creditors - existence of debt and dispute or not - HELD THAT:- It is evident that the Corporate Debtor did not respond to the notice of demand issued by the Operational Creditor. The Corporate Debtor did not file counter inspite of granting several adjournments. By virtue of order dated 15.04.2021, the Tribunal forfeited the right of the Corporate Debtor to file counter and the matter was listed for arguments. The Counsel for the Corporate Debtor did not appear thereafter. Hence it can be understood that the Corporate Debtor does not have anything to submit in opposition to the contentions made by the Operational Creditor. This is a fit case to admit and order initiation of Corporate Insolvency Resolution Process (CIRP) against the Corporate Debtor - application admitted.

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• 2021 (11) TMI 467
  Exclusion of period allowed for restructuring the corporate debtor from Liquidation - exclusion of fee of the Liquidator as per regulation 4(2) (b) of Insolvency and Bankruptcy Board of India (Liquidation Process) Regulations, 2016 excluding the period from 11th January 2021 to 28th July 2021 - HELD THAT:- Taking into consideration of the present pandemic as also Regulation 2 B (2) of the Insolvency and Bankruptcy Board of India (Liquidation Process) Regulations, 2020, this application is disposed off, excluding the period from January 11th, 2021 to July 28th, 2021 from the Liquidation period of the Corporate Debtor in order to complete the Liquidation process, strictly following the IBBI Regulations. The fee of the Liquidator shall be calculated excluding the period from 11.01.2021 to 08.07.2021 following the IBBI Regulations. Application disposed off.

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• 2021 (11) TMI 466
  Maintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its dues - Financial Creditors - existence of debt and dispute or not - HELD THAT:- Hon ble Supreme Court in SWISS RIBBONS PVT. LTD. AND ANR. VERSUS UNION OF INDIA AND ORS. [ 2019 (1) TMI 1508 - SUPREME COURT ] upholding the Constitutional validity of IBC, the position is very clear that unlike Section 9, there is no scope of raising a dispute as far as Section 7 petition is concerned. As soon as a debt and default is proved, the adjudicating authority is bound to admit the petition. In the present matter from Bank statement and Financial Statement it is clear that there is debt and resignation letters were handed over to existing directors of the Corporate Debtor with understanding that the Corporate Debtor would clear the loan amount given by the Financial Creditors on the date of acknowledging the resignation letters of the Financial Creditors form these submissions debt and default stand established. The application made by the Financial Creditor is complete in all respects as required by law. It clearly shows that the Corporate Debtor is in default of a debt due and payable, and the default is in excess of minimum amount stipulated under section 4(1) of the IBC. Therefore, the debt and default stands established and there is no reason to deny the admission of the Petition. In view of this, this Adjudicating Authority admits this Petition and orders initiation of CIRP against the Corporate Debtor. Petition admitted - moratorium declared.

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• 2021 (11) TMI 465
  Liquidation of Corporate Debtor - no resolution plan was approved by the Committee of Creditors - section 33(2) of the Insolvency Bankruptcy Code, 2016 - HELD THAT:- Section 33(2) of the Code enjoins the Adjudicating Authority to pass an order for liquidation of the Corporate Debtor where the resolution professional, at any time during the CIRP but before confirmation of the resolution plan, intimates the Adjudicating Authority of the decision of the CoC approved by not less than sixty-six percent of the voting share, to liquidate the Corporate Debtor - In the present case, the CoC has resolved by 85.97% voting share to liquidate the Corporate Debtor. The Corporate Debtor is ordered to be liquidated in terms of section 33(2) of the Code read with sub-section (1) thereof - Application allowed.

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• 2021 (11) TMI 464
  CIRP proceedings - Seeking dissolution of wrongfully constituted CoC of the Corporate Debtor - seeking removal of resolution professional of the Corporate Debtor - seeking grant of additional time to the new resolution professional for completion of verification of the claims of the creditors - amount of claim which is liable to be admitted - HELD THAT:- It is clear that the Statutory Auditor and Management of the Corporate Debtor have disclosed the fact regarding non-provisioning of interest. It is also noted that in the case of secured financial creditors as well the same methodology has been adopted. Further, interest element has been considered in arriving at the debt owed to secured financial creditors as well as to unsecured financial creditors. The voting rights have also been ascertained accordingly. Thus, on the basis of parity being deployed by the RP in admitting claims of both category of financial creditors, there remains no reason to be aggrieved. It is a settled principle that one cannot approbate and reprobate at the same time. Thus, in case the interest element is to be excluded in computation of the claim amount of unsecured financial creditors, the same needs to be excluded from the claim amount of secured financial creditors as well. It may not out of place to mention that though secured financial creditors, on the basis of agreement include substantial amount of interest in their claims in spite of making provision for NPA and not claiming interest income in their books of account and their voting percentage is worked out accordingly and they control CIRP but in the end accept substantial haircuts and fraction of their outstanding amount and on the other hand, they do not wish to get claims of Unsecured Financial Creditors admitted in the same manner. This approach results into unfair advantage to secured financial creditors, i.e. Banks - the amount of claim of unsecured financial creditors has been correctly ascertained by the RP. Unsecured financial creditors, being a related party of the Corporate Debtor - HELD THAT:- The contention of the RP that the applicant has relied on Report of 2016 and in such report relevant provisions of IBC have not been dealt with specifically, is agreed with. Hence, such report cannot be relied upon - the report obtained by RP has elaborately dealt with the aspect of the related party and taken into consideration the facts and legal provisions to hold that such financial creditors are not a related party of the Corporate Debtor - the report is agreed upon. The interchange of the managerial personal between various legal entities inter-se without any association with the Corporate Debtor is not a valid basis to hold that such parties fall under the category of related party of the Corporate Debtor, though they may be belonging to the same group - if on that basis it is established in a given case only then parties on the basis of past relations can be treated as related party. In the interest, none of the parties has served its connection with the Corporate Debtor after filing of application for initiation of insolvency proceedings against the Corporate Debtor and they were not a related party in recent years. Hence, this reason also they cannot be treated as a related party of the Corporate Debtor. Having held that action of the RP is correct in law in respect of both the issues raised by the applicant, there is no merit in the contention of the applicant for replacement of RP - there is no occasion to reconstitute the CoC. The application filed by the applicant stands rejected.

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• Service Tax

• 2021 (11) TMI 463
  SVLDRS - Clubbing of two SCN - whether the excess disputed amount deposited by the petitioner by way of pre-deposit in respect of the first show-cause notice (SCN-1) can be adjusted towards the amount payable by the petitioner in respect of the second show-cause notice (SCN-2) under the SVLDRS. - seeking issuance of discharge certificate pertaining to the petitioner without insisting on any further payments - HELD THAT:- The SVLDRS was promulgated with the object of providing amnesty and dispute resolution in order to unlock legacy cases locked up in litigation at various forums by providing relief/benefit to the assessee. This underlying object of the scheme has been noticed and reiterated by this Court as well as other Courts as can be seen in the various decisions. It is also relevant to state that the SVLDRS is a beneficial scheme and has to be construed and interpreted liberally keeping in mind the aims and objectives of the schemes. In the facts of the instant case, the material on record clearly indicates that both the show-cause notices and both the appeals arising therefrom, which were pending adjudication at the time of promulgation of the SVLDRS arose between the very same petitioner and the respondents and were in respect of the same subject matter i.e., jaggery powder, the only difference being that the show-cause notices and the proceedings were relatable to two different time periods - keeping in mind the aims and objectives of the SVLDRS, which is to provide amnesty and resolution of disputes, in the facts of the instant case, the disputes between the petitioner and respondents having been undisputedly brought under the SVLDRS, both the disputes deserve to be resolved by making mutual adjustment with regard to the disputed pre-deposit made by the petitioner by consolidating and clubbing both the disputes, particularly when deduction of any amount paid by the petitioner declarant was liable to be made under Section 124 of the SVLDRS. The contention of the respondents that two separate show-cause notices cannot be clubbed together for the purpose of SVLDRS cannot be accepted especially when the respondents have given the benefits/relief under the SVLDRS in favour of the petitioner in respect of both the show-cause notices. Respondent Nos.3 and 4 are directed to adjust the excess amount deposited by the petitioner towards the amount demanded from the petitioner in Annexure-H dated 13.12.2019 and issue a discharge certificate in favour of the petitioner in respect of the second case of the petitioner for the period 16.09.2015 to 30.06.2015 and take necessary steps in this regard as expeditiously as possible - Petition allowed.

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• Central Excise

• 2021 (11) TMI 462
  Valuation - Job-worked goods - governed by Rule 8 of Central Excise (Valuation) Rules, 2000 or on cost construction method i.e. cost of raw material plus job charges? - suppression of fact or malafide intention in non-payment/short-payment of duty on the job work goods on the part of the appellant, or not - HELD THAT:- The value of the goods shall be done under Rule 8 only in case if the said goods is either used by the assessee himself or on his behalf in the manufacture of other articles. In the present case, job-worked goods manufactured by M/s. Turbhe Chemical Pvt. Ltd. was neither used by themselves nor on their behalf in the manufacture of any other articles. Admittedly, the job-worked goods after manufacture was returned back to principal manufacturer M/s. Total Oil India Pvt. Ltd. and it is M/s. Total Oil India Pvt. Ltd., who have used the job-worked goods in the manufacture of their final products and such manufactured goods cleared on payment of duty. Therefore, the ingredients of Rule 8 are not satisfied on the part of the appellant, therefore, valuation of job work goods cannot be done under Rule 8. Whether there is suppression of fact with malafide intention for non-payment/short-payment of duty? - revenue neutrality - HELD THAT:- The appellant have been paying the excise duty. The only lapse is that the appellant have not revised the price after 2006, however on pointing out by the audit they have paid the duty along with interest. It was also found that the duty so paid/payable by the appellant is undisputedly available as Cenvat Credit to the principal manufacturer M/s. Total Oil India Pvt. Ltd. Therefore, it is a clear case of revenue neutral. In catena of case law including the case laws cited by the learned Counsel, it was held that where there is situation of revenue neutrality the malafide intention cannot be attributed to the assessee. For this reason also, we find that there is no suppression of fact or malafide intention on the part of the appellant. However, the appellant have admittedly paid the duty however the duty paid is not disputed by the appellant. The excise duty payable on the value i.e. cost of manufacture plus job-work charges is correctly payable by the appellant. The adjudicating authority should re-determine the value accordingly. Consequently, the correct excise duty payable and interest thereon should be recomputed - there is no malafide intention on the part of the appellant, hence the penalty is set aside. Both the matters are disposed of by way of remand to the adjudicating authority for passing a fresh order.

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• 2021 (11) TMI 461
  Process amounting to manufacture or not - Aluminium dross and skimming arising out of the manufacture of aluminium motor vehicle parts - Applicability of explanation to section 2(d) of Central Excise Act, 1944 - extended period of limitation - HELD THAT:- There is no dispute prior to 2008 amendment. In the various judgments even after considering the amendment section 2(d) to Central Excise Act, 1944 it was held that no duty liability arise on the aluminium dross skimming generated unavoidably during the manufacture of aluminium products. Reliance placed in the Supreme Court judgement UNION OF INDIA VERSUS HINDALCO INDUSTRIES LIMITED [ 2019 (3) TMI 1933 - SC ORDER] , where it was held that manufacture do not take place. The generation of aluminium dross and skimming in the manufacture of aluminium castings/parts of motor vehicles does not amount to manufacture. Accordingly, it is not liable to duty. Time limitation - HELD THAT:- Since the issue itself is not sustainable on merits, Revenue s appeal, which is on time-bar will also not sustain. Appeal allowed - decided in favor of assessee.

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• 2021 (11) TMI 460
  Confiscation of goods - imposition of penalty - CENVAT Credit - appellant had issued the invoice without actual supply of goods - HELD THAT:- Since, the show cause notice did not implead M/s. Mittal Corp Limited, seeking confiscation of goods as well as imposition of redemption fine, the adjudication order confirming such demand cannot be considerd as legal and proper. Therefore, the impugned order confirming confiscation of goods and imposition of redemption fine is set aside and the appeal to such extent is allowed in favour of the appellant M/s. Mittal Corp Limited. Imposition of penalty under Rule 15A ibid - HELD THAT:- The receipt of the impugned goods in the factory premises have not been accounted for in the statutory records as mandated in the Central Excise as well as Cenvat statutes. Thus, the appellant M/s. Mittal Corp Limited is exposed the penal consequences provided under Rule 15A ibid. The appeal filed by Mittal Corp Limited is partly allowed in setting aside the impugned order, insofar as it has upheld confiscation and imposition of redemption fine - the quantum of penalty imposed on the other appellants namely, M/s. Nakoda Ferromet and Heeralal Kanungo can be reduced in the interest of justice - Appeal allowed in part.

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• CST, VAT & Sales Tax

• 2021 (11) TMI 484
  Recovery of VAT (Tax) dues - Auction of property - Property was owned by the Directory of the company - Continuation of sale proceedings until tax arrears are paid - default in tax payments - HELD THAT:- This Court is of an opinion that the petitioner himself admitted that the Company was registered and he had signed all necessary documents, applications and forms. The two circumstances are to be considered in the present case. Firstly, if the Company belongs to the petitioner is not wound up, then admittedly, the petitioner and his wife are the only two Directors of the Company. In such circumstances, the Directors of the Company are liable to pay the tax. If the petitioner claims that the Company is already wound up, then Section 37 of the Tamil Nadu Value Added Tax Act, 2006 would come into operation and then also they are liable to pay the tax jointly and severally. Thus, in either of the case, the petitioner is liable to pay the tax and he cannot seek any exoneration from the liability of tax. Even the legal representatives under Section 26 of the Tamil Nadu Value Added Tax Act, 2006 is liable for assessment. This being the Scheme of the Act, no person shall be allowed to escape from the clutches of Taxation Law, merely by stating that he is not personally liable to clear the tax as the Company is failed to pay the tax - Though the Company is the legal entity, the Directors of the Company are the actual functionaries in the Company and therefore, the Directors and the Legal Representatives are liable to pay tax and in the event of failure to pay the same, the Taxation Department is entitled to recover the same by following the procedures as contemplated. This being the principles to be followed, the petitioner has not established any acceptable legal ground for the purpose of interfering with the auction notice order impugned - petition dismissed.

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• 2021 (11) TMI 459
  Levy of Entry tax - classification of goods - machinery, imported for use of installation of electronic exchange for providing telephone services to the public at large - U.P. Tax on Entry of Goods Act - HELD THAT:- The issue is not res integra . This Court, on various occasions, has come to the conclusion that inter - parties have decided the issue against the applicant and in favour of the Revenue. This Court, on identical set of facts in DOOR SANCHAR MAHA PRABANDHAK VERSUS COMMISSIONER, COMMERCIAL TAXES, UP., LUCKNOW [ 2012 (11) TMI 1043 - ALLAHABAD HIGH COURT] has held that it is clear that during the assessment year under consideration, the equipments which were imported by the revisionist-assessee, were the machinery and its part and the value of the same was more than ten lacs. So, the same is subject to entry tax. The authorities were justified in levying entry tax on the import and hence, no substantial question of law arises - revision dismissed.

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• Indian Laws

• 2021 (11) TMI 458
  Nature of the award - award arising out of an international commercial arbitration - breach of settlement agreement - Arbitral proceedings and Court proceedings in relation to arbitral proceedings - HELD THAT:- The respondent moved a petition under Section 34 of the said Act on 24.01.2015 before the Bombay High Court as Arbitration Petition No.167/2015, while the appellant filed for execution of the award. Consequently, the respondent also filed for stay of the enforcement of the award. Interim stay was granted on 06.04.2018 and the SLP against the same was dismissed, being SLP No.27085 of 2018. The learned Single Judge of the High Court set aside the award in terms of the judgment dated 19.05.2020. The appeal filed by the respondent under Section 37 of the said Act was dismissed by the Division Bench in terms of the impugned judgment dated 20.04.2021. The High Court also granted interim protection against withdrawal of the amount specified under the Deed of Settlement for a limited period of time. In the Special Leave Petition while issuing notice on 02.08.2021, the interim arrangement by the High Court was extended and after grant of leave, arguments were concluded on 28.09.2021. Nature of the award - appellant claims that it is an award arising out of an international commercial arbitration - HELD THAT:- While the plea of the award being vitiated by patent illegality is available for an arbitral award, such an award has to be a purely domestic award, i.e. the plea of patent illegality is not available for an award which arises from international commercial arbitration post the amendment. Whether the amendment would apply in the facts of the present case? - HELD THAT:- It is not in dispute that the Section 34 proceedings commenced prior to 23.10.2015, which is the crucial date. As to when the amendment would apply is an aspect that is no longer res integra. The arbitrator s conclusions are not in accordance with the fundamental policy of Indian law, and can thus be set aside under the pre-2015 interpretation of S. 34 of the said Act. It is also noted that clause 6 of the Deed of Settlement could not have been relied on to award liquidated damages in favour of the appellant, we agree with the observations of the Single Judge and the Division Bench in this regard. The fault cannot be found with the judgment of the learned Single Judge and the Division Bench to the extent it interferes with the award and sets aside the award - appeal dismissed.

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• 2021 (11) TMI 457
  Dishonor of Cheque - insufficiency of funds - complaint had not been filed by the payee in terms of Section 142 of the NI Act - rebuttal of presumptions - format of the complaint filed - HELD THAT:- The Managing Director has filed the complaint on behalf of the Company. There could be a format where the Company s name is described first, suing through the Managing Director but there cannot be a fundamental defect merely because the name of the Managing Director is stated first followed by the post held in the Company. The description of the complainant with its full registered office address is given at the inception itself except that the Managing Director s name appears first as acting on behalf of the Company. The affidavit and the cross-examination in respect of the same during trial supports the finding that the complaint had been filed by the Managing Director on behalf of the Company. Thus, the format itself cannot be said to be defective though it may not be perfect. The body of the complaint need not be required to contain anything more in view of what has been set out at the inception coupled with the copy of the Board Resolution. One of the most material aspects is that the signatures on the cheques were not denied. Neither was it explained by way of an alternative story as to why the duly signed cheques were handed over to the Company. There was no plea of any fraud or misrepresentation. It does, thus, appear that faced with the aforesaid position, the respondent only sought to take a technical plea arising from the format of the complaint to evade his liability. There was no requirement of a loan agreement to be executed separately as any alternative nature of transaction was never stated. The order of the High Court cannot be sustained and are required to be set aside - the finding is, thus, reached that the complaint was properly instituted and the respondent failed to disclose why he did not meet the financial liability arising to a payee, who is a holder of a cheque in due course. Appeal allowed.

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• 2021 (11) TMI 456
  Grant of Interim award - stridhana property of Respondent No. 1 or not - Section 34 of the Arbitration and Conciliation Act, 1996 - HELD THAT:- The Arbitrator had committed an error in deciding the issue relating to 99 diamonds and one emerald ring for the following reasons. As has been rightly held by the High Court, the mandate for the Arbitrator is to decide whether said jewellery is stridhana property of the Respondent No. 1. A plain reading of the terms of reference No.(iii) would indicate the fact that the said jewellery being given to the Appellants in 1971 has been taken note of. Mere handing over of the jewellery to the Appellants in 1971, therefore, cannot be the reason for holding that the Appellants are entitled to retain the jewellery. The Arbitrator has concluded that 99 diamonds and one emerald ring, are in fact, stridhana property of Respondent No.1. The Arbitrator has committed a jurisdictional error by travelling beyond the terms of reference. Further, the Arbitrator has committed an error in permitting the Appellants to retain the jewellery - the Arbitrator had to decide the entitlement of all the seven parties to equal shares in the event of finding that the jewellery is not stridhana property - the conclusion of the High Court is approved by upholding the impugned judgment. Appeal dismissed.

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• 2021 (11) TMI 455
  Dishonor of Cheque - manner in which the loan has been advanced - whether there has been compliance with the loss relating to the Income Tax Act? - HELD THAT:- Learned Appellate Court acted on a letter of the Advocate and interfered with the order of conviction passed by the Learned Trial Court. On the face of it, the Learned Appellate Court unnecessarily gave importance to a G.D. Entry number which was reflected in the notice although the original G.D. Entry was never brought on record. The Appellate Court s finding on the subject so far as the issue of debt or liability is concerned are not on accepted principles of law so far as the provisions of Negotiable Instruments Act is concerned. The Appellate Court should have been cautious as a belated plea taken by an accused cannot be given undue importance in cases where presumption under Section 118 and 139 of the Negotiable Instruments Act exist. The manner in which the learned Appellate Court set aside the order of the learned Magistrate calls for interference of this court as the same is against the settled principle of law relating to Negotiable Instruments Act and as such the same is liable to be set aside - Application allowed.

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• 2021 (11) TMI 454
  Dishonor of Cheque - preponderance of probabilities - existence of enforceable debt or not - rebuttal of presumption u/s 118 and Section 139 of the NI Act - HELD THAT:- There is no equivocality. It is not required that the accused shall always advance the evidence to disprove the existence of consideration. The standard of proof evidently is preponderance of probabilities. Inference of preponderance of probabilities can be drawn not only from the materials on record but also by reference to the circumstances upon which the complainant relies. For the purpose of rebutting the initial evidential burden, the defendant can rely on the direct evidence or the circumstantial evidence or a presumption of law of fact once such convincing rebuttal evidence is adduced and accepted by the Court. On overall appreciation of the evidence, this court finds no infirmity in the finding returned by the trial judge that if those two cheques were not in discharge of the liability of the accused person of his debt as stated by the accused person [the respondent] then, why those cheques were issued. The complainant did not mention anything about that episode of issuance of two cheques in his complaint petition or during the examination-in-chief. He did not even explain why those two cheques bearing No.610768 and 610772 were given to him by the accused person. His explanation is fragile and amounts to failure in explaining the episode properly. The respondent [The accused person] has made out a probable case that there was no enforceable debt against him and that he was under no obligation/liability to make payment. It appears more probable that the cheque that has been dishonoured is a security cheque. Therefore, the order of acquittal does not warrant any interference. Appeal dismissed.

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• 2021 (11) TMI 453
  Dishonor of Cheque - appellant failed to produce any relevant document like Bank statement or loan sanction letter to prove that the cheque was issued against the loan taken by the respondent - preponderance of probability - section 138 of NI Act - HELD THAT:- A bare perusal of the impugned judgment clearly reveals that the learned trial court has given the cogent reasoning for acquitting the accused-respondent. It has been concluded by the learned court below that the appellant has failed to prove that the cheque in question was issued by the respondent against the loan sanctioned to him and therefore, if the cheque was dishonoured for want of sufficient funds, the same does not constitute an offence under Section 138 of the Act - it would be hazardous to convict the respondent only on the basis of the presumption under section 139 of the Act in the absence of any material, and which material ordinarily would be expected to be in the complainant s possession and control, to show that loan was in fact disbursed to the accused. The standard of the proof that is required to probabilise the suggestive case of the accused in a case filed under Section 138 of Negotiable Instruments Act is that the presumption under Section 139 of Negotiable Instruments is as that of statutory presumption, however, the same is rebuttable. The standard of proof that required to shift the burden on the shoulders of the accused is based on the principles of preponderance of probability and not on the principle as being examined in the criminal case to prove the guilt of the accused beyond reasonable doubt . It is well settled that the proceedings under Section 138 of Negotiable Instruments Act are quasi-criminal in nature. The principles that will apply to acquittal in other criminal cases are not applicable in cases instituted under the Act. The test of proportionality should guide the construction and interpretation of reverse onus clauses and the respondent/accused cannot be expected to discharge an unduly high standard of proof. Since the proceedings under Section 138 of the Negotiable Instruments Act are quasi-criminal in nature, it is sufficient enough for the accused to prove the suggestive case or defence theory up to the level of preponderance of probability . While the presumption is indeed triggered, the presumption is rebuttable. The burden on the accused is to make out a probable defence. The accused need not step into the witness box or adduce direct evidence. It would suffice if the accused is in a position to create a reasonable doubt that the version of the complainant is false. In the factual matrix, the accused has more than succeeded in rebutting the presumption. Appeal dismissed.

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• 2021 (11) TMI 452
  Dishonor of Cheque - contention has been raised on behalf of the petitioner that the summoning order was passed without due application of mind - principles of natural justice - HELD THAT:- Considering that the law is settled to the effect that a summoning order need not be a detailed order, the contention raised does not incline this Court to take a view in favor of the petitioner and the same is rejected. Even in the complaint filed under Section 138 of the Act, the respondent has reiterated that it had fulfilled the service tax obligation in terms of the agreement and the service tax deposit challans were also stated to have been supplied to the petitioner on more than one occasion - it is apparent that the parties have taken conflicting stands on the issue of payment of service tax/statutory dues. The complainant has averred that the dues stand paid, whereas the petitioner has denied the payment of entire dues, despite admitting that certain dues were paid. There are no ground to entertain the present petition - petition dismissed.

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• 2021 (11) TMI 451
  Dishonor of Cheque - service of legal notice - amicable settlement entered into - compounding of offences - guilty of having committed offence punishable under Section 138 of the Negotiable Instruments Act - HELD THAT:- Complainant on oath states that since he has received Rs. 2,25,000/- in cash and accused has agreed for release of Rs. 75,000/- lying deposited with the learned trial Court, in his favour, as such, he shall have no objection, in case the accused is acquitted of the charges framed against him under Section 138 of the Act. Complainant further states that he has come to the court to make statement, of his own volition and without there being any external pressure. His statement is taken on record. Since the parties to lis have already resolved to settle the dispute inter se them amicably and in terms of compromise between them, Rs. 2,25,000/- has been received by complainant and remaining amount of Rs. 75,000/- has been agreed to be released in his favour by the accused, this court sees no impediment in accepting the prayer made in the present petition, for compounding of the offence, while exercising power under S. 147 of the Act as well as guidelines laid down by Hon ble Apex Court in DAMODAR S. PRABHU VERSUS SAYED BABALAL H. [ 2010 (5) TMI 380 - SUPREME COURT] , whereby it has been held that court while exercising power under S. 147 can proceed to compound offence even in those cases, where accused stands convicted. Judgments/order of conviction and sentence passed by both the learned Courts below are quashed and set aside and accused is acquitted of the charges framed against him under S. 138 of the Act. Bonds furnished by the accused are discharged - Revision allowed.

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• 2021 (11) TMI 450
  Dishonor of Cheque - insufficiency of funds - compounding of offence - consensus ad idem - terms of compromise complied with or not - Section 147 of the Negotiable Instruments Act, 1881 read with Section 320 (6) Cr.P.C. - HELD THAT:- It is apparent that both the contesting parties are ad idem that the compromise has been effected between the parties without any pressure, threat or undue influence and the terms of the said compromise have been duly complied with. The compromise would go a long way in maintaining the peace and harmony between the parties and thus, a prayer has been made to the Court for compounding the offence in terms of Section 147 of the Negotiable Instruments Act, 1881 read with Section 320 (6) Cr.P.C. Since the offence relating to dishonour of cheque has a compensatory profile and is required to have precedence over punitive mechanism, therefore, the present revision petition deserves to be allowed. It is also relevant to state that the petitioner has already undergone custody of 02 months and 20 days out of the total sentence of 01 year and 06 months of rigorous imprisonment - the judgment of conviction and order of quantum of sentence passed by the Judicial Magistrate Ist Class, Panipat, and the Additional Sessions Judge, Panipat, respectively, are set aside. The petitioner is directed to deposit an amount of Rs. 60,000/-, being 15% of the cheque amount, with the Haryana State Legal Services Authority within a period of three weeks from the date of receipt of certified copy of this judgment - Petition disposed off.

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• 2021 (11) TMI 449
  Dishonor of Cheque - existence of enforceable debt or not - whether the cheque was given only as a security to ensure the payment? - HELD THAT:- On a perusal of E-mails sent by the learned counsel for the private complainant, it is seen that the amount is only as an investment not as a loan as projected by PW1 in the witness box assumes significance - Ex. D1 is exchange of email between the respective counsels. In Ex. D2/E-mail sent to the accused from the complainant, it is specifically mentioned in Clause (2) in reply namely mail given by the complainant is to help us to move forward to consider investing in ABL as a whole. Under Ex. D5, in third page, it is mentioned as investment not as a loan. Even under Ex. D10/series of email sent by defacto complainant to the accused it refers to investment proposals only. Thus, this Court finds that Ex. P3/cheque was issued only as a security for the investment and not for the hand loan as projected by PW1. The Lower Appellate Court has considered the same and has arrived at the similar conclusion that in the absence of anything reflecting on the transaction as a loan, which is only an investment made therefor, for which it was agreed to pay Rs. 48,87,200/- [principle amount Rs. 46,00,000/- along with interest for 90 days viz., Rs. 2,87,200/-] and hence, the amount deposited by the private complainant in escrow account is only an investment for the company, for which by way of security a cheque in issue has been issued by the accused and the said cheque does not represented any legal consideration or does not support by any legally enforceable debt and hence, presentation of cheque for encashment itself is under cloud and hence, similar findings rendered by the Lower Appellate Court is justified and the same is hereby confirmed. Appeal dismissed.

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• 2021 (11) TMI 448
  Dishonor of Cheque - legally recoverable debt between the complainant and the accused or not - misuse of cheque - rebuttal of presumption - brevity of contract or not - all the incriminatory circumstances denied - Section 138 of NI Act - quantum of sentences ordered - HELD THAT:- In the case on hand, the issuance of cheque and the signature found on the cheque is not in dispute. According to the accused, the said cheque was issued as a security to Venugopal, who is examined as P.W. 2 in the case. In his cross-examination, there is not even a suggestion that the cheque which was issued to Venugopal has been misused by him by illegally handing it over to the complainant - Irfan Chougley and therefore, there was no legally recoverable debt between the complainant and the accused. There is no action taken by the accused against the complainant or Venugopal Reddy for the alleged misuse of the cheque. The legal notice was replied on 03.07.2003. No prudent person would keep quiet if the cheque has been misused by the complainant even after approaching the lawyer and got a reply. Further, even after conducting the evidence, the accused has not explained in his written statement filed under Section 313(5) of Cr.P.C., as to how the signature found in Ex. P2 is not his signature. So also, the signature found in Ex. P1 is also not in dispute. All these aspects of the matter has been properly considered by the learned Magistrate and recorded a categorical finding that cheque was issued for the legally recoverable debt and therefore, which on dishonour and the amount covered in the cheque being not paid, the accused has committed an offence punishable under Section 138 of the Act. In the case on hand, the accused did not even step into the witness box. Under such circumstances, in view of the material evidence available on record, coupled with the statutory presumption, this Court is of the considered opinion that there is no legal infirmity or capriciousness or perversity in recording the findings by the learned Magistrate that the accused is guilty of the offence punishable under Section 138 of the N.I. Act which has been rightly appreciated by the learned Judge in the First Appellate Court - Admittedly, the cheque amount is Rs. 4,50,000/- and the learned Magistrate has fined the accused in a sum of Rs. 4,55,000/-. Out of which, Rs. 4,50,000/- was ordered to be paid as compensation to the complainant. Under the circumstance, the complainant for the reasons best known to him has not challenged the order passed by the learned Magistrate seeking enhancement of the fine amount. Under such circumstances, there is no case made out by the accused to reduce the sentence. Revision dismissed.

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• 2021 (11) TMI 447
  Dishonor of cheque - acquittal of the accused - legally enforceable debt or not - proof for presentation of the cheques - rebuttal of statutory presumption - HELD THAT:- This Court finds that the private complainant is entitled for statutory presumption under Section 139 of the Negotiable Instruments Act. In order to probabilize the suggestive case, the respondent/accused raised a plea that Ex. D.1 was marked by the respondent to show that the cheques were not presented for encashment. Had there been any such cheque presented for encashment, it could have been found relates entry between the period 25.06.2007 and 09.06.2007. D.W. 1 had deposed regarding the entries made in Ex. D.1. He has categorically stated that he has brought the original Cheque Referred and Returned Register, wherein, there is no suggested entry for penalty charges for processing and returning for insufficient funds. Since there is a zero balance in the account of the accused, even penalty charges for the cheque bounced could not be reflected. So is the pathetic condition of the accused. It appears that the accused is attempting to divert the attention of this Court by filing irrelevant document viz., Ex. D.1. Specific answer is given by P.W. 2-Manager that penalty charges for cheque bouncing could not be reflected in the account of the accused, since the account of the accused has already touched zero balance . All the pleas raised by the respondent/accused to probabilise the suggestive case stands negatived. It appears that such pleas are raised by the accused only for the sake of to built a false case. Accordingly, there are no hesitation to hold that the accused has miserably failed to probabilise the suggestive case and in view of the fact that the private complainant has successfully satisfied the necessary ingredients under Section 139 of the Negotiable Instruments Act and on the failure of the accused to probabilise the suggestive case, it is found that the order of acquittal passed by the Lower Appellate Court is erroneous and finding thereon is found to be perverse and hence, both the finding as well as the order of acquittal of the Lower Appellate Court are liable to be set aside. The finding rendered by the trial Court that the accused is entitled for statutory presumption is correct one and the finding rendered based upon Ex. P.7 that the cheques have been presented for encashment and the same were returned and penalty charges for cheque bouncing could not be found place in Ex. D.1 due to the fact that the account of the accused as reflected in Ex. D.1 is zero account and the accused has not probabilise the suggestive case and hence, the finding rendered by the Lower Appellate Court is perverse, as the same is not reflection of Exs. P.7 and D.1. The accused has miserably failed to probabilise the suggestive case. Consequently, the conviction laid by the trial Court is held to be sustainable in law - Criminal Revision Case is allowed.

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• 2021 (11) TMI 446
  Dishonor of Cheque - only contention that has been raised by the learned counsel for the petitioner is that once an order of dismissal of complaint is made by the Magistrate, the same amounts to acquittal - HELD THAT:- It is clear that if a Magistrate chooses to dismiss a complaint because of non-appearance of the complainant, he has to acquit the accused meaning thereby that acquittal of the accused is a necessary consequence of the dismissal of complaint in default of appearance of the complainant. Once it has been held that the dismissal of complaint of the respondent in default has led to the acquittal of the accused/petitioner, the only remedy available to him was to file an appeal against the said order after seeking leave in terms of Section 417 of J K Cr.P.C. A revision petition against an order of acquittal, which is appealable, is not maintainable in view of sub-section (5) of Section 439 of J K Cr.P.C. The order of dismissal of complaint passed by learned Magistrate amounted to acquittal of petitioner herein and the said order could have been challenged only by way of an appeal and not by way of a revision petition. Therefore, the Revisional Court has exercised a jurisdiction which is not vested in it and, in fact, is barred in terms of sub-section (5) of Section 439 of J K Cr.P.C. The impugned order passed by the Revisional Court is set aside - Petition allowed.

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• 2021 (11) TMI 445
  Dishonor of cheque - power of appellate court to allow additional evidence at appellate stage - Discharge of burden to prove payment - HELD THAT:- It is well settled principle of law as held by the Hon ble Supreme Court in the judgment RAMBHAU ANR. VERSUS STATE OF MAHARASHTRA [ 2001 (4) TMI 937 - SUPREME COURT] , that the Appellate Court has wide power under Section 391 Cr.P.C. to allow additional evidence even at an appellate stage subject to the condition that the same is not going to cause any prejudice to the accused or amounts to re-trial or change the nature of the case of the accused or not to fill up the lacuna but to serve the ends of justice - It is also held by the Hon ble Supreme Court that the Appellate Court can take additional evidence to rectify irregularity committed by the prosecution but not to rectify a defect and lacuna in the prosecution. The same principles of law is applicable for leading the defence evidence. In the instant case though, the initial burden was on the petitioner/complainant to prove the payment and receipt of the part payment, however, the trial Court has put up the onus on the complainant by observing that he has failed to prove his stand by not adducing any cogent evidence. The complainant has also admitted that a repayment of Rs. 11.00 lacs out of total Rs. 35.00 lacs was done by the accused through RTGS, however, the petitioner/complainant did not lead any specific evidence to prove whether the repayment of Rs. 11.00 lacs was against the amount advanced through cheques or through RTGS and the trial Court has wrongly put the onus on the accused whereas it was for the complainant himself to prove this fact while leading the evidence. Petition dismissed.

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• 2021 (11) TMI 444
  Dishonor of cheque - existence of legally enforceable debt or not - case of the defence is that the cheques were handed over only towards security in the course of the business transaction to one Siva Arasu and he had presented some of the cheques to this complainant - Section 138 of the Negotiable Instruments Act - HELD THAT:- The accused has to owe a sum of Rs. 13,45,000/-, to her husband. According to her, a sum of Rs. 81,190/- is due payable under Sun Shine Trading Company and Rs. 5,13,994/- is due payable under Macsun India . As the accused never procure any order and that represents the two cheques and other two cheques namely one for a sum of Rs. 1,02,220/- and another cheque for a sum of Rs. 6,47,632/- are due in view of the interest payable on the advance amount - Admittedly, no books of accounts have been filed before the Court to show that the accused owed money as claimed by PW1 and there was an agreement to pay the interest amount in default of the repayment of the principal amount. Admittedly, she is not aware in the business transaction between the complainant and the accused and her husband is responsible for business activity. Furthermore, she has not produced books of accounts for the Company though she said she willing to produce the same and no calculation sheet has been filed to show the period of interest and rate of interest and principle amount - in view of the answer elicited in the cross examination of the PW1, the suggestive case of the defence that he has not received any amount from the complainant, a cheque that was given to complainant has also probablise the suggestive case to the preponderance of probability level that passing of consideration is doubtful as claimed by PW1. In the absence of any positive evidence to prove the preexisting legally enforceable debt, this Court does not find any reasons to interfere with the order passed by the Courts below - Appeal dismissed.

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• 2021 (11) TMI 443
  Dishonor of Cheque - territorial jurisdiction of drawee bank - It is contended that since the drawee bank in this case is located in Baramulla District, as such, Judicial Magistrate at Srinagar had no jurisdiction to entertain the complaint and to take cognizance of offence - Section 138 Negotiable Instruments Act - HELD THAT:- Sub-section(2) of Section 142 of the Act alongwith its explanation has been inserted in the Act by Amendment Act 26 of 2015 with effect from 15th of June 2015. This provision has modified the law as laid down in DASHRATH RUPSINGH RATHOD VERSUS STATE OF MAHARASHTRA ANOTHER [ 2014 (8) TMI 417 - SUPREME COURT] , whereby it was held that the territorial jurisdiction for filing of cheque dishonour complaint is restricted to the court within whose territorial jurisdiction the offence is committed i.e., which is the location where the cheque is dishonoured or returned unpaid by the bank on which it is drawn. Coming to the instant case, though the cheques which are subject matter of the complaint before the trial Magistrate, are drawn on Jammu Kashmir Bank Limited Hard Aboora Baramulla yet the complainant has clearly stated that when these cheques were presented with his banker i.e., J K Bank Ltd. Branch Unit Zainakote Srinagar, the same were dishonoured. Thus, the cause of action for filing the complaint in the instant case has also arisen within the local limits of the court having jurisdiction over Srinagar City. Thus, it cannot be said that the Judicial Magistrate at Srinagar did not have jurisdiction to entertain the complaint and issue process against the petitioner. The ground urged by the petitioner in this regard is without any merit. In the present times when the postal authorities resort to service through speed post etc., it is not in the realm of impossibility that a notice dispatched from Srinagar on 1st February, 2018, would not reach its destination in Baramulla the very next day. In any case, it is a matter of trial as to whether the notice was actually served upon the petitioner and if so, on what date - Petition dismissed.

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• 2021 (11) TMI 442
  Dishonor of Cheque - order of deposit of 20% of compensation is complied with by the petitioner - Section 138 of the Negotiable Instrument Act - HELD THAT:- Having apprised of the fact by learned advocate Ms. Shah that 20% which has already been directed to be deposited is complied with by the petitioner during the pendency of the main Criminal Appeal and as such, nothing more to be examined since the main Criminal Appeal is yet to be adjudicated upon. Further respondent no. 2 herein though served by notice of rule as well as at the time of issuance of rule has chosen not to represent or remain present and today also when the matter is taken up even in the second sitting, nobody has represented respondent no. 2 nor respondent no. 2 has remained personally present and, therefore, in this set of circumstance, the Court is constrained to dispose of the present Criminal Revision Application as intervening circumstances are indicating that the order of deposit of 20% of compensation is complied with by the petitioner. The present Criminal Revision Application stands disposed of as having become infructuous more particularly, when the petitioner is already enlarged on bail by taking note of the aforesaid deposit and the same order of bail continued to operate, nothing further remains to be done - Criminal revision application disposed off.

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