Newsletter: Where Service Meets Reader Approval.
TMI Tax Updates - e-Newsletter
November 20, 2024
Case Laws in this Newsletter:
GST
Income Tax
Customs
Insolvency & Bankruptcy
FEMA
PMLA
Service Tax
Central Excise
Articles
News
Notifications
Circulars / Instructions / Orders
Highlights / Catch Notes
GST
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Disputed GST assessment order annulled; 25% tax deposit required; objections permitted.
Challenge to assessment order and rectification order for assessment year 2018-19 - mismatch between GSTR-3B and GSTR-2A/GSTR-2B - order challenged on grounds of non-service through tendering or registered post, violating principles of natural justice - impugned order set aside - petitioner directed to deposit 25% of disputed tax as per rectification order within 4 weeks - on compliance, assessment order treated as show cause notice - petitioner to file objections with supporting documents within 4 weeks - writ petition disposed of.
Income Tax
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Non-resident taxed on capital gains from development deal despite jurisdiction challenge.
Taxation of long-term capital gains arising from a development agreement u/s 153C read with Section 144C(3) of the Income Tax Act. The assessee, being an NRI, was assessed to have no source of income in India and was taxable under the residual charge at Delhi. The jurisdiction of the Assessing Officer (AO) u/s 153C read with Section 144C(3) was challenged, but the ITAT held that the AO having territorial jurisdiction where the property is situated and where the necessary documents/information is available should be the appropriate forum for adjudication. Section 127 was not applicable as there was no transfer of jurisdiction from one authority to another. The ITAT upheld the CIT(A)'s decision that a transfer took place on account of the Joint Development Agreement (JDA) entered on 30.12.2015, as the assessee was entitled to receive built-up flats, indicating a transfer of land/capital asset. The taxable event occurred in the assessment year 2016-17, and the income was rightly charged in that year. The valuation of the property at Rs. 5,000 per sq.yd by the AO was upheld, rejecting the registered valuer's valuation of Rs. 8,000 per sq.ft, as the valuation report did not.
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Tax Deduction at Source Liability Quashed Due to Time Limit Breach.
Assessee company failed to deduct tax at source as reflected in Tax Auditor's report. Demand u/s 201(1)/201(14) was barred by limitation. Assessee submitted that Assessing Officer's order was time-barred. Scope of amendment to Section 201(3) was examined. For deductors filing TDS statement, limitation period of two years remained unchanged. For non-filing, it was extended from four to six years. Subsequently, uniform limitation of seven years was introduced prospectively from October 1, 2014. In the present case, for FY 2010-11, where statement was filed on May 13, 2011, the time limit for passing order u/s 201(1) was March 31, 2014. However, the Assessing Officer passed the order on March 28, 2018, beyond the prescribed time limit. Hence, the Appellate Tribunal rightly allowed the appeal, dismissing the revenue's appeal as the assessment was time-barred.
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Salary for overseas assignment taxable only in host country under India-UK DTAA.
Non-resident individual seconded on overseas assignment to UK - Salary received for employment exercised in UK taxable only in UK under Article 15(1) of India-UK DTAA, not taxable in India. Proportionate salary for services rendered in India offered to tax in India, balance salary offered to tax in UK, no foreign tax credit claimed. Identical issue decided in favor of assessee in Nanthakumar Murugesan case. Appellate Tribunal upheld deleting the addition made by lower authorities, deciding in favor of assessee on taxability of salary earned during overseas assignment.
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Undisclosed investments, agricultural land purchase, cash dealings for property, income non-disclosure, lack of accounts.
Key issues related to undisclosed investments u/s 69, undisclosed investment in purchasing agricultural land without substantiating the source, violation of provisions regarding cash payment for immovable property, lack of evidence regarding cash received from mother-in-law, non-disclosure of income in the return, and the assessee's failure to maintain books of accounts. It discusses the validity of the assessment order due to the absence of a DIN number and digital signatures, highlighting that the assessee did not raise objections or prove any prejudice caused. Additionally, it examines the prior approval u/s 153D, refuting the claim of mechanical approval based on the documented approval letter. The summary covers all critical aspects concisely, using relevant legal terminology.
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Inadequate evidence for treating sales as bogus; reassessment approval flawed.
The sales declared by the assessee were treated as bogus, leading to an addition u/s 69A. However, the CIT(A) found that the AO accepted the purchases, inventory, and net profit declared by the assessee. The AO's presumption that the assessee rerouted their own funds was not backed by material evidence. Consequently, the addition was dismissed. Regarding reassessment proceedings, the approval granted u/s 151 was invalid as it was granted for another person's assessment, with the reason merely recorded as 'yes', indicating a mechanical approval. Therefore, the initiation of proceedings itself was held as bad in law, and the assessment made in the assessee's case was set aside. The assessee's appeal was allowed.
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Taxpayer's victory: AO's order upheld, PCIT's revisionary powers under Sec 263 denied due to lack of independent application of mind.
Invocation of Section 263 by the Principal Commissioner of Income-Tax (PCIT), alleging non-application of mind and lack of jurisdiction. The key points are: The appellant maintained separate books of accounts for eligible and non-eligible units, which were duly submitted and accepted by authorities in previous years. The Assessing Officer (AO) conducted a detailed inquiry and examined the records before completing the assessment u/s 143(3). The PCIT invoked Section 263 solely based on audit objections, without independently applying mind. The ITAT held that mere audit objections cannot justify invoking Section 263, and the revenue failed to demonstrate how the AO's order was erroneous or prejudicial to its interests. Consequently, the ITAT decided in favor of the assessee, concluding that the PCIT lacked jurisdiction to invoke Section 263 in this case.
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Ruling on tax deductions: Interest, promotional expenses, dividend income, authorized capital hike.
This is a summary of an order from the Income Tax Appellate Tribunal (ITAT) covering various issues related to the allowability of deductions and expenses claimed by the assessee company. The key points are: Disallowance of deduction u/ss 80IB/80IE for interest on staff advances and statutory/bank deposits was upheld based on coordinate bench rulings. Expenditure for doctors' accommodation and business promotion was disallowed, but the assessee was allowed higher deduction u/ss 80IB/80IE on such disallowance as per CBDT Circular. Disallowance u/s 14A read with Rule 8D was set aside for re-computation based on availability of interest-free funds. Disallowance u/r 8D(2)(iii) was remanded back for re-verification. No adjustment was required to book profits u/s 115JB for amortization of intangibles recorded at fair value pursuant to a scheme of arrangement, following coordinate bench rulings. Stamp duty charges incurred for increasing authorized capital pursuant to a court-sanctioned scheme were disallowed as capital expenditure based on Supreme Court judgments. Delayed payment of employees' contribution to ESIC was disallowed u/s 36(1)(va) read with Section 2(24)(x.
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Non-resident Singapore firm's software licensing income from Vizag Smart City project not taxable as royalty.
The assessee, a non-resident company incorporated in Singapore without a permanent establishment in India, received income from licensing of software to M/s. L&T Ltd. for the Vizag Smart City project. The End User License Agreement (EULA) clearly stated that no title or ownership of the software or its documentation was transferred to the buyer, and the ownership and modification rights remained with the assessee. Based on the facts and circumstances, the supply of software by the assessee to M/s. L&T Ltd. cannot be treated as royalty u/s 9(1)(vi) of the Income Tax Act or Article 12 of the India-Singapore DTAA. The decision relies on the Supreme Court's ruling in Engineering Analysis and Centre of Excellence Pvt. Ltd., as well as the Delhi High Court's judgments in CIT vs. Microsoft Corporation and EY Global Services Ltd., which held that mere supply of software without a sale of copyright cannot be treated as royalty for taxation purposes u/s 9(1)(vi). Following these precedents, the ITAT set aside the Assessing Officer's order, concluding that the supply of software by the assessee cannot be brought to tax under the Income Tax Act or the India-Singapore DTAA.
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Tribunal upholds tax exemption for late filing; Department's denial unjustified.
The Income Tax Appellate Tribunal held that the denial of exemption u/s 10(23C)(iiiab) for late filing of the income tax return beyond the time specified u/s 139(1) or for filing the return u/s 139(4D) instead of Section 139(4C) is not justified. The Tribunal ruled that the Department could not point out any relevant provision that disentitles the assessee from claiming exemption u/s 10(23C)(iiiab) for non-filing or late filing of the return. Consequently, the action of the lower authorities in denying the exemption on these grounds was set aside, and the Assessing Officer was directed to grant the exemption claimed u/s 10(23C)(iiiab). The assessee's appeal was allowed.
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Excessive transport expenses deduction and TDS non-deduction: CIT wrongly set aside order without probing assessee's explanations.
Revision u/s 263 involving excess deduction of transport expenses and non-deduction of TDS on transportation charges. CIT held AO failed to verify adequately, rendering assessment order erroneous and prejudicial to Revenue's interests. ITAT examined AO's verification of Form 26Q, quarterly returns in Form 27A, quarter-wise details of transporters from whom TDS was deducted and those not liable u/s 194C(6). Assessee provided explanations before AO and CIT, but CIT set aside order without examining explanations or pointing out defects. ITAT found CIT's observations regarding lack of inquiry factually incorrect. u/s 263, CIT was required to inquire as deemed necessary and examine assessee's reply to form prima facie opinion on order's erroneousness prejudicing Revenue's interests. AO examined issues during assessment proceedings. Without counter-questioning assessee or considering submissions, CIT was unjustified in setting aside order merely stating more inquiries needed. CIT's order u/s 263 unsustainable, quashed by ITAT. Assessee's appeal allowed.
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CSR donations by companies eligible for tax deduction u/s 80G if made to approved institutions.
Deduction claimed u/s 80G for donations qualifying as CSR expenditure was expressly disallowed u/s 37(1). The court held that even though there is no explanation for disallowing deductions for contributions to Swachh Bharat Kosh and Clean Ganga Fund u/s 80G, there is no such restriction for other contributions mentioned in Schedule VII of the Companies Act and Section 80G. The CBDT clarified that CSR expenditure admissible u/ss 30 to 36 shall be allowed despite being for CSR obligations. The contention that "donations" u/s 80G(2)(a) excludes mandatory CSR expenditure was rejected, as there is no compulsion to donate to institutions approved u/s 80G for CSR expenditure. Taxing statutes must be interpreted strictly, and deductions u/s 80G cannot be denied by importing restrictions from other sections, except where specifically barred. Therefore, the assessee is not barred from claiming deduction u/s 80G for donations to approved institutions, even if made for discharging CSR obligations u/s 135 of the Companies Act.
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Reopening assessment on deceased person invalid, procedural defects uncurable.
The issue pertains to the validity of reopening proceedings against a deceased assessee. It was held that the issuance of a notice u/s 148 of the Act is the foundation for reopening an assessment, and the sine qua non for acquiring jurisdiction is that such notice should be issued in the name of the correct person. Issuing a notice to a deceased person is not merely a procedural defect but a condition precedent for the notice's validity. The defect cannot be cured u/s 292BB, as this provision applies when the assessee is aware of the proceedings but takes advantage of defective notices. In cases where the initiation itself is against a deceased person, Section 292BB cannot be invoked. The decision was in favor of the assessee, and the matter was decided by the Appellate Tribunal.
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Interest income from investments: Eligibility for deduction for agricultural co-op society.
Deductibility of interest income from investments u/s 80P(2)(a)(i) of the Income Tax Act for a primary agricultural credit cooperative society. The key points are: The assessee, being a primary agricultural credit cooperative society registered under the Kerala Co-operative Societies Act, is eligible for deduction u/s 80P. Interest earned from investments in cooperative banks is assessable as 'income from other sources' and eligible for deduction u/s 80P(2)(d). However, interest earned from treasury/commercial banks is not eligible for deduction u/s 80P. Interest and dividends received from entities registered under the Cooperative Societies Act, though income from other sources, are eligible for deduction u/s 80P(2)(d). The ITAT decided in favor of the assessee, rejecting the Revenue's contention that the interest income is not eligible for deduction u/s 80P(2)(d).
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Tax reassessment row: Tribunal recalls order after overlooking judicial precedents.
The case pertains to the rectification of a mistake and reopening of assessment u/s 147 versus assessment u/s 153C. The information or seized document belonging to the assessee was found at the searched person's place. The authorized representative mentioned that the Tribunal did not consider judicial decisions and dismissed the additional ground of appeal, upholding the CIT(A)'s decision on the validity of reassessment proceedings u/s 147. The ITAT supported its view relying on the Supreme Court's decision in Honda Siel Power Productions Ltd., where the Tribunal's rectification application was allowed as it had missed considering a precedent judgment while dismissing the appeal on enhanced depreciation u/s 43A. The ITAT held that non-consideration of cited judicial decisions is a mistake apparent from the record. Accordingly, in the interest of natural justice, the Tribunal recalled its order and directed the registry to post the appeal for regular hearing and inform the parties.
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Employees' Co-op Bank Eligible for Deductions on Interest Income from Members.
Co-operative bank registered under state Act, main objective providing credit facility to members who are employees, funds contributed by members given as loans on interest to members only. Principal business not banking as no transactions with general public. First and third conditions for categorization as co-operative or primary co-operative bank not met, hence not hit by Section 80P(4) disallowing deduction. Small portion of income from interest on investments and dividend, eligible for deduction u/s 80P(2)(d). Remaining income from interest from members on deposits attributable to business income, deductible u/s 80P(2)(a)(i). Authorities not justified in denying Section 80P deduction to assessee society.
Customs
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Confiscation of Areca Nuts: Burden of Proof on Customs or Importer?
Seizure of goods as smuggled into the country from Myanmar u/s 130 of the Customs Act, 1962. The burden of proof lies on the respondent u/s 123 to show that the seized areca nuts are not smuggled goods, or on the Department u/s 111 to establish that the seized betel nuts are of foreign origin and smuggled before confiscation. The High Court emphasized that the existence of a substantial question of law is a prerequisite for exercising jurisdiction u/s 130. The Court examined whether the Appellate Tribunal ignored material evidence or acted without evidence, which could constitute a substantial question of law. The Court analyzed the evidence, including the proximity to the international border, lack of foreign markings, absence of expert opinion on origin, and documents showing purchase from a local store. The Court concluded that the Tribunal's order cannot be treated as perverse, as it was not arrived at without evidence or reasons, thus answering the substantial question of law framed regarding perversity against the appellant.
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Value redetermination leads to penalty but Tribunal moderates fine for non-deliberate breach.
The case pertains to the imposition of a fine and penalty for the rejection of the declared value and redetermination of the value u/r 12 of the Customs Valuation (Determination of Price of Imported Goods) Rules, 2007. The goods were confiscated u/s 125 of the Customs Act, 1962, with an option to redeem them on payment of a fine of Rs. 3,25,000/- and a penalty of Rs. 1,50,000/- u/s 112(a) for rendering the goods liable for confiscation u/s 111. The Appellate Tribunal found that the issue involved a non-deliberate contravention of the law due to business exigencies, with no loss of revenue or deliberate intention to evade duty payment. While acknowledging that any breach of civil obligation under the Act is blameworthy, the Tribunal drew a distinction between a bona fide mistake and dishonest non-compliance when imposing a fine and penalty. Considering that the goods were not prohibited for import and the assessable value was determined at Rs. 6,54,349/-, the Tribunal found the initially imposed fine and penalty excessive and moderated them to a fine of Rs. 6,500/- and a penalty of Rs. 1,000/-.
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Customs duty evasion case: Importer cleared despite altered MRP stickers on imported goods.
Mis-declaration of value, rejection of assessable value of seized goods, and liability for confiscation of goods and imposition of penalty u/s 111(m) of the Customs Act, 1962. The differential customs duty on seized goods with altered MRP stickers was proposed to be recovered from the appellant, along with proportionate interest and appropriate penalty. The department wrongly invoked Rule 5 of Central Excise (Determination of Retail Sale Price of Excisable Goods) Rules 2008, which applies to manufacturers altering retail sale price after removal from the place of manufacture. However, the appellant is an importer, and the rule is inapplicable. The MRP sticker on imported goods matched the import declaration, and alteration occurred later in the domestic market. No evidence suggests the appellant altered the MRP or had knowledge of it. The department failed to prove any money flowed back to the appellant. The demand was confirmed based on presumptions and surmises. The evidence provided by the department, including invoices and font size similarities, was inadequate. Consequently, the Appellate Tribunal held that the goods are not liable for confiscation u/s 111(m), and no circumstances warrant penalty imposition. The order under challenge was set aside, and the appeal was allowed.
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Importer imports "Ground Colemanite (B2O3 40%) Natural Boron Ore," claims duty exemption as per notifications. Dispute on Tariff heading qualification resolved.
The importer imported consignments of "Ground Colemanite (B2O3 40%) Natural Boron Ore" and claimed exemption from basic customs duty under relevant notifications. The issue was whether the imported goods fell under Customs Tariff Heading 2528 to qualify for exemption. The Tribunal held that since the test report confirmed the goods as "Boron Ore" and satisfied the notification requirements, they were eligible for duty exemption. There was no condition in the notifications that exemption was available only for ore with impurities. The revenue erred in reading additional conditions into the notifications. The exemption was available for all types of "Boron Ores" from March 1, 2005, not restricted to "Natural Boron Ore." The Tribunal ruled that claiming a particular classification or notification was a matter of belief, not willful mis-statement or suppression of facts. The larger period of limitation u/s 28(4) of the Customs Act could not be invoked merely due to a different departmental view. The Tribunal allowed the appeal, setting aside the demand, confiscation, fines, and penalties.
FEMA
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Enforcement of Foreign Arbitral Awards: Balancing Act between Finality and Public Policy.
This is a summary of a court ruling on the recognition and enforcement of foreign arbitral awards under the Arbitration and Conciliation Act, 1996. The key points are: The court upheld the maintainability of a common petition seeking both recognition and execution of foreign awards, following the Supreme Court's decision in Vedanta Limited. However, the petition was dismissed as barred by limitation under Article 137 of the Limitation Act, 1963. The court emphasized the pro-enforcement bias u/s 48 and held that non-parties cannot object to enforcement unless falling under specific grounds. It found violation of public policy and principles of natural justice, as the arbitral tribunal derived findings contrary to uncontroverted witness testimony without affording a fair hearing. The court rejected the petitioner's challenge to the de-merger scheme, as the orders attained finality after inordinate delay. It also held impleading non-signatory parties at the execution stage unwarranted without substantiating fraud allegations. Objections regarding the validity of invoking arbitration and the tribunal's composition were not considered, as the court found the awards unenforceable due to violation of public policy, lack of RBI approval for the transaction, and the foreign party's entitlement to substantial damages without supplying goods under the agreement.
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Under-invoicing imports to evade customs duty leads to forex violations.
This case involves the contravention of Section 3(b) of the Foreign Exchange Management Act (FEMA), 1999, pertaining to under-invoicing of imports to evade customs duty. The appellant imported goods worth Rs. 6,01,82,311 but declared a lower value of Rs. 1,71,62,087 against 26 Bills of Entry, and paid the differential amount in cash to the supplier in Japan in Indian Rupees. The Directorate of Enforcement (ED) relied on statements recorded under the Customs Act and conducted independent inquiries under FEMA. The key points are: the ED's reliance on Customs Act proceedings was valid as information sharing between agencies is permitted; the appellant's statements over nine months consistently admitted the offenses; the Show Cause Notice was not vague; the change in adjudicating officer did not vitiate proceedings; the determination of the "sum involved" for penalty u/s 13 was correctly based on the appellant's admissions and corroborating evidence; and the appeal was dismissed.
IBC
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Corporate debtor's belated arbitration plea rejected in default admission case.
Corporate debtor filed a reply to the financial creditor's Section 7 application in December 2023, but moved an application u/s 8 for reference to arbitration only on March 7, 2024. The financial creditor had initiated arbitration proceedings by unilaterally appointing an arbitrator in July 2019, but the arbitrator terminated the proceedings in October 2021, holding the appointment contrary to law. The NCLAT held that if an application u/s 8 is filed, the adjudicating authority must first decide the Section 7 application by recording satisfaction regarding default. The pendency or initiation of arbitration proceedings after filing the Section 7 application is immaterial. Allowing the Section 8 application would defeat the IBC's purpose by asking the adjudicating authority to await arbitration proceedings. The corporate debtor admitted debt and default in one-time settlement offers in 2019 and 2022. The adjudicating authority rightly rejected the Section 8 application, and the NCLAT dismissed the appeal.
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Limitation period for appeals under IBC: Counting from e-filing, not physical filing.
The order addresses the computation of the limitation period for filing an appeal before the Appellate Tribunal u/s 61 of the Insolvency and Bankruptcy Code (IBC). The key points are: The appellant has a statutory right to file an appeal within 30 days u/s 61(2), with an additional 15 days if there is sufficient cause for delay. The appeal was filed on 30.05.2022 through e-filing, and the hard copy was filed on 20.06.2022, before the effective date of the Standard Operating Procedure (SOP) dated 21.10.2022. The SOP dated 21.10.2022 was withdrawn by the SOP dated 24.12.2022, which stipulated that the limitation period is to be counted from the date of e-filing. Following the Supreme Court's decision in Somdev Kappor, the rules prevalent at the time of considering the application are applicable. Therefore, the SOP dated 24.12.2022 is applicable, and the limitation period is to be calculated from the date of e-filing. The respondent's objection that the limitation should be counted from the date of presentation at the counter is overruled. The delay of three days in filing the appeal is condoned as sufficient reason has been assigned by the appellant u/s 61(2) proviso.
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Improper notice to Corporate Debtor derails Insolvency Application by Operational Creditor.
The Appellate Tribunal upheld the dismissal of an application u/s 9 of the Insolvency and Bankruptcy Code due to improper service of notice u/s 8. The notice was issued to Key Managerial Personnel (KMP) of the Corporate Debtor (CD) but not to the CD itself at its registered office as mandated by Rule 5(2)(a) of the Insolvency and Bankruptcy (Application to Adjudicating Authority) Rules, 2016. Issuing notice u/s 8 on Form 3 to the CD at its registered office is a prerequisite for filing an application u/s 9 by the Operational Creditor (OC). The Tribunal distinguished the cited case as it dealt with a different issue regarding the nomenclature of the company. Consequently, the appeal was dismissed.
PMLA
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Authorities can attach properties equivalent to illegal gains, upheld by court.
Legal case related to money laundering and attachment of properties. It discusses the evolving definition of 'proceeds of crime' under the 2002 Act, allowing authorities to attach properties equivalent in value even if not directly derived from criminal activities. The court upheld the provisional attachment order, stating the authorized officer fulfilled the 'reason to believe' requirement based on seized electronic records and fake e-Rawana bills. It clarified that filing a report under CrPC 173 is not mandatory for provisional attachment. The court interpreted the word 'immediately' as directory rather than mandatory and found no merit in quashing the order, given the availability of an adjudication process and alternative remedies. Disputed factual questions regarding illegal mining activities and NGT penalties were also mentioned.
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Bank penalized for delayed reporting of high-value cash transactions violating anti-money laundering laws.
Section 12(1)(b) of the Prevention of Money Laundering Act, 2002 requires reporting entities to furnish information about transactions referred to in Section 12(1)(a) to the Director, FIU-IND within the prescribed time. The appellant bank failed to report or delayed reporting cash transactions of high value, violating Section 12(1)(b) read with Rules 3(1)(A), 3(1)(B), 7(2), and 7(4) of the 2005 Rules. The penalty of Rs. 25,70,000/- was imposed for this violation. The Tribunal held that the phrase "each failure" in Section 13 refers to failure or delay in furnishing information for each transaction, attracting penalty. Ignoring contraventions would undermine the Act's sanctity and compliance. The appellant admitted inadvertent error, but penalty was rightly imposed as per the Supreme Court's judgment in Shriram Mutual Fund case. The minimum penalty of Rs. 10,000/- was imposed for 167 defaults, while Rs. 50,000/- was imposed for 16 CTRs. The penalty cannot be considered disproportionate given the bank's continuous contravention and delayed reporting only after RBI's notification. The appeal was dismissed as lacking merit.
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Slum rehab project embroiled in alleged fraud, money laundering; property attached but authorities get pandemic relief on timelines.
The appellant sought lapse of the attachment order u/s 5(1) and (3) of the Prevention of Money Laundering Act, 2002, questioning the legality of the order issued in relation to alleged criminal conspiracy, cheating, and forgery in the Slum Rehabilitation Scheme. The Adjudicating Authority issued a Provisional Attachment Order on 18.06.2021, followed by a Show Cause Notice on 04.08.2021, with the appellant filing a reply on 16.09.2021. Pleadings were completed on 23.09.2021, and the matter was listed for final hearing. While the Adjudicating Authority is required to pass an order within 180 days to prevent the attachment from lapsing u/s 26, the Appellate Tribunal considered the extraordinary situation during the Covid-19 pandemic. Referring to the Supreme Court's decision in Prakash Corporates v. Dee Vee Projects Limited, which provided safeguards for termination of proceedings, including illustrative reference to provisions like the Arbitration Act, the Appellate Tribunal held that the exclusion period from 15.03.2020 to 20.08.2022 would apply. Excluding this period, the remaining period in this case was merely 26 days, less than the prescribed 180.
Service Tax
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Contractor wrongly taxed for "Works Contract" instead of notified "Commercial Construction", denied opportunity to defend.
The appellant entered into works contracts for providing services along with materials. The show cause notice proposed demand under "commercial and industrial construction service", but the impugned order confirmed demand under "works contract service" for the period after 1st June 2007, without giving an opportunity to defend against this head. The order travelled beyond the show cause notice by demanding tax under a different head, which is impermissible as per settled legal position. Consequently, the order was set aside by the Appellate Tribunal on this ground alone.
Case Laws:
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GST
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2024 (11) TMI 870
Territorial Jurisdiction - Search and seizure - multiple agencies have carried out search operations - centralisation of investigation with DGGI, AZU - it was held by High Court that 'Section 6(2)(b) of the CGST Act has limited application and therefore, is not applicable to the facts of the present petitions. Similarly, the Circular dated 05.10.2018 also has no application to the facts of the present petitions.' HELD THAT:- Having heard learned counsel for the petitioner and learned ASG appearing on behalf of the respondent(s)/Department, it is not required to interfere in the matter. The Special Leave Petition is hence dismissed.
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2024 (11) TMI 869
Challenge to impugned order and rectification order for assessment year 2018-19 - mismatch between GSTR-3B and GSTR-2A/GSTR-2B - impugned order is challenged on the premise that neither the show cause notices nor the impugned order of assessment dated 24.11.2023 has been served by tendering to the petitioner or by registered post, instead it was uploaded in the common portal - principles of natural justice - HELD THAT:- The impugned order dated 24.11.2023 is set aside and the petitioner shall deposit 25% of the disputed tax i.e., as reduced by order of rectification dated 08.05.2024 within a period of four (4) weeks from the date of receipt of a copy of this order. On complying with the above condition, the impugned order of assessment shall be treated as show cause notice and the petitioner shall submit its objections within a period of four (4) weeks from the date of receipt of a copy of this order along with supporting documents/material. The writ petition stands disposed of.
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Income Tax
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2024 (11) TMI 873
Validity of Final Assessment Order passed u/s 143(3) r.w.s. 144C(13) as barred by time limitation - HELD THAT:- In the context of faceless assessment process time and place of dispatch and receipt of electronic document (in this case DRP order) is required to be ascertained by reference to section 13 of Information Technology Act, 2000 which is the basis prescribed under section 144B of Income Tax Act also (refer section 144B (6)(v)). Hon'ble Supreme Court in case of GS Chatha Rice Mills [ 2020 (9) TMI 903 - SUPREME COURT] interpreted this very provision. Applying principles laid down by Hon'ble Supreme Court, only relevant fact necessary for deciding additional ground in present appeal relating to time barred assessment, is time of uploading by DRP of DRP order onto ITBA portal. Intimation letter to DRP order unambiguously shows 26.05.2022 as date of uploading of DRP order. This fact cannot be disputed. Except this critical and relevant information everything else (like when order is visible to AO, date of uploading some document by DCIT/ACIT circle 2 (1) (1) Delhi) has been submitted by Respondents. It is fair to conclude that date of uploading DRP order on ITBA portal is 26.05.2022. As per section 144C(13) of the Act, assessment had to be completed on or before 30.06.2022. In present case the assessment is completed only on 01.07.2022 i.e., it is time barred null and void. Therefore, impugned assessment order dated 30.06.2022 is set aside being barred by limitation.
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2024 (11) TMI 872
Addition u/s 68 - unexplained cash credits - cash deposited into bank account during the demonetization period - Use of theory of human probability - HELD THAT:- As going by the analysis of purchase and sales, there is no abnormality in sales declared by the assessee during the demonetization period. As undisputedly clear that the AO has conveniently ignored the supporting evidences filed by the assessee to justify the cash sales made during the period October 2016 and upto 08/11/2016, because, if we go by the analysis of purchase and sales, there is no reason for doubting the sales declared by the assessee during the period of October and November, 2016. AO has not made out any case of discrepancy in the books of accounts maintained by the assessee nor made out a case for any incorrectness in purchase, sales declared during relevant period. In fact, purchases are supported by necessary purchase bills and sales declared by the assessee including cash sales are supported by sale bills. Although the AO made observation with regard to uniform cash sales, in our considered view, only on the basis of uniform pattern of sales, it cannot be held that the sales declared by the assessee is not genuine. Further in so far as the non-maintenance of phone number and PAN of the buyers, in our considered view, as per Rule 114B of IT Rules, 1962 there is no mandatory requirement of PAN of the buyers in case sales to single customer does not exceed Rs. 2 lakhs. Similarly, in respect of KYC compliances, the same is mandatory, in view of amendment to provisions of Money Laundering Act,2002 w.e.f. 04/05/2022 and the same is not applicable for the impugned assessment year. The observation of the AO on non-maintenance of phone and PAN number of the customer and adverse inference drawn against sales declared by the assessee is devoid of merit and cannot be accepted. Assessee has furnished all relevant details in respect of cash deposited during demonetization period into bank account when the DDIT(Investigation) Wing has carried out enquiries with regard to source for huge cash deposit into bank account. In fact, the appellant has submitted all relevant information including supporting evidence for sales and cash in hand available as on 08/11/2016 to explain the source for cash deposits. As undoubtedly clear that the additions made by the Assessing Officer towards cash deposited into bank account u/s 68 of the Act is purely on suspicion and surmises, without there being any contradictory evidence to suggest that the sales declared by the assessee is not genuine. It is not the case of the AO that the cash sales made prior to 08/11/2016 were not recorded in the books of accounts. It is also admitted fact that the assessee has filed VAT returns and declared sales to VAT authorities. Closing stock of the year is carried forward as opening stock of the next year and even in the subsequent year, scrutiny assessment was made by accepting the opening stock which shows that the sales made in the year under consideration and income earned thereon was never disputed. Although the Assessing Officer doubted purchases made from related parties, the fact remains that there is no evidence with the AO to allege that said purchases are not genuine. Therefore, in our considered view, merely for the reason of purchase from a related party, genuineness of purchases cannot be doubted in case said purchases are supported by necessary evidence. Further, the assessee has made payment against purchases through proper banking channel - adverse inference drawn by the Assessing Officer is devoid of merit. AO ignored all evidence filed in support of the claim for cash deposit, which is in favour of the assessee. However, consider only the elements which go against the assessee, which is evident from the discussion of the Assessing Officer in the assessment order to draw adverse inference against the assessee. The Assessing Officer rested his discussion only on the basis of cash in hand maintained by the assessee during demonetization period, prior to demonetization period and post demonetization period. According to the Assessing Officer, the cash balance held by the assessee is against human tendency. In our considered view, theory of human tendency or probability cannot work in a situation which is an exception to the normal conditions / situations. No one was aware as to what was the right step to move. Further huge amounts cannot be sent at a time through any one employee to avoid the risk of employees running away, theft, snatching money from employees etc. Therefore, the adverse inference drawn by the Assessing Officer considering human probability that no prudent person would carry huge cash in hand is only on suspicion and surmises. Therefore, in our considered view, the Assessing Officer is not justified in giving more weightage to unnecessary factors even though the evidence filed by the assessee clearly shows that the cash deposited in the bank account during demonetization period is out of opening cash in hand available as on 08/11/2016, which is supported by sales declared with supporting evidence. Merely for the reason of carrying excess cash balance during a particular period when compared to other periods, it cannot be held that the argument of the assessee is against the theory of human probability, more particularly, when evidences clearly suggest that the explanation of the assessee is genuine and supported by necessary evidences - Decided in favour of assessee.
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2024 (11) TMI 871
Denial of exemption u/s 11 - assessee society has violated the provisions of section 13(1)(c) on account of Loans and Advances to related parties and Transportation fees received by M/s. Ashram Educational and Consultancy Pvt Ltd (AECPL) - HELD THAT:- In the present case, it is not disputed that the loans were advanced in earlier years and were not extended during the relevant assessment year. AO failed to demonstrate how any income of the assessee society was used to confer a benefit during A.Y. 2015-16. Assessee s claim that the loans were given out of advance received against proposed property sale and do not form income of the assessee, has merit. In our considered view the advances, being liabilities, do not constitute income of the society. Hence, the invocation of Section 13(1)(c) for AY 2015-16 is legally untenable. Transportation Fees involving AECPL the assessee drew our attention to the audited financial statements as on 31/03/2015 of the company AECPL showing that after deducting operating expenses and agreed amount of Rs. 40.00 Lakhs to the assessee Trust as vehicle lease charges, the net income of the Company from transportation fees was very nominal i.e. Rs. 2.46 Lakhs for the whole year. There is no evidence that the assessee conferred an undue benefit to AECPL. AO s conclusion that the lease arrangement was disadvantageous is based purely on a comparison of gross receipts, without considering the associated costs. Hence, the denial of exemption under Section 11 on this ground is not justified. There is no violation of section 13(1)(c) of the Act, by the assessee, we direct the AO to allow the exemption u/s.11 of the Act and direct the AO to delete the addition made on account of the Corpus donation received. Further, according to the submission of the Ld.AR section 40(a)(ia) is not applicable for the A.Y. 2015-16 to the institutions / funds eligible for exemption U/s.11 of the Act. On perusal of the provisions of section 40(a)(ia), the claim of the assessee is found correct and the disallowance of Rs. 24,95,469/- i.e. 30% of the Rent of Rs. 83,18,230/- is hereby deleted by allowing the grounds of the assessee. Exemption u/s.11 denied for violation of Section 13(1)(c) along with certain disallowances due to non-furnishing of details during the re-assessment proceedings - We note from the assessment order as well as impugned order, it is established that there was no opportunity for the assessee in prosecuting his case, but, however, on the undertaken given by assessee is ready to prosecute his case before the AO without fail, we deem it proper in the interest of justice to remand the matter back to the file of the AO - The assessee is at liberty to file evidence in support of his claim and the AO shall conduct the assessment proceedings de novo, by allowing the appeal of the assessee.
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2024 (11) TMI 868
Computation of total income in the Computation Sheet attached with the assessment order - HELD THAT:- We notice from the assessment order that the total income was determined by the AO at Rs. 16,82,668/-. However, in the computation sheet, the total income has been taken as Rs. 36,69,410/-. We also find that the AO has not given any explanation for the income so adopted in the computation sheet. Hence, there is some merit in the submission of the Ld.AR that there was an error in adopting the figure of total income by the AO in the computation sheet. However, we are of the view that this plea of the assessee requires verification at the end of AO. Accordingly, we set aside the order passed by the Ld.CIT(A) on this issue and restore the same to the file of AO for examining this plea of the assessee. If it is an error as pointed out by the assessee, then the AO may correct the same. Addition made u/s. 14A - assessee had earned share income from partnership firm and claimed same as exempt. However, the assessee did not make any disallowance u/s. 14A - HELD THAT:- We notice that the investment have been made by the assessee in the year 2000-01 and Over Draft facility has been obtained from ICICI Bank in November, 2014. Hence, there is merit in the contentions of the Ld A.R that the assessee could not have utilized loan funds for making investments. It is also stated that the overdraft facility availed from ICICI Bank was used for day to day activities. Hence, as per the decision rendered in the case of Gujarat Narmada Valley Fertilizers Company Ltd. [ 2014 (3) TMI 847 - GUJARAT HIGH COURT] no disallowance out of interest expenditure is called-for. Accordingly, we set aside the order of the Ld.CIT(A) on this issue and direct the AO to delete the disallowance made under Rule 8D(2)(ii). Disallowance made under Rule 8D(2)(iii), the Ld.AR submitted that there is an error in computing average value of investment. Since this plea of the assessee requires verification, we restore this issue to the file of the AO for examining the same afresh. After affording adequate opportunity of being heard to the assessee, the AO may take appropriate decision in accordance with law. Appeal of the assessee is treated as allowed.
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2024 (11) TMI 867
Taxation of long-term capital gains arising on the development agreement u/s 153C r.w.s 144C(3) - assessee, being an NRI, was assessed to have no source of income in India and therefore, was taxable under the residual charge at Delhi, having a PAN number - As argued JDA, based on which the additions were made in the assessment for 2016-17, though registered, did not result in a transfer of possession Jurisdiction of the AO u/s 153C r.w.s. 144C(3) - challenge the assessment made by the AO without a transfer order u/s 127 - HELD THAT:- In the present case, the documents were found during the course of search belonging to the assessee and notice u/s 153C was issued by the Assessing Officer having the territorial jurisdiction where the property is situated. The contention of the assessee that the notice should have been issued by the AO at Delhi will lead to lot of complications as there is no record available at the AO of Delhi nor the documents were available at the AO of the Delhi. The law is fairly settled that the forum in whose jurisdiction the situs is situated and where the necessary documents / information is available should be the appropriate forum for adjudication. Section 127 of the Act will only come into play when there is some transfer of jurisdiction from one authority / office to the other. In the present case, the assessee has not filed the return of income and has not assessed at the Delhi ITO / Assessing Officer and therefore, there is no question of transfer of jurisdiction of the Assessing Officer from ITO, Delhi to ITO, Hyderabad. In view of the above, we are of the considered opinion that the jurisdiction invoked by the Assessing Officer at Hyderabad is in accordance with law - this ground is decided against the assessee. Whether the transfer took place on account of JDA entered on 30.12.2015 or not? - Undoubtedly, as per the JDA, both parties agreed to raise the construction and share the built-up area - CIT(A) had captured the various clauses of the JDA which clearly shows the respective transfer of rights by one party to the other in respect of land share. Assessee before us, pursuant to the construction was also entitled to receive the built-up flats as per the Annexure to the JDA. We are unable to comprehend as to how the assessee will receive the possession of built-up flats when the assessee has not allegedly transfer the possession. In fact, the ld.CIT(A) has categorically mentioned that no document has been produced by the assessee to separate transfer of possession to the developer. No error in the decision of ld.CIT(A) on this aspect as the fact speaks for itself. The Developer was under obligation to construct the property after receiving due sanctions from various authorities as per the specification and cost of construction agreed between it and the assessee. For all purposes, there is a transfer of land / capital asset within the meaning of law and for the above said purposes, we may rely upon the decision of Balbir Singh Maini [ 2017 (10) TMI 323 - SUPREME COURT ] In the light of the above, this ground of the assessee is dismissed. Year of assessment - assessee has disclosed his capital gains in the assessment year 2019-20 and therefore, it should not have been assessed in A.Y. 2016-17 - The law is settled that the tax has to be levied in the year when it is due and payable. In the present case, the taxable event as per the judgment in the case of Potla Nageswara Rao [ 2014 (6) TMI 494 - ITAT HYDERABAD ] and Balbir Singh Maini [ 2017 (10) TMI 323 - SUPREME COURT ].happened in the year 2016-17 and therefore, it is to be charged in the said assessment year only. In case, as claimed by the assessee, the income has been offered in 2019-20, then the Assessing Officer may verify and pass rectification order, otherwise, it amounts to double taxation. In view of the above, the argument of the assessee is unsustainable. Valuation of property - value of Rs. 5,000/- per sq.yd taken by the AO as against Rs. 8,000/- per sq.ft adopted by the registered valuer - The valuation report was required to be given of the property as on the date of its transfer i.e., in the assessment year 2016-17 and not on a the subsequent occasion. The inspection of the property on 08.06.2019 had not thrown the light on the extent and nature of construction. Furthermore, the valuation report cannot be considered as it does not inspire confidence and is therefore required to be rejected. In this regard, the Assessing Officer has relied upon the guidance value of the area in which the property is situated, we do not find any reason to interfere with the same as the assessee failed to point out the peculiarity of the location, status and construction of the property for fetching more price in comparison to the guidance value. In view of the above, this ground of the assessee is dismissed. Accordingly, the appeal of the assessee is dismissed.
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2024 (11) TMI 866
Demand u/s 201(1)/201(14) as barred by limitation - assessee company has failed to deduct tax at source as reflected by Tax Auditor in his report - assessee submitted that the order passed by the AO was time barred by limitation - Scope of amendment - HELD THAT:- Only change which was effected from the earlier provision was the limitation period of four years in case of a deductor not filing TDS statement was extended to six years from four years. Whereas, in case of a person /deductor filing TDS statement, the limitation period of two years remained unchanged. The aforesaid sub section (3) of section 201 was again amended by Finance Act, 2014 w.e.f 1st October 2014 by substituting the earlier provision and earlier provision with a uniform limitation period of seven years from the end of relevant financial year wherein payments made or credit given was made applicable. If the legislature intended to apply the amendment provision of sub-section (3) retrospective it would definitely have provided such retrospective effect expressing in clear terms while making such amendment. In the instant case the time limit for passing order u/s 201(1) of the Act pertaining to financial year 2010-11 where a statement u/s 200 of the Act has been filed was two years from the end of the financial year in which such statement was filed. It is evident from the order of the AO that the tax statement in the relevant form i.e. Form 26Q for F.Y. 2010-11 was filed by the assessee on 13-05-2011. The time limit for passing an order u/s 201(1) of the Act was up to 31-03-2014.The assessment order was completed on 28-03-2018 by the AO beyond the prescribed time limit. The sub-section (3) of the Section 201 of the Act does not applicable in this case. We find that the assessment was made by the AO was time barred has no leg to stand and the Ld. CIT(A) has rightly allowed the appeal. The appeal of the revenue is liable to be dismissed.
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2024 (11) TMI 865
Salary received by non-resident in India - appellant was seconded on overseas assignment to UK - Income taxable in India or not? - number of days stay in India - Taxability of Salary Income under the India-UK DTAA - whether employer-employee relationship existed or not? - assessee is assessed as non-resident in AY 2020-21 as he had spent less than 60 days in India and was an employee of the M/s. Ernst Young LLP during the previous year 2019-20. During Financial Year 2019-20 the appellant was seconded on overseas assignment to UK by his employer - Assessee submitted before AO that salary is taxable in India only if it accrues in India and salary is considered to be accrued where the employment is exercised HELD THAT:- We find substance in the arguments of the Ld.AR that assessee being tax resident of UK, the salary income was taxable in UK only. In fact, salary received for the employment exercised in UK is taxable in UK and in the light of Article 15(1) of the India-UK DTAA it is exempt income. A similar view, has also been taken in the case of Nanthakumar Murugesan [ 2024 (6) TMI 815 - ITAT CHENNAI] . We find that identical fact exists before us in the present appeals. The proportionate salary for services rendered in India has already been offered to tax in India whereas the balance salary has already been offered to tax in UK. The assessee has not claimed any foreign tax credit in any of the jurisdiction. The UK tax has been paid. Therefore, ld. CIT(A) has rightly deleted the addition - Decided in favour of assessee.
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2024 (11) TMI 864
Assessment u/s 153A - Addition u/s 69 - assessee had availed of unsecured loan - HELD THAT:- It is true that the AO observed that the assessee had deposited a sum in the account of M/s Mohan Broker Agency, and credit was also shown by M/s Mohan Broker Agency and the assessee did not disclose in her Income tax return about said transaction, once said credit dated 7.1.2017 had been depicited in said statement of M/s Mohan Broker Agency, and no action was taken as regards the Income tax return furnished by the husband of the appellant in the relevant Assessment Year, it cannot be said that this is a case of discovery of any incriminating material only on search and seizure action on 29.3.2018. Therefore, this addition made by resorting to provisions of section 69 of the Act deserved to be set aside. We order accordingly. Sale of immovable property - Other addition, the only submission on behalf of the appellant is that having regard to the income declared by the assessee for the year under consideration and income declared in the previous 3 years, it cannot be said that the assessee had not the capacity to make payment of Rs. 92,700/-, and as such, this addition deserves to be set aside. Sale consideration in respect of the immovable property was Rs. 12,48,000/-, and the assessee admittedly paid Rs. 12,28,000/-by way of cheque. As such, the assessee was required to disclose source of payment of remaining sale consideration and stamp duty charges, total amounting to Rs. 92,700/-, as submitted by Learned DR. But having regard to the income of the assessee during the last 3 years, and the income of the year under consideration as shown in the ITR, it cannot be said that payment of this much amount remained unexplained. As is established from the documentary evidence, which was also made available before the AO and Learned CIT(A), we find that said addition also deserves to be set aside.
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2024 (11) TMI 863
Undisclosed investments u/s 69 and undisclosed investment in purchase of agriculture land - no explanation regarding the source of this investment provided - HELD THAT:- Firstly, it may be mentioned that payment of the sale consideration in cash to the vendors for purchase of immovable property was clearly in violation of provisions of the Act. Secondly, there is no evidence from the assessee-appellant to suggest that she had received cash from her mother in law and paid the said cash amount to the vendors. Contrary to it, the submission put forth by AR for the appellant is that Smt. Yashoda Devi had withdrawn the abovesaid amount and paid the same in cash to the co-owners. This version was never put forth by the assessee at any stage of the proceedings before the AO or before Learned CIT(A). Thirdly, the assessee did not disclose said income in the Income tax return for the year under consideration. Same adversely affects the case of the assessee, particularly, when, admittedly, she has not been maintaining any books of accounts. In the given situation, self serving confirmation by Smt. Yashoda Devi, mother in law of the appellant, does not come to the help of the assessee-appellant. Nowever, taking into consideration income of the assessee during the F.Y. 2016-17 i.e. of Rs. 3,66,224.00 - Rs. 54,000.00 paid to Mohan Broker Agency during said year, we restrict the addition to Rs. 9,08,376 (i.e. Rs. 12,20,600.00 - Rs. 3,12,224.00, source of which she failed to establish, despite reasonable opportunity, before the Assessing Officer and before Ld. CIT(A). Validity of impugned assessment order as no DIN Number was generated as regards the assessment order - Record reveals that while challenging the impugned assessment order before Learned CIT(A), no such ground/objection on behalf of the assessee-appellant was raised. Even though this is a legal ground and can be raised before the Appellate Tribunal, it was for the assessee-appellant to prove to the satisfaction of this Tribunal if any prejudice has been caused to the assessee-appellant due to non mentioning of DIN number. Instructions issued by Central Board of Direct Taxes are meant for compliance by the Income Tax Authorities. When the instructions were issued that such communications without DIN number shall be treated as non-est , and shall be deemed to have never been issued, can safely be said to have been issued to ensure and lay emphasis on their compliance by the Income tax authorities, without fail. It is not the allegation of the appellant that no assessment proceedings were conducted by the Assessing Officer or that the impugned assessment order is a made up or forged and fabricated document. In absence of any such plea or material to suggest that any prejudice was caused to the assessee-appellant, we do not find any merit in the contention raised on behalf of the assessee-appellant that because of non mentioning of DIN number. in the impugned assessment order, the same deserves to be set aside. Impugned assessment order not digitally signed-its impact - Instruction No.1/18 dated 12.2.2018 issued by Central Board of Direct Taxes has also been relied on in the written submissions to submit that all departmental orders/notices/communications issued to the assessee through e-proceedings are to be digitally signed by the AO. As already noticed above, instructions issued by Central Board of Direct Taxes are meant for compliance by the Income Tax Authorities. Same can safely be said to have been issued to ensure compliance and lay emphasis on their compliance by the Income tax authorities, without fail. It is not the allegation of the appellant that no assessment proceedings were conducted by the Assessing Officer or that the impugned assessment order is a made up or forged and fabricated document. Ld. AR for the appellant has not been able to satisfy if any prejudice was caused to the assessee-appellant for want of digital signatures on the impugned assessment order. Accordingly, we do not find any merit in the contention raised on behalf of the appellant. Prior approval u/s 153D of the Act, whether the same was granted mechanically? - Significant to note that after having raised abovesaid inconsistent grounds as regards the approval, in the common paper book-II dated 29.08.2024 presented on behalf of the assessee-appellant on 17.09.2024, the very first document made available at page No. 23 (as assigned by the Ld. AR for the appellant), is the copy of approval u/s 153D of the Act, accorded by Additional Commissioner of Income Tax, Central Range, Udaipur, vide its letter dated 31.12.2019.The impugned assessment order is dated 30.12.2019. It is available from the abovesaid letter dated 31.12.2019 that on receipt of letter dated 30.12.2019 from the office of DCIT, Central Circle, forwarding therewith draft assessment orders, mentioned therein, for approval u/s 153D of the Act, Additional Commissioner of Income Tax went through the contents of draft assessment orders and accorded approval u/s 153D of the Act. In view of the said document submitted by the appellant, there is no merit in the contention raised on behalf of the assessee-appellant.
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2024 (11) TMI 862
Revision u/s 263 - assessment framed u/s 143(3) as erroneous in so far prejudicial to the interest of Revenue - HELD THAT:- It is settled law that for initiating the proceedings u/s 263 it is compulsory to reach to the conclusion that the assessment framed by the AO is not only erroneous but also prejudicial to the interest of Revenue. On a perusal of the order of the learned PCIT, we note that the learned PCIT has observed that the expenses in dispute have already been capitalized by the assessee in the books of account. Since this fact has already been observed by the learned PCIT in his order, there remains no ambiguity that the assessee has not claimed the benefit of deduction of the impugned expenses in its P L Account. Thus, we hold that once no deduction has been claimed by the assessee of the impugned expenses in the P L Account, then we are of the view that even the order is held as erroneous for any reason, the same cannot be held as prejudicial to the interest of Revenue. Accordingly, we are of the considered view that the twins conditions being erroneous in so far prejudicial to the interest of Revenue have not been satisfied which was mandatory for invoking the provisions of section 263. Accordingly, we hold that the order framed by the learned PCIT u/s 263 is not sustainable and hence we quash the same. Assessee appeal allowed.
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2024 (11) TMI 861
Addition u/s 69A - sales declared by the assessee were treated as bogus - HELD THAT:- CIT(A) has given clear finding that the AO has not rejected the books of account and accepted the purchases and inventory declared by the assessee, proceeded to make the addition. We are also in agreement with the above findings that the basis of financials submitted by the assessee is the sales and the same was accepted. The net profit declared by the assessee was accepted by the revenue. The AO has taken a presumption that the assessee must have rerouted his own funds. This presumptions is not backed by any material and ld CIT(A) has rightly observed that the assessee must have purchased the gold in grey market and the revenue has not found any discrepancy in the financial result. No reason to take a different view considering the relevant facts on record. Therefore, we are inclined to dismiss the grounds raised by the revenue. Validity of reassessment proceedings - Invalid approval granted u/s 151 - In this case, the approval was granted from the assessment of another person and merely recorded the reason as yes , proceeded to approve the same mechanically. Hence we are inclined to allow the ground raised by the assessee and held to be initiation of proceeding itself is bad in law and accordingly, the assessment made in the case of the assessee is set aside. In the result, appeal filed by the assessee is allowed.
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2024 (11) TMI 860
Revision u/s 263 - As per CIT AO had failed to carry out necessary inquiries and verification on the issue of verification of apportionment of expenses between eligible unit claiming deduction u/s 80IA(4)(iv) and non-eligible unit - HELD THAT:- It is evident that the appellant maintains separate records for Unit I and Unit II. Additionally, proper records were submitted to both the TPO and the AO. The appellant utilizes SAP for its accounting, ensuring a complete demarcation of each unit. Furthermore, the appellant has been granted deductions under Section 80IA in previous years, and thus, it cannot be alleged for the year under consideration that separate books of accounts were not maintained for eligible units, especially given that the same SAP software was used in those prior years. Accordingly, the ground raised by the appellant is hereby allowed. AR argued that the assessment u/s 143(3) was completed after detailed enquiry and examination of books of account - The assessments for the earlier assessment years specifically, AY 2012-13, 2013-14, 2014-15, and 2015-16 were conducted by the department with the acceptance of the fact that the assessee maintained separate books of accounts for both the Units. It is noted that these separate books of accounts were submitted during the assessment proceedings and also before the Principal Commissioner of Income Tax (PCIT) concerning the specified Unit II. Additionally, Form 10CCB, in conjunction with Rule 18BBB as per Section 80IA(7), along with a standalone balance sheet, was also submitted to the Assessing Officer (AO). Moreover, separate disallowances required as per income tax for the specified unit for the year ending March 31, 2017. The cost sheets, along with the standalone profit and loss statements submitted before the Transfer Pricing Officer (TPO) demonstrate the bona fides of the assessee in maintaining separate books of accounts. Again, it is necessary to upload a consolidated balance sheet on the Income Tax portal; however, this requirement does not negate the fact that separate books of accounts were maintained, especially given that the appellant has submitted all relevant documents to substantiate this assertion. Assessee has in fact maintained separate books of accounts. Therefore, the ground raised by the Appellant is allowed. Jurisdiction u/s 263 was invoked solely based on audit objections and the proposal from the AO and without any independent application of mind by the Principal Commissioner of Income Tax (PCIT) - As we find that while partially accepting the audit objections, the AO stated in the concluding paragraph of the letter dated February 9, 2024, that the objections raised would be settled by invoking the provisions of Section 263. This statement underscores the reliance on audit findings, despite the AO's prior acknowledgment of the separate books of accounts maintained by the assessee. In view of the above discussion referring the facts and circumstances of the present case, it is evident that the proceedings u/s 263 were culminated on the basis of audit objections without application of mind. As decided in the case of Sohana Woollen Mills [ 2006 (9) TMI 157 - PUNJAB AND HARYANA HIGH COURT ] held that invocation of section 263 merely based upon audit objection is bad in law. As whole case has been framed based on audit objections without application of mind by the Ld. PCIT. In our view, the AO has undertaken complete enquiry and as such, the subsequent cause of action of invocation of section 263 is held to be without jurisdiction. Revenue in the present case has failed to demonstrate how the order passed by the Assessing Officer (AO) was erroneous or prejudicial to the interests of the revenue. The Principal Commissioner of Income Tax (PCIT) has not substantiated any claims of non-application of mind by the AO, particularly given that the appellant submitted all requisite documents, including standalone profit and loss statements, cost sheets for Unit I and Unit II, turbine bills, invoices, and other relevant materials to the Assistant Commissioner of Income Tax (ACIT), Transfer Pricing Officer (TPO), and the PCIT. All submitted documents have been verified by the respective authorities, and, in our view, mere allegations that the AO issued the order without proper consideration are insufficient to justify the setting aside of the assessment order through the invocation of Section 263 - Decided in favour of assessee.
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2024 (11) TMI 859
Disallowance of deduction u/s 80IB/80IE in respect of interest on staff advances statutory/bank deposit - AO observed that the Assessee is not entitled for deduction on loan to employees and bank deposits as such interest income is not income derived from industrial undertaking - HELD THAT:- Identical issue has been decided against the Assessee by the Co-ordinate Benches in A.Yrs. 2011-12 to 2014-15 [ 2022 (8) TMI 1444 - ITAT AHMEDABAD] disallowed the assessee's claim of deductions in respect of interest on staff advances statutory/bank deposits. Disallowance of expenditure incurred for doctors towards business promotion and accommodation - HELD THAT:- We find that since the Senior Counsel appearing for the assessee has not pressed this ground of appeal for the year under consideration, the Ground no.2 raised by assessee becomes infructuous and dismissed. However, this finding should not be considered as a binding precedent for all the subsequent years and it goes without saying that the assessee company has the right to bring out relevant facts so as to allow claim of expenditure u/s. 37(1) of the Act. So far as alternate claim of the assessee that it is entitled for higher deduction u/s. 80- IB/80-IE on the above disallowance is concerned, claim of assessee is allowable as per CBDT Circular No. 37 of 2016, dated 2nd November, 2016. Thus the Ld. AO is directed to verify that if above referred expenditure is part of profit loss account for Unit eligible for deduction under Section 80-IB/80-IE, the assessee would be entitled for higher deduction and re-compute the same accordingly. Thus, Ground of Appeal no.2 raised by assessee is dismissed and relevant ground no.4 in Revenue s appeal is allowed. Disallowance u/s 14A r.w. Rule 8D - HELD THAT:- So far as proportionate interest disallowance is concerned, the Ld Senior Counsel contended that it is evident from audited financial statements that the assessee has sufficient interest-free funds, whereas the CIT(A) has given adverse findings in this regard. Considering these facts, we set aside this issue to the file of AO and direct him to verify whether the assessee has sufficient interest-free funds or not and workout the disallowance in accordance with law. Disallowance under Rule 8D(2)(iii) is concerned, considering the principle of natural justice, we direct the AO to verify the disallowance on the basis of facts of the case and provisions of the law. Thus, the ground no.3 raised by the assessee is hereby allowed for statistical purpose. Addition of the amortization of Intangibles while computing book profits under section 115JB - HELD THAT:- As recording of Assets at Fair Value pursuant to Scheme of Arrangement and at time of initial recognition cannot be regarded as Revaluation of Assets and consequently no adjustment is required to made to book profit u/s. 115JB of the Act. There is no change in the facts of the present case with that of the earlier asst years 2013-14 and 2014-15 [ 2023 (10) TMI 652 - ITAT AHMEDABAD] the Co-ordinate Bench considered various judgements, Accounting Standard AS- 14, AS-10 and also provision of section 115JB of the Act and held that adjustment made by the Ld AO in the Book profit is liable to be deleted. Disallowance of Stamp Duty charges being capital in nature on the share expenses pursuant to the terms of Court sanctioned Scheme of Arrangement - HELD THAT:- The expenditure incurred by the assessee is directly connected with such increase in authorized capital and such expenditure cannot be allowed in view of judgements of Punjab State Industrial Development Corporation [ 1996 (12) TMI 6 - SUPREME COURT] and Brooke Bond India Limited [ 1997 (2) TMI 11 - SUPREME COURT] Thus, the addition made by the Ld.AO of Rs. 28,00,000 is confirmed. This Ground raised by the of assessee is dismissed. Disallowance made u/s. 36[1][va] rws 2[24][x] for delayed payment of employees contribution to ESIC - HELD THAT:- This issue is held against the assessee by the Hon ble Supreme Court in Checkmate Services Pvt Ltd [ 2022 (10) TMI 617 - SUPREME COURT] . Disallowance of long term loss on sale of land - Assessee neither claimed it in the original RoI nor in the Revised RoI filed by the assessee - During the assessment proceedings the assessee requested the AO to consider the inadvertent omission and allow LTCL - AO instead of allowing the loss, added back the amount of loss to the income of the assessee - HELD THAT:- The judgements relied by the assessee are not applicable to the present case, since the LTCL is neither claimed by the assessee in the original return nor in the revised return, but claimed during the course of assessment proceedings. The judgements referred above deals with fresh claim namely 80IA, depreciation made for the first time during the appellate proceedings and not on a LTCL/loss. Section 139[3] makes it mandatory to claim business loss or capital loss in the return filed u/s. 139[1] and as per Rule 12 of Income Rules. Thus we do not find any infirmity in the order passed by Ld CIT[A] and the Ground raised by the assessee is devoid of merits and the same is liable to be dismissed. Disallowance of deduction u/s 80IE in respect to Sikkim Unit - HELD THAT:- . Since the eligibility of deduction was upheld in the first year of claim being AY 2010-11, the same cannot be disputed in the subsequent year of claim on the same ground of ineligibility. More particularly when the AO himself has observed that there is no change in facts and circumstances of the case during the year under consideration. Before us, no material has been brought on record by the Revenue to demonstrate the above decision of the Co-ordinate bench in earlier year has been reversed or set aside by the higher Judicial Forums. Deduction u/s 80-IB/80-IE in respect of receipt of interest allowed. Disallowance of business/conference fee and sponsorship expenses under the gift and freebies to doctors - HELD THAT:- Vide paragraph 6.2. of this order the above disallowance was confirmed and the Ld. AO is directed to verify that if above referred expenditure is part of profit loss account for Unit eligible for deduction under Section 80-IB/80-IE, the assessee would be entitled for higher deduction and re-compute the same accordingly. Thus, Ground no. 4 in Revenue s appeal is partly allowed. Disallowance made towards care protection plan for Apple i-pads as valid for more than 12 to 24 months - HELD THAT:- The expenses incurred by the assessee towards care protection plan for Apple i-pads is allowable as Revenue expenditure u/s. 37(1) of the Act. Disallowance of interest - CIT[A] after considering the facts on the penal interest paid and contractual agreement between the parties which is well within Arm s Length pricing deleted the above addition - HELD THAT:- Perusal of the facts, the assessee paid interest to M/s. Neetnav Real Estate Pvt Ltd. though being a related party u/s. 40A[2][b] of the Act, but the interest was subject to domestic transfer pricing provisions u/s. 92BA - as per FAR analysis of the transaction, it has been found that the rate of 9% p.a. paid by the Assessee company is in conformity with the Arm's Length Pricing and also much lesser than the prevailing interest rates in the market. It is undisputed fact that based on contractual obligation the late payment of 232 days has attracted the penal interest which is to be allowed u/s. 37(1) of the Act. Thus the addition made by the Ld AO on this account is against the provisions of law and was rightly deleted by Ld. CIT(A). Nature of expenses - software upgradation and support expenses - assessee claimed that these expenditures were mainly on account of data migration charges, online support services, improve its accounting software so as to effectively manage its day-to-day operation and also includes expenditure for regular maintenance of the software - AO held that the said software expenses gives benefit which would be available for more than one year i.e. enduring in nature and held as capital expenditure - HELD THAT:- The disallowance made on this account by the AO was rightly deleted by the Ld CIT[A] which does not require and interference. MAT - addition of Wealth Tax to book profit for computation u/s. 115JB - CIT(A) following his predecessor s order held that Wealth-tax paid cannot be treated on par with Income-tax and accordingly the payment of Wealth-tax was not required to be added to the book profit u/s. 115JB - HELD THAT:- Clause (a) of Section 115JB of the Act clearly talks on the Income Tax paid or payable only liable to be included for the purpose of book profit u/s. 115JB of the Act. Thus the addition made by the AO to Wealth Tax paid is liable to be deleted. Ground raised by the Revenue is devoid of merits and is hereby dismissed. Disallowance of management consultancy charges paid to Mckinsey Company - Addition made as payment was incurred for the benefit of the parent company namely, SPIL and not that of the assessee and the consultancy fees will benefit the assessee for indefinite period being capital in nature, therefore not allowable u/s 37(1) - HELD THAT:- No hesitation in upholding the order passed by Ld. CIT(A) deleting the addition made on account of consultancy service charges paid to Mckinsey Company. Consultancy charges paid to Makov Associates for availing strategic consulting services especially with respect to strategy building, business development, management of mergers and acquisitions etc. - HELD THAT:- AO failed to consider that the consultancy services rendered by Makov Associates enabled the assessee company to effectively undertake its operation and at the same time focus on the growth aspects of the company. Thus the above expenses is directly have nexus with the business of the assessee company and liable to be allowed as revenue expenditure u/s. 37(1) - CIT[A] also observed that in the case of SPIL the concerned AO after going through various documents, allowed the claim of Consultancy Service expenses paid to Makov Associates as allowable expenses u/s. 37[1] of the Act. Thus Ground raised by the Revenue is devoid of merit and the same is liable to be dismissed.
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2024 (11) TMI 858
Income taxable in India or not - income from licensing of software - Royalty receipts u/s 9(1)(vi) of the Act and Article 12 of India- Singapore DTAA - HELD THAT:- Assessee is a non-resident company incorporated under the laws of Singapore and did not have PE in India. During the assessment year the assessee has received an order for supply, installation, testing, commission and AMC of Video Management Software and Video Analytics Software for Vizag Smart city project from M/s. L T Ltd. Warranty/AMC should also be provided by the supplier up to December, 2022 by the assessee to M/s. L T Ltd. On perusal of EULA entered between the assessee and M/s.L T Ltd, it clearly mentions that no title or ownership of the software or its documentation is transferred to the buyer (M/s. L T Ltd) and also the ownership of the software and its modification rights shall remain at all times with the assessee only. Considering the present facts and circumstances, supply of software sale made by the assessee to M/s.L T Ltd, of India cannot be treated as royalty u/s. 9(1)(vi) of the Act and hence, the action of the Assessing Officer cannot be accepted. Further, the assessee s claim of software is only a sale of software but not the copyright of the software and treated as royalty by relying on decision in the case of Engineering Analysis and Centre of Excellence Pvt. Ltd. [ 2021 (3) TMI 138 - SUPREME COURT ] Further, the decision of Hon ble Supreme Court is considered in the case of CIT vs. Microsoft Corporation [ 2022 (5) TMI 1070 - DELHI HIGH COURT ] and also in EY Global Services Ltd. [ 2021 (12) TMI 571 - DELHI HIGH COURT ] and held that mere supply of software without a sale of copyright cannot be treated as royalty to bring it to tax u/s. 9(1)(vi) of the Act. The same analogy has been following with reference to India-Singapore DTAA in the following cases and decided in favour of the assessee by excluding the supply of software without any copyright as non-taxable under Income-tax Act, 1961. Thus, the supply of software by the assessee cannot be brought to tax either u/s. 9(1)(vi) of the Act or under the India-Singapore DTAA and hence, we set aside the order of the Assessing Officer/DRP by allowing the ground raised by the assessee.
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2024 (11) TMI 857
Denial of exemption u/s. 10(23C)(iiiab) - late filing of the income tax return i.e. beyond time specified u/s. 139(1) - also if the return is required to be mandatorily filed then whether, the filing of the return u/s. 139(4D) instead of section 139(4C) of the Act disentitles the assessee from claiming the exemption u/s. 10(23C)(iiiab) - HELD THAT:- DR could not point out any relevant provision or section under the Income Tax Act which disentitles the assessee from claiming exemption u/s. 10(23C)(iiiab) of the Act for non-filing/late filing of the income tax return. Therefore, the action of the lower authorities in denying the exemption to the assessee on this ground is not sustainable. Second issue as to whether the filing of the return in wrong form i.e. Form u/s. 139(4D) instead of Form u/s. 139(4C) becomes irrelevant. Action of the lower authorities in denying exemption to the assessee cannot be held to be justified. The impugned order of the Ld. CIT(A) is set aside and the AO is directed to grant exemption to the assessee as claimed u/s. 10(23C)(iiiab) of the Act - Appeal of the assessee stands allowed.
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2024 (11) TMI 856
Revision u/s 263 - excess deduction of transport expenses and non deduction of TDS on transportation charges - CIT held that the AO failed to verify these issues adequately, thus rendering the assessment order erroneous and prejudicial to the interests of the Revenue - HELD THAT:- Details of Form 26Q and quarterly return in Form 27A were verified by the AO along with quarter wise details of both the transporters from whom TDS was deducted as well as from transporters who were not liable for TDS deduction in view of sub-section (6) of section 194C of the Act, as they were not owning more than ten goods carriage during the relevant financial year. We find that the aforesaid issues were duly explained by the assessee not only before the AO, but also, before the ld. Pr. CIT. However, the Ld. Pr. CIT without examining the explanation given by the assessee and also without pointing out any defect or infirmity in the details furnished by the assessee, simply held that the AO was supposed to make enquiries/verification upon the aforesaid issues and set aside the assessment order. The ld. Counsel has demonstrated that all the factual discrepancies pointed out by the ld. Pr. CIT regarding lack of enquiry by the AO were, in fact, factually wrong. As per the provisions of section 263 of the Act, the ld. Pr. CIT was supposed to go through the said details and should have pointed out as to which of the fact or explanation needs what further enquiries. The words as he deems necessary , in our view, do not mean that the Ld. Pr. CIT is left with a choice either to make or not to make an enquiry. As per the relevant provisions of section 263 of the Act, it was incumbent upon the Ld. Pr. CIT to make or cause to make an enquiry. So far as the words as he deems necessary are concerned, the said words suggest that the enquiries which are necessary to form a view as to whether the order of the Assessing Officer is erroneous and prejudicial to the interest of Revenue? Once a point wise reply was given by the assessee, then a duty was cast upon the Ld. Pr. CIT to examine the reply of the assessee and form a prima-facie opinion as to whether the order of the Assessing Officer was erroneous so far as it was prejudicial to the interest of Revenue. Admittedly, the Assessing Officer asked the assessee to furnish the necessary details from time to time which were duly furnished by the assessee and after considering the same the Assessing Officer passed the assessment order. The ld. Counsel for the assessee, has demonstrated before us that both the points, which the Ld. PCIT has held that the Assessing officer was supposed to examine, have been duly examined by the Assessing Officer during the assessment proceedings and the observations of the Ld. PCIT regarding any lack in enquiry on both the points was factually wrong. The ld. Pr. CIT, as discussed above, has not pointed out any error or discrepancy in the details furnished by the assessee and without examining such evidence and without counter questioning the assessee on the relevant points and even without considering the submission of the assessee furnished in reply to the show-cause notice, the ld. Pr. CIT, in our view, was not justified in setting aside the order, simply stating that in his view more enquiries were needed to be carried out by the Assessing Officer. Thus, the impugned order of the Ld. PCIT passed u/s 263 of the Act is not sustainable as per law, the same is accordingly, hereby quashed - Assessee appeal allowed.
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2024 (11) TMI 855
Deduction claimed u/s 80G under Chapter VIA in respect of donations which also qualifies as CSR expenditure and expressly disallowed u/s 37(1) - HELD THAT:- Even there is no explanation provided under the Income Tax Act as to why the contributions towards Swachh Bharat Kosh and Clean Ganga Fund set up by the Central Government are not eligible for claiming deduction u/s 80G whereas, there is no such restriction in relation to other type of contributions and to the institutions whose names find mention in Schedule VII of the Companies Act read with CSR Rules of 2014 and CSR Rules of 2021, as well as u/s 80G the even u/s 35 of the Act. Rather, as noted above, in the explanatory notes explaining the amendment to section 37(1), it has been clarified by the CBDT that if the funds meant for CSR are spent and are in the nature of expenditure described u/s 30 to 36 of the Act, that shall be allowed as deduction under those sections, despite the fact that such funds are made towards discharge of CSR obligation. Hence, this clarifies the position that the purpose of introduction of Explanation-2 to section 37(1) is not to disallow the CSR expenditure, if so admissible, under any other provision of the Act, but under section 37 only. Contention of the ld. DR, that u/s 80G(2)(a) the deduction is admissible on the sum paid by the assessee to the approved institutions as donations - The term donations refers to a gift usually one of a charitable nature. That the donation is a voluntary transfer of property by the doner to the donee without any exchange of value on the part of the recipient and that the CSR expenditure u/s 135 of the Companies Act, 2013 is a mandatory/statutory obligation and cannot be termed as donation . Though, on the face of it, there seems to be some force in the aforesaid contention of the ld. DR, however, on deeper analysis of the facts, we find that this contention is not applicable in this case. Though, there is a statutory obligation of CSR expenditure u/s 135 of Companies Act 2013, however there are many prescribed modes and activities under Schedule VII of the Companies Act for spending the CSR expenditure, which list is not exhaustive rather inclusive. There is no provision either u/s 135 of the Companies Act or under Schedule VII to the Companies Act or the CSR Rules, requiring mandatory donations to the institutes/funds prescribed under the relevant provisions of section 80G of the Income Tax Act. Therefore, there was no compulsion upon the assessee to donate the funds to a charitable organisation approved u/s 80G of the Income Tax Act.The assessee has chosen this mode out of its own volition. When a taxing statute imposes a financial burden/tax liability even though the same appears to be harsh and not equitable, the courts have held that the fiscal statues are to be interpreted in strict terms and such liability cannot be set aside on the ground of equity or natural justice. The vice-versa is also true. Since, there is no bar to claim deduction under the relevant provisions of section 80G, except wherein so specifically barred i.e. in respect of donation towards Swachh Bharat Kosh and Clean Ganga Fund, the same cannot be denied to an assessee importing or reading the barring provisions of some other section to the entire provisions of section 80G. In view of the above discussion, the assessee, in our view, is not barred from claiming deduction u/s 80G of the Income Tax Act in respect of donations made to the approved institutions even though the same is made in discharge of CSR obligation u/s 135 of the Companies Act.
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2024 (11) TMI 854
Addition u/s 68 - unexplained cash credit - Case of the assessee was selected for scrutiny as the assessee has deposited cash during demonetization period - HELD THAT:- On one hand ld. AO accepted the sales and on the other hand on the same set of evidence placed before him he is not considered the other part of the sales and that too based on the estimation, presumption and assumption he has not placed on record failure on the part of the assessee as when the part of the sale is considered then why the other part is not considered. Addition made by the ld. AO and sustained by the ld. CIT(A) merely based on the presumption and assumption. They did not deal to the fact of the case on the same set of evidence part of the sale is accepted and part of the same were not accepted. Considering that factum we do not find any reason to sustain the addition and therefore, we direct the ld. AO to delete that addition made in the hands of the assessee. Assessee appeal allowed.
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2024 (11) TMI 853
Validity of reopening proceedings against dead assessee - HELD THAT:- This issue exactly on identical facts has already been examined in the case of Savita Kapila [ 2020 (7) TMI 441 - DELHI HIGH COURT] held that the issuance of a notice u/s 148 of the Act is the foundation for reopening of an assessment. Consequently, the sine qua non for acquiring jurisdiction to reopen an assessment is that such notice should be issued in the name of the correct person. This requirement of issuing notice to a correct person and not to a dead person is not merely a procedural requirement but is a condition precedent to the impugned notice being valid in law. Curable defect u/s 292BB or not? - In Commissioner of Income Tax-VIII, Chennai v. Shri M. Hemanathan [ 2016 (4) TMI 258 - MADRAS HIGH COURT] as been held In the case on hand, the assessee was dead. It was the assessee's son, who appeared and perhaps cooperated. Therefore, the primary condition for the invocation of Section 292BB is absent in the case on hand. Section 292BB is in place to take care of contingencies where an assessee is put on notice of the initiation of proceedings, but who takes advantage of defective notices or defective service of notice on him. It is trite to point out that the purpose of issue of notice is to make the noticee aware of the nature of the proceedings. Once the nature of the proceedings is made known and understood by the assessee, he should not be allowed to take advantage of certain procedural defects. That was the purpose behind the enactment of Section 292BB. It cannot be invoked in cases where the very initiation of proceedings is against a dead person. Hence, the second contention cannot also be upheld. Decided in favour of assessee.
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2024 (11) TMI 852
Foreign Tax Credit (FTC) - denial of claim on delay in filing of Form 67 prescribed under Rule 128 of the Income Tax Rules - HELD THAT:- Admittedly, the assessee has revised the return of income claiming the foreign tax credit much before the intimation generated u/s 143(1). Thus, in our considered view, the Revenue should have allowed the benefit of foreign tax credit to the assessee. The assessee has filed Form 67 for claiming the benefit of foreign tax credit, which is directory in nature. Thus, even there was no Form 67 filed by the assessee with the original return of income, yet the Revenue should have accepted the claim made by the assessee in the revised return of income. In holding so, we draw support and guidance form the order of this Tribunal in the case of Sanjeev Gopal [ 2022 (10) TMI 1033 - ITAT BANGALORE] . Thus direct the AO to allow the benefit of foreign tax credit to the assessee after due and necessary verification as per the provisions of law. Hence, the ground of appeal filed by the assessee is allowed.
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2024 (11) TMI 851
Validity of proceedings against company dissolved/insolvent - HELD THAT:- As per the provisions of Insolvency and Bankruptcy Code, 2016, and the judicial pronouncements of various Courts including that of the Hon ble Supreme Court and Hon ble Bombay High Court and other Jurisdictional Benches which strongly support the case of assessee. The NCLT has prohibited all the proceedings against the assessee before any of the Courts including this Tribunal and also judgments relied upon by the learned A.R. for the assessee which covers the case of the assessee respondent. Hence, in view of the judicial pronouncements, as relied upon by the learned A.R. appearing for the assessee, the appeal filed by the Revenue is liable to be dismissed.
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2024 (11) TMI 850
Deduction u/s 80P(2)(a)(i) - interest income from investments treated as 'Business Income' or 'Income from Other Sources ' - HELD THAT:- After the decision of Hon'ble Apex Court in the case of the Mavilayi Service Cooperative Bank Ltd. Ors. [ 2021 (1) TMI 488 - SUPREME COURT ] AO's case does not stand, as inclined to agree with its claim that being primary agricultural credit cooperative society registered and operating under the provisions of the Kerala Co-operative Societies Act, 1969, it is eligible for deduction u/s 80P of the Act. Also decided in Peroorkada Service Co-Operative Bank Ltd. [ 2021 (12) TMI 1084 - KERALA HIGH COURT ] interest earned from investment of surplus funds to be assessable as 'income from other sources and not as 'profit and gains of business. Further, the Hon'ble court has held the interest earned from Co-operative banks to be eligible for deduction u/s 80P(2)(d) holding the co-operative banks to be co-operative societies for the purposes of section 80P(2)(d). However, Hon'ble courts has held interest earned from treasury/commercial banks to be not eligible for deduction under section 80P as it is neither covered under section 80P(2)(a)(i) nor under section 80P(2)(d). To sum up, even though such interest and dividends as received from entities registered with Cooperative Societies Act is income from other sources, it is eligible for deduction u/s 80P(2)(d) of the Act. DR vehemently quotes Totagars Cooperative Sales Society Ltd. [ 2010 (2) TMI 3 - SUPREME COURT ]; CIT vs. Totagars Cooperative Sale Society [ 2017 (1) TMI 1100 - KARNATAKA HIGH COURT ] that the assessee s impugned interest income is not eligible for sec.80P(2)(d) deduction. He could hardly dispute that learned CIT(A)-NFAC has already considered the catena of case law (supra) whilst deciding the instant issue in assessee s favour. That being the case, we did not find any substance in the Revenue s instant sole substantive grievance - Decided in favour of assessee.
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2024 (11) TMI 849
Rectification of mistake - Addition made in respect of Reserve for Unexpired Risks (URR) u/s 115JB - HELD THAT:- We feel that the Tribunal made mistake in observing that the assessee agreed and hence, the above line may be read as under:- Hence, taking a consistent view, we remit this issue also back to the file of the AO with similar direction to the AO as mentioned in para 15.10 of this order. Provision made towards Claims Incurred But Not Reported (IBNR) and Claims Incurred But Not Enough Reported (IBNER) added to the Book profits u/s 115JB - Revenue pointed out that this issue is neither adjudicated by the CIT(A) nor the Tribunal, on merits and only some facts are available in the order of the Assessing Officer. Hence, this issue can be remitted back to the file of the Assessing Officer before whom the assessee will place all evidences and prove whether claim made by the assessee is ascertained liability or unascertained liability. Rectification of mistake allowed as Tribunal has not adjudicated the addition grounds raised pertaining to considering of income as per 143(1)(a) of the Act and addition to book profit relating to URR, even though no amount have been debited to Profit Loss account - We have gone through the order of the Tribunal and noted that the Tribunal has not adjudicated these two additional grounds and hence, to that extent we recall the order of the Tribunal and direct the Registry to fix this appeal for the assessment year 2018-19 for hearing.
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2024 (11) TMI 848
Rectification of mistake - Reopening of assessment u/s 147 v/s assessment u/s 153C - information or seized document pertains/ belongs to the assessee was found at searched person place - AR mentioned that the Hon ble Tribunal has not considered the judicial decisions and dismissed the additional ground of appeal and sustained the decision of the CIT(A) upholding the validity of the reassessment proceedings U/sec147 of the Act HELD THAT:- We support our view relying on the decision of the Hon ble Supreme Court in the case of Honda Siel Power Productions Ltd. [ 2007 (11) TMI 8 - SUPREME COURT ] reversing the decision of the High Court, that in allowing the rectification application the Tribunal gave a finding that the earlier decision of a co-ordinate Bench was cited before it but through oversight it had missed the judgment while dismissing the appeal filed by the assessee on the question of admissibility/allowability of the claim of the assessee for enhanced depreciation under section 43A. One of the important reasons for giving the power of rectification to the Tribunal under section 254(2) was to see that no prejudice was caused to either of the parties appearing before it. The rule of precedent was an important aspect of certainty in the rule of law, and prejudice had resulted to the assessee since the precedent had not been considered by the Tribunal. The Tribunal was justified in rectifying the mistake on record. We, thus find that non consideration of judicial decisions cited before the bench is a mistake apparent from the record Accordingly, in the interest of principles of natural justice, we recall the Hon ble Tribunal order [ 2022 (11) TMI 443 - ITAT MUMBAI ] and direct the registry to post the appeal for regular hearing and inform the parties.
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2024 (11) TMI 847
Deduction u/s 80P(4) - appellant is a co-operative bank - HED THAT:- As the appellant CIDCO Employee co-operative credit society was registered under Maharashtra state co-operative societies Act, 1960 on 11.10.1999. According to appellant's bye laws the main objective of the appellant society is to provide credit facility among its members and the membership is restricted to its employees only. The appellant assessee society s members contribute their funds to society and same funds are given as loans on interest amongst its members only. Assessee s principal business is not banking business as it does not transact banking business with general public in India. The first and third conditions, thus do not exist in the functioning of assessee society. It is accordingly held that in absence of aforesaid two conditions, the appellant assessee does not fall under the category either of a co-operative bank or a primary co-operative bank , hence not hit by sub section 4 of section 80P of the Act. Apart from the business income, certain small portion of income of the society was earned from the interest and dividend. It appears from the profit loss A/C of paper book at page 37 that the appellant's co-operative credit society received interest income on investments and dividend income on bank shares. The investee institutions have not been questioned by the authorities below in respect of their status as co-operative societies. The total income from profit gains during the term under consideration is not disputed by the revenue. The income from interest on investment dividend is eligible for deduction u/s. 80P(2)(d) and the remaining amount received from the interest from members on deposit is attributable to assessee society s business income and is deductible u/s. 80P(2)(a)(i) - AO was thus not justified in denying the benefit of Section 80P of the Act to the assessee society. The aforesaid point is accordingly determined in favour of the assessee and against the revenue.
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2024 (10) TMI 1615
Addition arising out of search proceedings - disallowance of wages payable salaries payable - addition is based on notings found in Measurement books (M Books) for labor payments and excel sheets - HELD THAT:- As identical issue has been decided by us in assessee s appeal for AY 2017-18 [ 2024 (9) TMI 1654 - ITAT CHENNAI] wherein held as seen that the assessee has reversed provision of wages payable and salaries payabe and claimed the same on actual payment basis in FY 2016-17. The same is very much clear from the above reconciliation. Since the provision as wrongly claimed in return of income filed u/s 139(1) has now been reversed in return of income filed u/s 153A, the payment made in subsequent year would be allowable as deduction in the subsequent year. If the same is not allowed, the assessee would suffer double disallowance which is wholly unjustified Therefore, considering the fact of the case, the amount would be allowed as deduction. For balance provision of Rs. 14.69 Lacs has been made on 31-03- 2017. The aggregate provision as on 31-03-2017 was Rs. 29.53 Lacs which has fully been paid by the assessee through banking channels in the month of April and May, 2017 which is evident from ledger of salaries payable. Unexplained investment u/s 69 - Onus to prove - addition stem from excel sheet titled as 15% and 12% found during search - HELD THAT:- Upon perusal of loose excel sheet as extracted in the assessment order, it could be seen that these sheets lacks sufficient details to form an opinion of actual cash introduction by the partners of the firm. The same merely contain certain computation of interest only without suggesting anything more. The complete details of the transactions could not be deciphered from the same. The same do not have any details as to source of alleged capital introduction by the partners. Under these circumstances, not much credence could be given to this document to make impugned additions in the hands of the assessee in the absence of corroboration of entries as contained therein. As decided in the case of Kranti Impex Pvt. Ltd. [ 2018 (3) TMI 424 - ITAT MUMBAI] when the seized papers were undated having no acceptable narration and did not bear the signature of any party, they are in the nature of dumb documents having no evidentiary value and could not be taken to be the sole basis for determination of undisclosed income of the assessee. The onus would be on revenue to collect cogent evidences to corroborate the nothings therein. The ratio of other decisions as cited by the assessee during first appeal also supports the case of the assessee. Thus, impugned additions as made by Ld. AO, merely on the basis of loose sheets without corroboration thereof, was not adequate enough to draw adverse inference of cash flows against the assessee. Therefore, we delete the same and allow the corresponding grounds as raised by the assessee. AO is directed to recompute the income of the assessee in terms of our adjudication.
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Customs
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2024 (11) TMI 846
Seizure of goods as smuggled into the country from the bordering Myanmar - exercising the jurisdiction by this Court u/s 130 of the Customs Act, 1962 - burden of proof to show that the seized areca nuts are not smuggled goods is on the respondent u/s 123 of the Customs Act, 1962 or it is for the Department to show that the seized betel nuts are of foreign origin and are smuggled goods, before it can be confiscated u/s 111 of the Customs Act, 1962. HELD THAT:- An appeal under Section 130 of the Customs Act, 1962 shall lie to the High Court only if the High Court is satisfied that it involves a substantial question of law. It also appears that the provision of Section 130 (1) appears to be in pari materia with Section 100 (1) of the Code of Civil Procedure, 1908. There are a catena of judgments of the Apex Court, which has held that the existence of a substantial question of law is a sine qua non for exercise of jurisdiction of the High Court under Section 100 of the Code of Civil Procedure, 1908. Thus, applying the same logic to an appeal preferred under Section 130 of the Customs Act, 1962 it can be safely concluded that the existence of a substantial question of law is a sine qua non for exercising the jurisdiction by this Court under Section 130 of the Customs Act, 1962. Thus, if the Appellate Tribunal has ignored the material evidence available on record or has acted on no evidence, same shall in light of the above observations made by the Apex Court can be considered while deciding the substantial question of law so formulated by the High Court. Let us now consider the substantial questions of law formulated by this Court by its order dated 19.03.2024. For the sake of convenience, the substantial questions Nos. 1 and 2, formulated by this Court, by order dated 19.03.2024, are taken up for consideration, together. Cogent and positive evidence that the seized betal nuts were smuggled betal nuts or not - It appears that the betel nuts, in this case, were seized at Kawlbem which is within the Indian Territory and there is no material available, including any foreign markings on the bags in which the seized betal nuts were found to show that they are of foreign origin. There is also no credible expert opinion regarding origin of the goods. Merely, on the basis of presumption that as Kawlbem is near the international border and as Kawlbem is situated in a district which is not producing much betal nuts and is far away from the betal nuts producing districts of Mizoram like Kolasib and Mamit, it cannot be concluded that the betal nuts which were seized in this case were smuggled into India. Moreover, in the instant case, though, the learned Appellate Tribunal has not taken into the considerations the documents produced by the respondent to show that the betal nuts were purchased from M/s Emily Store, Bethel Veng by the respondent, in reaching the conclusion arrived at in the impugned order, however, same cannot be ignored in toto unless there is some material on record to show that the said GST documents are fake. In any view of the matter, this is not a case where the learned Appellate Tribunal has arrived at its finding without any evidence on record or without any reasons being mentioned for arriving at the decision in the impugned order. Hence, in our considered opinion the impugned order passed by learned Appellate Tribunal cannot be treated as perverse. Accordingly, substantial question of law framed by this Court as regards perversity is also answered against the appellant.
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2024 (11) TMI 845
Imposition of fine and penalty - Rejection of declared value and redetermined the value under Rule 12 of Customs Valuation (Determination of Price of Imported Goods) Rules, 2007 - goods u/s 125 of the Customs Act, 1962 with an option to redeem the same on payment of fine of Rs.3,25,000/- and also imposed penalty of Rs.1,50,000/- under sec. 112(a) ibid for having rendered the goods liable for confiscation under sec. 111 ibid. HELD THAT:- As carefully perused the Appeal we find that the issue involves a non-deliberate contravention of law, due to the exigencies of the business process. No loss of revenue or deliberate intention to evade payment of duty is made out. It is true that any breach of a civil obligation under the Act is a blameworthy conduct by the appellant and can be visited with a penalty as provided for in the Act and Rules. However a distinction has to be drawn between a bona fide-mistake and dishonest non-compliance while imposing a fine and penalty. The goods are not prohibited for import. In M/s. Hindustan Steel Ltd. v. The State of Orissa [ 1969 (8) TMI 31 - SUPREME COURT] held that Whether penalty should be imposed for failure to perform a statutory obligation is a matter of discretion of the authority to be exercised judicially and on a consideration of all the relevant circumstances . Aassessable value of the goods involved in this case has been determined at Rs 6,54,349/-, with a fine of Rs 3,25,000/- and a penalty of Rs 1,50,000/-. Hence feel that the fine and penalty imposed in this case are excessive and needs to be moderated. A fine of Rs.6,500/- (Six Thousand Five hundred only) and a penalty of Rs.1,000/- (One thousand only) would be appropriate. The appeal is disposed of on the said terms.
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2024 (11) TMI 844
Mis-declaration of value - rejection of the assessable value of seized goods - Liability for confiscation of goods and imposition of penalty under Section 111(m) of the Customs Act, 1962 - Differential customs duty in respect of the seized goods, on which altered MRP stickers were found, was proposed to be recovered from the appellant along with the proportionate interest and the appropriate penalty - HELD THAT:- Rule 5 of Central Excise (Determination of Retail Sale Price of Excisable Goods) Rules 2008 has been relied upon by the department while confirming the impugned demand. We observe that the said rule is vis-a-vis a manufacturer who alters or tempers the retail sale price declared on the package of the goods after their removal from the place of manufacture resulting in increase of price and in such situation the said increase price shall be taken as retail sale price of the goods removed. However, since the appellant herein is the importer as different from the manufacturer the said rule is held to has wrongly been invoked. The apparent and admitted fact on record remains is that the MRP sticker found present on the product examined at import shed was true as per the declaration in the import documents. The alteration was found at a later stage when the goods were already reached the domestic market to the retailers through the distributor of the appellant. The only basis that origin of both types of MRP stickers i.e. from two different retailers is same has wrongly be held to be an evidence against appellant to have altered those stickers. Thus, we hold that there is no evidence whatsoever on record that the alleged alteration in the MRP was done by the appellant or with the consent and/or knowledge of the appellant. As already brought to notice that there is no evidence for any flow back of money to the appellant. The onus was upon the department to prove that any money has come back to the appellant. On the contrary, the proprietors of the retailers have denied sending any money back to the appellant. We hold that demand has been confirmed on the basis of presumptions and surmises. We rely upon decision of this Tribunal in the case of Videocon International Ltd [ 2004 (3) TMI 111 - CESTAT, MUMBAI] . Finally keeping in view that the two samples withdrawn for verifying the value from the open market, one invoice in that regard is post GST regime so is invalid and cannot be applied to the instant case and it is not clear that the same piece was sold under invoice produced as evidence by the department. Secondly department has failed to produce any evidence that the goods purchased on those two invoices are same as have been imported by the appellant. The similarity of font size is nothing more than the presumption and assumption on part of department. In light of these observations, we are not in agreement with the findings in the order under challenge. Hence we hold that the goods in the present case are not liable for being confiscated in terms of Section 111 (m) of the Customs Act, 1962. There is no circumstance apparent which warrants the imposition of penalty. Consequently, the order under challenge is hereby set aside and the appeal is hereby allowed.
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2024 (11) TMI 843
Custom Classification - importer imported various consignments of Ground Colemanite (B2O3 40%) Natural Boron Ore - Eligibility for exemption from basic customs duty under Sr. No. 113 of Notification No. 12/2012-Cus and Sr. No. 130 of Notification No. 50/2017-Cus - whether the imported goods falls under Customs Tariff 2528? - HELD THAT:- In the instant case, the Department had drawn the samples and the testreport of the samples is clearly in favour of the appellants. Since the goods imported by the appellant fall under CTH 2528 and since as per the Test Report of the CRCL, New Delhi the imported goods are Boron Ore , both the requirement of the said Sr. No. 113 and 130 of Notification No. 12/2012-Cus, and 50/2017 Cus. respectively are satisfied. Therefore, in our view the goods imported by the appellants are indeed Boron Ores , hence eligible to the duty exemption. There is no stipulation in the said Notifications that if the Boron Ore is imported after removing the foreign particles, impurities and other substances, it would not be entitled to the exemption. The presumption of the department that the exemption to Boron Ores under Sr. No. 113 of Notification No. 12/2012-Cus and Sr. No. 130 of Notification No. 50/2017-Cus. is available only if the Boron ores is imported with the foreign particles impurities and other substances contained in it when extracted from the mine and that the exemption is not available if the Boron ore is imported after removing the foreign particles, impurities and other substances by physical processes, is totally baseless and untenable in law. The revenue clearly erred in reading into the Notification additional words and conditions which are absent in the Notification. Entry Natural Boron Ore in the earlier exemption Notification has been replaced by the entry Boron Ores - With effect from 1st March 2005, the exemption is available to all types of Boron Ores and is not restricted or confined to only Natural Boron Ore. Therefore we are of the considered view that the goods imported by the appellant is Boron Ores and clearly eligible for exemption under notifications as claimed by the appellant in the Bills of Entry. Invoking larger period of limitation under Section 28(4) of the Customs Act 1962 - It is settled law that claiming of a particular classification or notification is matter of belief on the part of the importer and the claiming of a particular classification or exemption notification does not amount to mis-declaration or willful mis-statement or suppression of fact. Issue of eligibility to exemption notification or classification of goods under one heading or another is an issue of law and not a statement of fact. We also find that number of bills of entry were assessed by the proper officer of customs after examination of the goods. The issue whether the goods are Boron ores or not was specifically examined by the officers in the case of number of Bills of Entry and the exemption benefit was extended by the officers after such verification/examination. Accordingly, in our view it cannot be said that there was any willful mis-statement or suppression of fact on appellant s part. The larger period of limitation cannot be applied merely because the department subsequently entrains a different view on the scope of the Notification. We do not consider that the ingredients of Section 28 are satisfied so as to invoke the extended period of limitation in the present case. Hence the demand for the extended period is not sustainable on limitation also apart from merit. Thus, we find that the demand of duty and penal action cannot sustain in the facts of the instant case and all the other confirmation such as confiscation of the goods, fines in lieu thereof, penalties on all the appellants being consequential to demand of duty, are also not sustainable. Appeal allowed.
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Insolvency & Bankruptcy
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2024 (11) TMI 842
Maintainability of appeal - Approval of resolution plan - HELD THAT:- The appellants have preferred an appeal before the NCLAT on the ground that they were not aware about the Corporate Insolvency Resolution Process (CIRP). Therefore, the NCLAT is right in not entertaining the appeal. Appeal dismissed.
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2024 (11) TMI 841
Rejection of application under Section 9 of the Insolvency and Bankruptcy Code, 2016 - no valid Board resolution in favour of the appellant - existing arbitration clause under the agreement - HELD THAT:- This aspect as to whether there was a bona fide pre-existing dispute or not has to be considered by the Tribunal and Appellate Tribunal which has not been dealt with nor the application under Section 9 of the IBC has been rejected on the above ground. Both the impugned orders passed by the NCLAT as also by the NCLT are set aside and the application filed under Section 9 of the IBC needs to be considered afresh on its own merits after hearing learned counsel for the parties and the material on record - Appeal allowed.
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2024 (11) TMI 840
Permission to withdraw application filed u/s 9 of the Insolvency and Bankruptcy Code, 2016 - Appellant challenging the order contends that the Adjudicating Authority committed error in not granting liberty to the Appellant to file a fresh Application - it was held by NCLAT that 'no error has been committed by the Adjudicating Authority in permitting withdrawal of the Application, while denying liberty to file fresh Application, once again.' HELD THAT:- There are no good ground and justification to interfere with the impugned judgment and, hence, the present appeal is dismissed.
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2024 (11) TMI 839
Non-compliance with sub-section 1 of Section 9 of the IB Code - HELD THAT:- Issue notice on the application for stay, returnable on 18th November, 2024. By order dated 26th November, 2020, a company has been impleaded as Additional Corporate Debtor in the pending application under Section 9 (1) of the Insolvency and Bankruptcy Code, 2016 2016. Prima facie, the order is illegal as compliance with sub-section 1 of Section 9 of the IB Code has not been made. The order dated 26th November, 2020 passed by the National Company Law Tribunal, Kochi Bench, Kerala is stayed - the main application under Section 9 of the IB Code can always proceed against the original Corporate Debtor.
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2024 (11) TMI 838
Maintainability of Application seeking reference to Arbitration - existence of debt and default or not - commencement of the Arbitration Proceeding by the Financial Creditor - HELD THAT:- In the present case, the Reply to Section 7 was filed in December 2023, whereas Application under Section 8 has been moved on 07.03.2024. There are substance in the submission of the Appellant that right to move Section 8 Application was forfeited since Corporate Debtor did not choose to file the Application. Application under Section 7 was filed by the Financial Creditor in the Year 2023. The thrust of submission of the Appellant is that Financial Creditor itself has initiated Arbitration Proceeding by unilaterally appointed an Arbitrator on 26.07.2019, hence Section 7 Application ought not to have been proceeded and the Adjudicating Authority ought to have allowed the Application filed by the Corporate Debtor under Section 8 of the Arbitration Act. There is no dispute to the fact that Financial Creditor has unilaterally appointed a sole Arbitrator and sole Arbitrator, however, terminated the Arbitration Proceeding on 26.10.2021 holding that appointment of Arbitrator is contrary to the law laid down by the Hon ble Supreme Court in `Perkins Eastman Architects DPC Anr. Vs. `HSCC (India) Limited [ 2019 (11) TMI 1154 - SUPREME COURT ] reported in Arbitration Application 32/2019. From the law laid down by the Hon ble Supreme Court, it is clear that if an Application under Section 8 of the Arbitration and Conciliation Act, 1996, is filed, the Adjudicating Authority is duty bound to proceed first to decide the Application under Section 7 by recording a satisfaction with regard to their being default or not. The fact that whether Arbitration Proceedings are pending on the date when Section 7 Application is filed or it is sought to be initiated subsequent to filing of Section 7 Application is immaterial. The remedy under Section 7 is a special remedy, keeping the object and purpose of the IBC Code. When it is brought in the notice of the Adjudicating Authority that a Corporate Debtor needs a resolution it having committed default in payment of debt, the Court is obliged to consider the Section 7 Application to find out as to whether there is a debt and default. Allowing the Application under Section 8 filed by the Corporate Debtor amounts to asking the Adjudicating Authority to wait till Arbitration Proceedings are decided which is not in accord with the scheme of the IBC and shall defeat the entire purpose and object of the IBC. Adjudicating Authority in the Impugned Order has rightly rejected Application under Section 8 filed by the Corporate Debtor for referring to the dispute between the parties to the Arbitrator. The Application under Section 8 was filed much subsequent to the filing of the Reply by the Corporate Debtor. In the present case, debt and default is admitted by Corporate Debtor in its One Time Settlement offers issued twice in the Year 2019 and 2022 - no error has been committed by the Adjudicating Authority in rejecting the application filed by the Appellant. There is no merit in the Appeal. The Appeal is dismissed.
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2024 (11) TMI 837
Condonation of delay of 3 days in filing the appeal - Computation of limitation period for filing the appeal - whether the date of limitation is to be counted from the date of e-filing or the date of presentation of appeal? - HELD THAT:- As per the provisions of Section 61 of IBC, any person who is aggrieved against the order passed by the Tribunal has a statutory right to file an appeal before the Appellate Tribunal. Section 61(2) provides statutory period of 30 days for filing such an appeal, however, if the proposed Appellant failed to file the appeal within a period of 30 days for some reason then Section 61(2) proviso gives another period of 15 days to file the appeal provided it satisfy the Appellate Tribunal that there was a sufficient cause for not filing the appeal in time. In no case, the period beyond 15 days can be extended. Since, the appeal has been filed by the Appellant on 30.05.2022 through e-filing and the hard copy was filed on 20.06.2022 though before coming into force the SOP dated 21.10.2022 which has been made effective from 01.11.2022, the SOP dated 21.10.2022 has been withdrawn by SOP dated 24.12.2022 and it has been ordered that limitation is to be counted from the date of e-filing, therefore, in view of the decision of the Hon ble Supreme Court in the case of Somdev Kappor [ 2013 (10) TMI 384 - SUPREME COURT ] where it has been held that the rules which are prevalent on the date when the application is considered are to be applied and not the date when the application is made, the application having been filed by the Appellant has to be considered in terms of SOP dated 24.12.2022 which is in operation at the time when the application for condonation of delay is being considered. The argument raised by Respondent No. 1 not agreed upon, that limitation is to be counted from the date of presentation of appeal at the counter because the issue of computation of limitation was first determined by way of SOP dated 21.10.2022 whereas the appeal was filed much earlier in both ways i.e. e-filing as well as by way of hard copy and the SOP dated 21.10.2022 was superseded/withdrawn by SOP dated 24.12.2022 as per which the limitation is to be counted from the date of e-filing. The objection raised by the Respondent is hereby overruled and since there is a delay of only three days in filing the appeal which has also been duly explained in detail in the application which is supported by an affidavit and the power to condone the said delay in terms of Section 61(2) proviso is with this Tribunal, therefore, the same is hereby condoned on being satisfied that sufficient reason has been assigned by the Appellant. The application is thus allowed.
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2024 (11) TMI 836
Service of notice - notice issued under Section 8 of the Code was not in accordance with law - appellant argued that the Tribunal has committed a patent error in dismissing the application on the ground that the notice was not given to the juristic person but has been addressed to the KMP of the CD - HELD THAT:- Undisputedly, the issue of notice under Section 8 that too on a printed proforma (Form 3) is a sine qua non for the purpose of invoking Section 9 of the Code for filing an application under Section 9 of the Code by the OC. In case, the notice is not issued then the cause of action is not complete and application under section 9 cannot be maintained. In the present case, though the notice has been issued on 31.03.2021 and it is also on Form 3 but the same has been addressed to Mr. Sameer Singh, Director, Bibhuti Bhushan Rath, Chief Financial Officer and Mr. S. Subudhi, Manager Commercial of the Corporate Debtor in their capacity of KMP of the CD but no notice has been addressed to the company (CD), namely, Mesco Kalinga Steel Ltd. through its managing director etc., therefore, the said notice cannot be termed to have been delivered to the CD and therefore, the same cannot be taken to be a notice issued under Section 8 of the Code. In so far as the delivery of notice is concerned, Rule 5 of the Rules prescribes the procedure in which Rule 5(2)(a) provides that notice has to be sent to the Registered office for which various modes have been provided, namely, it can be sent by hand, registered post or speed post with acknowledgement but the notice has to be sent of the CD at its registered office. Rule 5(2)(b) provides for delivery of notice by electronic mail to the KMP of the CD but it does not apply to the present case because no electronic mail has been sent, therefore, it is not required to make any observation in this regard. Form-3 specifically provides for a notice to mention the name of the CD and delivered at the address of the registered office of the corporate debtor. In so far as the decision in the case of Niraj Kumar [ 2023 (1) TMI 1147 - NATIONAL COMPANY LAW APPELLATE TRIBUNAL , PRINCIPAL BENCH , NEW DELHI ] is concerned, that was a case where the dispute was about the nomenclature of the Company because the name of the company was Lex Innova Digital Payments Pvt. Ltd. which was mentioned as LI Digital Payments Pvt. Ltd. and in this regard, the judgement is not on the issue which has been addressed before this Court, therefore, the said judgment is on its own facts and has settled the law which is not applicable to the present case. There are no error in the impugned order which may require any interference by this Court. Hence, the present appeal fails and the same is dismissed.
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FEMA
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2024 (11) TMI 835
Recognition and enforcement of a foreign award - Common petition filed by the Petitioner seeking recognition/enforcement and execution - HELD THAT:- In the wake of the decision in the case of Vedanta Limited [ 2020 (9) TMI 1178 - SUPREME COURT ] where it is clearly pronounced that there is no need to take two separate proceedings i.e. one for deciding the enforceability (recognition) of the award as a deemed decree and then separate proceeding for execution of the deemed decree thereafter, and it is open for the award holder to apply for recognition and execution of a foreign award by common petition. In stage 1, the Court would decide the enforceability of the award as a deemed decree, on satisfying the requirement of Section 47 and 48. Once the Court decides that a foreign award is enforceable as a decree of that Court, it shall proceed to take effective steps for its execution as a deemed decree and then would take recourse to the provision of Order 21 of the Code of Civil Procedure. The reliefs sought in the present Petition has been bifurcated, as prayer clause (a), seek a declaration that the awards in favour of the petitioner are enforceable under part II of the Act of 1996 and a direction is sought to enforce and execute the awards as decree in its favour and against all the Respondents. Prayer clauses (c) and (d) are the reliefs sought under Order XXI of the Code and needless to state that while these reliefs are to be considered, it is open for the judgment debtors to raise the possible objections permissible, while executing the decree. In any case, the Execution Application which is filed will be decided subsequent to the declaration in the petition in terms of prayer clause (a) thereof, as prayers (b), (c) and (d) will be a part of the execution stage. In the wake of the above, Issue No.A is answered by holding that a common petition seeking enforcement and execution as a deemed decree is maintainable in the wake of the law laid down in case of Vedanta Limited (supra) and the issue is answered in favour of the Petitioner, by holding that a common petition can be entertained for enforcement and execution of the three awards. Scope of review u/s 48 of the Arbitration and Conciliation Act, 1996, and whether it is permissible to undertake the review on the merits of the Award - The pro-enforcement bias of the New York Convention, which has found its way in Section 48 has cast the burden on the party/parties objecting to the enforcement instead of party seeking enforcement and it is only when the proof is tendered to the effect, that the parties to the agreement being under some incapacity, or the agreement being invalid under the law to which the parties have subjected it, the enforcement can be refused. The question as to whether a non-parties to the agreement can raise such an objection is also well settled in Gemini Bay Transcription Private Limited (supra). By a bare look at Section 47, which speaks of an arbitral award on differences between persons and specifically, since Section 48 (1) (a) refers only to the parties to the agreement referred to in Section 44 (a), it is concluded that to include non-parties to the agreement, by introducing the word person would run contrary to the express language of Section 48 (1) (a). It is with this intention that the legislature has conferred the right to object to the enforcement of an award at the instance of the party against whom it is invoked and, since, the grounds on which the objection can be raised, are clearly stipulated by the legislature, and speak of incapacity of parties and the agreement to be invalid under the law to which the parties have subjected it, an attempt to bring non-parties within this ground has been described to be trying to fit a square peg in a round hole. It is thus well settled, that Section 48, is hedged with pro-enforcement bias and unless the Respondent No. 1 is able to show that its case falls within Section 48 (1) or 48 (2), the foreign award must be enforced. Arbitration Petition is filed beyond the period of limitation in the wake of the decision of the Apex Court in the case of Government of India Vs. Vedanta Limited [ 2020 (9) TMI 1178 - SUPREME COURT ] - Since the awards, which are sought to be enforced through the present petition are dated 5/04/2006, 24/08/2007 and 27/03/2008, and as per the law laid down in Vedanta Limited (supra) the limitation period to file the petition for enforcement of the foreign award is held to be governed by Article 137 of Schedule to the Limitation Act, the petition filed under Section 48 of the Act of 1996 in March/ April 2018 is hit by the bar of limitation. Since the period consumed from the day of passing of the last award on 27/03/2008, despite filing of petition under Section 34 of the Act of 1996 in India and since it did not amount to an automatic stay on the enforcement/ execution of the award, it was open to the petitioner to file the enforcement petition within time period of 3 years from the expiry of 28 days from each of the award, as under the English Arbitration Act, 1996, time period to challenge the award is 28 days, and the time to enforce the award began to run on expiry of 28 days from passing of the awards. As a sequel to the above, the present petition in my view is barred by limitation and the argument of Mr. Seksaria on behalf of Respondent No. 1, and entertaining the petition would also be hit by the public policy of India, being not to entertain the proceedings barred by the law of limitation. Whether the transaction contemplated under the Master Agreement is violative of public policy of India, making the Awards unenforceable under Section 48 (2) of the Arbitration and Conciliation Act, 1996? - When the admissions coming from the witness of E-City was not controverted by subjecting him to cross-examination, find that the Tribunal derived an inference contrary to what has been deposed by the witness, without affording a chance to explain or clarify the said statement, has definitely resulted into a loss of fair hearing as Mr. Chudasama had unequivocally stated that it was not possible for E-City to have made the remittances without prior approval of Reserve Bank of India, but without going for the cross-examination, the Tribunal has questioned this testimony, expressed doubt and derived at a finding that it was not a mandatory requirement and it was not refused, which definitely has resulted into perversity in its finding. Award which is in violation of principal of natural justice, on the ground of fairness , is contrary to the public policy and hence cannot be enforced. Whether the Petitioner can raise challenge to the de-merger scheme? - The Petitioner had a knowledge of the demerger of Respondent No. 1 when it approached the Supreme Court of New York as an authenticated true copy of the order passed by the Bombay High Court in Company Petition approving the scheme of demerger between Respondent Nos.1 and 3 was annexed alongwith the proceedings and the certified copy of the same was obtained by the Petitioner on 01/11/2007. Since the Petitioner continued to remain silent despite having knowledge of the demerger scheme from 2008, after a gross delay of 11 years, there cannot be an indirect challenge to the scheme of demerger as the orders have already attained finality. Necessity of impleading Respondent Nos. 2 to 4 in the petition seeking enforcement and execution of the Arbitral Awards - Since the Respondent Nos. 2 to 4 who are not signatory to the arbitration agreement are sought to be roped into the present proceedings, which is the post arbitration stage, the burden of establishing the necessity to implead them as parties, is on the petitioner and it is an onerous burden, as they are the parties being proceeded in execution and never had the opportunity to make out a case before the Arbitral Tribunal. They had no opportunity to plead/contradict the pleadings, lead evidence, advance arguments, and therefore, impleading them at this stage, on a broad premise that they have participated in the fraud, so as to divest the Respondent No. 1, a party to the award, of its assets, with an intention to avoid its liability under the awards, is very difficult proposition to be accepted. Respondent Nos. 2 to 4 were never party to the agreement, nor they were part of any transaction, nor they had any opportunity to meet the case against them during the arbitral proceedings. Merely alleging that they had played a fraud is insufficient, as fraud is not to be pleaded and in absence of any evidence tendered to that effect, the bare and unsubstantiated averment cannot be entertained and hence, according to me, no case is made out by the petitioner against the Respondent Nos. 2 to 4, in seeking the relief in the present petition. On the other hand, Chamber Summons taken out by Respondent Nos. 2 to 4 to delete them from the proceedings deserve to be made absolute. Objection of E-City that IMAX Ltd. had merged into IMAX Corporation in January 2002 and, hence, invocation of arbitration by IMAX Ltd. was invalid under the laws of Singapore - As the subject contract entered between the Petitioner and the Respondent No. 1, was a contract contingent upon the approval of Reserve Bank of India and IMAX had acknowledged this fact and agreed for any reasonable restructuring, as long as it did not negatively impact it in a material fashion. Admittedly, no prior approval of Reserve Bank of India was received and the transaction could not be completed. The ICC has awarded the damages on the premise that RBI s approval could have come, but the fact remains that it never came. Since, according to me, as held above, the necessity of RBI s approval was imperative and obtaining such an approval was in tune with the FEMA, in not adhering to its requirement and acting in violation of it s provision, is a matter of public policy, and since in the wake of the statutory provision u/s 48 (2)(b), the enforcement of the award, which is contrary to the public policy shall be refused by the Court, thus rejecting the relief sought in the Petition by the Petitioner, seeking enforcement of the awards. In addition, since there is also violation of fair hearing rule, which is also a part of the fundamental policy of Indian law and the process followed by the Tribunal in arriving at the awards, being in violation of the same, we also express that it is in contravention of the fundamental policy of Indian law. We must clarify that the test for contravention of fundamental policy of Indian law, which is applied by me, in no way has touched the review of the matter on merits of the dispute between the parties. Petition is barred by limitation, since in light of the law laid down by the Apex Court in Vedanta Ltd.(supra), the enforcement and execution of a foreign award shall be governed by Article 137 of the Limitation Act, 1963, and though it is permissible to condone the delay, but in absence of the Petitioner seeking condonation of delay, and rather assertively staking the claim that the Petition is within limitation, I am left with no option, but to dismiss the Petition. Similarly,also expressed that the impleadment of Respondent Nos. 2 to 4 in the Petition is unwarranted and specifically when Mr. Chinoy has set out his intention clear and loud, that the Respondent Nos. 2 to 4 are impleaded, based on an assumption that the assets of E-City are diverted through them. There could be definitely no challenge raised to the demerger schemes, which by this time are settled, with the sanction from the Company Court in the country and they cannot be re-opened. Though it is sought to be argued on behalf of Respondent No. 1 that there was no valid invocation for the reference to the Arbitral Tribunal and an objection is also raised to the composition of the Tribunal, coupled with non-compliance of ICC rules and the ground that proper authority to file claim was not determined is also pressed into service on behalf of E-City, as some of the points on which, the enforcement of the awards is opposed by it, in the wake of the finding rendered above, I have already formed an opinion that the awards do not deserve enforcement and execution in light of the scheme contained in Part II, Chapter I of the Act of 1996 under the New York Convention awards, I have refrained myself from considering the said issues. From the awards passed against Respondent No. 1 and in favour of IMAX, a foreign party, who has not even supplied the goods under the agreement, but which is held entitled for a huge sum of money under the awards and the money will be taken out of this country, without the stipulation of the agreement being complied with and since, this shock the conscious of the Court, the enforcement and execution of awards, as prayed by the Petitioner in the Petition, is declined.
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2024 (11) TMI 834
Penalty for the contravention of Section 3(b) of FEMA, 1999 - under-invoicing to evade customs duty - significance of a statement recorded under Customs Act as relied upon - goods worth Rs. 6,01,82,311 imported as against the declared value of Rs. 1,71,62,087 against 26 Bills of Entry and had paid the differential amount in cash to the supplier in Japan in Indian Rupees in contravention of Sec. 3(b) of FEMA, 1999 Applicability of Customs Act on FEMA Issues - Reliance placed by the respondent Directorate on the proceedings conducted by the DRI under the Customs Act, 1999 - as contended that the intent and purpose of the two enactments are vastly different from each other and the findings of investigation under the first Act cannot be applied to the other - HELD THAT:- Though the case under the FEMA, 1999 may have been based on the findings of the investigations conducted by the DRI under the Customs Act, 1962, having initiated the investigation, the Directorate of Enforcement (ED) has examined the case and concluded enquiries from the point of view of violations under FEMA, 1999, if any. While the focus of investigation under the Customs Act, 1962 was under-invoicing of imports to evade Customs duty, the focus of investigation under FEMA, 1999 was payment of the differential amount between the invoiced value and actual value through illegal channels. The two are different, though related contraventions under the respective Acts. The respondent Directorate independently recorded the statements of the appellant under FEMA, 1999 in which he confirmed his earlier statements before the DRI and explained in detail not only the modus operandi adopted by him for under-invoicing, but also payment of the price differential in cash to the representatives of the overseas suppliers. Other verifications were also carried out, including letters sent to and reply received from the Citibank, Surat confirming the remittances made against imports made by the Shree Laxmi Trading Company, though, admittedly, the investigations in this case primarily relied on the statements of the appellant. No bar on the empowered agency under one Act utilizing the information and findings of the investigations conducted by another law-enforcement agency investigating the case from its own angle under another Act. In fact, it is considered good practice for law enforcement agencies to share information which may be relevance to each other so that appropriate investigation can be undertaken by the other agency on issues undue its domain. As such, no merit in these contentions of the appellant. Competence of the DRI to conduct investigations under the Customs Act, 1962 - The order under challenge in this appeal is an order arising from proceedings which were initiated and concluded under the FEMA, 1999 and not under the Customs Act 1962. Even if there is any substance in the contention that the DRI was not competent to conduct the said investigation under the Custom Act, 1962, so long as the investigations made out a case of violation of FEMA, 1999, the ED would be well within its rights to initiate appropriate enquiries under FEMA, 1999 take the matter to its logical end. As already pointed out, no doubt the action of the ED under FEMA, 1999 was triggered by the information received from the DRI in respect of proceedings under the Customs Act, 1962. However, proceedings under FEMA 1999 were independent proceedings initiated and concluded under the said Act which did not suffer from any illegality for want of jurisdiction since the ED is the designated authority empowered to implement the provisions of FEMA, 1999. Accordingly, there is no reason for me in the current proceedings to enter into the issue of competence of the DRI to investigate violations under the Customs Act, 1962. Reliance placed on statements of the appellant before the DRI and the respondent Directorate (ED) - Statements of the appellant under section 37 of the Act were recorded on 04.04.2011 wherein he confirmed the admissions made in his staements before the DRI. As has been pointed out by the learned adjudicating authority, the statements were recorded over a period of 9 months. Furthermore, they were recorded nearly four years after the DRI had recorded his statements and yet the appellant Shri Jariwala, confirmed the facts stated to the officers of the DRI during the investigation under Customs Act. Adjudicating authority has further pointed out that the statements had not been retracted even upto the time of passing the adjudication order. Keeping in view the time horizon over which the statements were recorded the consistency in the admissions made before the two authorities, allegation of threat and duress are clearly an afterthought on the part of the appellant to escape liability under FEMA, 1999. Show Cause Notice (SCN) was vague - There was no proposal in the SCN to impose penalty on the appellant under any section of FEMA, 1999 - SCN, the attached Complaint and the documents annexed thereto as Annexure-A , when read together as one, convey very specific allegations against the appellant as well as the material being relied upon in support of the said allegations. Nothing vague about the same as alleged by the appellant. Accordingly, reject these contentions of the appellants. SCN was issued by the Special Director of Enforcement whereas the case was actually adjudicated upon by the Additional Director who is junior in the hierarchy to the Special Director - SCN in this case was issued on 28.12.2011 and the impugned order in pursuance thereof was passed on 30.01.2013. Thus, it is evident that there was a considerable time gap between the date of issue of the notice and the date of passing the adjudication order. As under Section 16 of FEMA, 1999 the Central Government is authorised to appoint as many officers as it may think fit as adjudicating authority. In all likelihood, in the interim period between the date of issue of the notice and the passing of the impugned order, the jurisdiction of the adjudicating authority changed. Once a notice has been issued and the proceedings have commenced, the same shall not come to an abrupt end upon change of the incumbency in the post of the designated adjudicating officer and the proceedings can be continued by the new incumbent appointed as adjudicating authority and continuation of the proceedings already initiated and ongoing would not necessitate issue of a fresh SCN by the new incumbent. No doubt, in the interest of natural justice, the new incumbent would be expected to provide another opportunity of being heard to the affected person before passing an order based on the material already brought on record by his predecessor. But the law does not mandate that he should issue a fresh SCN and re- initiate the entire process. The process already initiated for adjudication can be continued until the final order is passed regardless of any change in incumbency. Nothing has been brought on record by the appellant to indicate how the passing of order by a different officer than the one who originally issued the SCN has caused any prejudice to the appellant. Violation of Sub-rule (1) and (3) of Rule 4 of the said rules which vitiated the entire proceedings - As prior to the issue of SCN, the adjudicating authority had already discussed the factual background of the case and come to a prima facie conclusion that M/s Shree Lakshmi Trading Company had contravened the provisions of FEMA, 1999 for which it prima facie appeared to be liable for penalty under Section 13. Since nothing was heard from the side of the appellant in response to the SCN, no new light was thrown upon the subject from the appellant s side. Therefore, there was no reason for any change in the opinion formed by the authority and the authority issued notices of hearing in the matter. Considering the above sequence of events, no illegality in the action of the learned adjudicating authority. Determination of sum involved in the contravention which is the basis of imposition of penalty u/s 13 of FEMA, 1999 - A very specific admission was made in the present case by the appellant in his statements that value declared for import $ 5 to $ 8 per kg per metallic prevailing rate of $ 30 -37 per kg for metallic yarn $ 23-25 per kg for metallic film. The above statement was confirmed in subsequent statements before the DRI as well as ED, although, it is now denied by the appellant. The veracity of the statement has already been discussed in para 56-58 above. On the basis of the above differential in the declared rate and the actual rate, it was held that the appellants had actually imported goods of value Rs. 6,01,82,311/- as against the declared value of Rs. 1,71,62,087/- against 26 Bill of Entry. He further admitted in his statement that he had paid the differential which works out to Rs. 4, 30,20,224/- to the representatives of the suppliers in India in cash in Indian Rupees while imposing penalty, the Ld. Adjudicating Authority has held the said amount to be the sum involved . Having considered the above facts carefully, I do not find any discrepancies in the same. Nor has the appellant provided any alternate working of the sum involved backed by necessary evidence. DRI received certain invoices showing the current value of goods supplied to that firm. The appellant, in the present case, has admitted that his firm was importing goods at the same prices. DRI also recovered insurance policy document disclosing the current value in respect of another importer. These facts, corroborate the facts stated by the appellant Sh. Jariwala in his statements. No merit in the contentions of the appellant wherein he has questioned the imposition of the penalty on the ground that the sum involved has not been arrived at correctly by the respondent. Appeal dismissed.
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PMLA
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2024 (11) TMI 833
Money Laundering - attachment of property which were acquired prior to the scheduled offence - connection with the proceeds of crime or not - jurisdiction of impugned PAO on account of non-compliance of mandatory provisions of Section 5 (1) i.e. reason to believe - HELD THAT:- The concept of the property of equivalent value was introduced with respect to the aforementioned properties. The amendment enabled the authorities to go after any other property of a person of equivalent value. In 2019, the scope of the phrase proceeds of crime was further expanded so as to include other properties which were not directly or indirectly the proceeds of crime, but were held abroad, to be liable to attachment. In 2019, the explanation has been added so as to give a wider scope to the authorities. From the objects and reasons of the 2002 Act , it becomes evident that the money laundering posed a serious threat not only to the financial system of the countries but also to their integrity and sovereignty. The 2002 Act was enacted to prevent money laundering and connected activities. The act of money laundering is a multi-layered, complex and complicated diversion of the property, which is required to be prevented. Consequently, the definition of proceeds of crime has undergone transformative changes from time to time so as to include all the complex acts involved in the offence of money laundering. It is not disputed that the Supreme Court in Vijay Madanlal Chaudhary s case [ 2022 (7) TMI 1316 - SUPREME COURT] was examining the scope of the 2002 Act including definition of phrase proceeds of crime . The submission put forth by the learned counsel that the phrase or the value of any such property is superfluous was rejected by the Court and it was held that the definition of proceeds of crime is wide enough to not only include to the property derived or obtained as a result of criminal activity related to a schedule offence but also any other property of equivalent value. While interpreting a statutory provision, it is the bounden buty of the Courts to interpret it in manner so that each word used by the statute conveys a meaning it was assigned by the Legislature. The words used in statute are of utmost significance. The Court cannot widen or restrict the provisions on its own whims and fancies. When a statute s language is clear and unambiguous, the general rule of interpretation of statute is to read the provision as a whole and the Court must adhere strictly to the ordinary, plain meaning of the words used. The words in a statute are used precisely, not loosely, and efforts must be made to interpret them in a literal manner to give effect to the objective of the Act. This approach of interpretation is based on the idea that the legislature s intent is best reflected in the exact words of the statute. Alleged failure to record reasons to believe - HELD THAT:- In the considered opinion of the Court, the PAO has fulfilled the mandatory requirement of recording the reasons to believe . This is only a provisional attachment order, which is subject to adjudication and confirmation within a period of 180 days by the competent authority in which opportunity has been provided to the petitioner. The reliance placed on para 287 of Vijay Madanlal Chaudhary s case is not appropriate because it has been observed that the authorized officer can order provisional attachment only upon recording satisfaction regarding two requirements. Specifically, the officer has to form his opinion and provide written reasons for such belief, which must be based on material in his possession rather than on mere assumptions. In this case, the electronic record has been seized and there was sufficient material apart from fake e-Rawana bills to substantiate this satisfaction. Evaluation of fulfillment of first proviso to section 5(1) in light of the challenge - HELD THAT:- It is evident that forwarding of a report to a Magistrate under Section 173 of Cr.P.C. is not sine qua non for ordering provisional attachment. Moreover, such report is required to be filed against a person who is in possession of proceeds of crime . The petitioner in CWP-22688-2024, is an accused in FIR No.21, dated 19.01.2024, registered under Section 120B, 420 IPC and Section 15 of the Environmental Protection Act, 1986. In the subsequent FIR that has been registered pursuant to the search carried out by the Enforcement Directorate substantial material has been found to prima facie establish not only the offence of money laundering but also large scale illegal mining of boulders, gravel, sand on the basis of fake, invalid e-Rawana invoices. There is material on record to show that the mined material has been transferred without e-Rawana invoices. There is a huge discrepancy in the minerals mined and sold. This FIR has been filed on the complaint filed by a person authorized to investigate the offences mentioned in the schedule. Hence, requirement of first proviso to Section 5 (1) stands fulfilled. Significance of the expression 'immediately' and its interpretation - HELD THAT:- It is evident that in Rao Mahmood Ahmed Khan Vs. Ranbir Singh, [ 1995 (2) TMI 359 - SUPREME COURT] , the word immediately and forthwith were treated as synonyms. Moreover, if failure to follow the statutory provision provides no express consequences, the procedural requirement shall be considered to be directory . Disputed questins of fact - HELD THAT:- Vehicles carrying mined material have not been provided with the GPS system and mining has been carried out beyond the permissible depth and National Green Tribunal has imposed penalty of Rs. 2.5 crore, Rs. 4.2 crore and Rs. 12 crore on M/s Delhi Royalty Company, M/s Development Strategies India Pvt. Ltd. and M/s Mubarikpur Royalty Company, respectively. Moreover, it is stated that against the order dated 18.11.2022, the matter is pending before the Supreme Court. In this situation, it would not be appropriate to quash the PAO particularly when an appropriate order after considering all aspects is yet to be passed by the adjudicating authority as provided under Section 8 of 2002 Act . Availability of an efficacious alternative remedy - HELD THAT:- The question of whether the writ petition can be entertained is one that the Court must consider based on the facts of each case. Availability of alternate statutory remedy is one of the grounds that dissuade the Constitutional Court to interfere. The petitioner has filed the writ petition based upon the interpretation given by a Division Bench in Seema Garg s Case [ 2020 (3) TMI 460 - PUNJAB HARYANA HIGH COURT] hence, this Court has considered it appropriate to entertain the writ petition and to adjudicate. The writ petitions lack merit and hence dismissed.
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2024 (11) TMI 832
Penalty u/s 26 of the Prevention of Money Laundering Act, 2002 - It was alleged that the appellant bank failed to make a report of cash transactions of high value or there was delay in making report, the heavy penalty of Rs. 25,70,000/- has been imposed - violation of Section 12(1)(b) of the Act of 2002 read with Rule 3(1)(A), 3(1)(B), 7(2) and 7(4) of the Rules of 2005 - HELD THAT:- Section 12(1)(b) requires reporting entity to furnish information of transactions referred to in clause (a) of sub section (1) of Section 12 of PMLA to the Director FIU India within such time as may be prescribed. From plain reading and careful consideration of the language employed in section 12(1)(b), it becomes clear that the allegation made against the appellant was of delay in furnishing information of transactions referred to in Section 12(1)(a) of PMLA within such time as may be prescribed and it was even for non-reporting. Rule 8 prescribes the time by which information in respect of transactions is to be furnished. Thus the appellant was enjoined to furnish the information in respect of transactions every 15th day of succeeding month to the respondent. Section 12(1)(b) read with rule 3,7 and 8 enjoined the appellant to furnish the information in respect of transactions otherwise it was to attract penalty. The penalty is for each failure and in our considered opinion, the phrase each failure used in Section 13 refers to failure to furnish information or delay in furnishing the information in respect of each transaction which would be taken as each failure for imposition of penalty. The argument of the learned counsel for the appellant cannot be accepted that despite contravention of the provisions of the Act and Rules, the penalty should not have been imposed on the appellant rather it should have been a warning. The argument aforesaid could not be accepted because if the contraventions are ignored and only warning given in a non-deserving case, then would be taken as a course and in that case there would be no sanctity of the provisions of the Act and nobody would make compliances. The imposition of the penalty is to ensure firm compliances of the provisions of the Act and the rules made thereunder. If the facts of this case are taken into consideration, the appellants have admitted their error though said to be inadvertent. In the light of the judgment of the Apex Court in the case of Shriram Mutual Fund [ 2006 (5) TMI 191 - SUPREME COURT ], the penalty for the failure of the appellant to make report of the CTRs or delay was rightly imposed. It is, however, urged that the minimum penalty is of Rs. 10,000/- as against 16 CTRs, penalty of Rs. 50,000/- has been imposed though for other 167 defaults, the minimum penalty of Rs. 10,000/- has been imposed. We do not find any substance in the argument for the reason that while adjudicating the appeal, this Tribunal has limited jurisdiction in causing interference on the imposition of penalty unless it is shown to be disproportionate. The case in hand is not of that nature because the appellant bank remained reckoned defaulter in making report of cash transaction for quite long and the report was made only when it was informed by the RBI to FIU. It was, however, urged that the appellant bank made the report but it was not accepted on computer. There was continuous contravention of the provisions of the Act and the Rules. It was thus rightly taken for imposition of appropriate punishment which on the facts cannot be said to be disproportionate. There are no merit in the appeal and accordingly the same is dismissed.
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2024 (11) TMI 831
Seeking lapse of the order of attachment in reference to Section 5(1) and (3) of the Act of 2002 - Legality of the attachment order under the Prevention of Money Laundering Act, 2002 - criminal conspiracy, cheating, and forgery in relation to the Slum Rehabilitation Scheme - Section 26 of the Prevention of Money Laundering Act, 2002 - HELD THAT:- The appellant has given reference of relevant dates which started with issuance of Provisional Attachment Order on 18.06.2021 followed by Show Cause Notice by the Adjudicating Authority on 04.08.2021. The reply to it was filed on 16.09.2021. The pleadings were then completed on 23.09.2021 and thereupon the matter was kept for final hearing. It is true that the Adjudicating Authority needs to pass an order to terminate the proceedings within 180 days otherwise the attachment would lapse but there was extra-ordinary situation during the period Covid-19 and, therefore, the Apex Court in the case of Prakash Corporates v. Dee Vee Projects Limited [ 2022 (2) TMI 1268 - SUPREME COURT ] has provided safeguard to the litigants and others for termination of proceedings and illustratively reference of few provisions like Arbitration Act was given. It was with clarity that it would apply to other statutes also - the argument of the appellant to lapse the proceedings despite the period for termination of proceedings which was excluded from 15.03.2020 till 20.08.2022, cannot be accepted. If the aforesaid period is excluded, left out period in this case is hardly of 26 days i.e. less than 180 days. Thus, even the subsequent legal issue raised by the appellant is not worth acceptance and is rejected summarily. Accordingly, appeal fails and is dismissed.
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Service Tax
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2024 (11) TMI 830
Recovery of CENVAT Credit erroneously refunded alongwith interest - penalty for ineligible availment of CENVAT Credit - HELD THAT:- It is stated at the bar pursuant to the direction issued by the High Court, the refund amount has been released to the respondent. No reason to entertain this Special Leave Petition. Hence, the Special Leave Petition is dismissed.
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2024 (11) TMI 829
Order travelled far beyond the show cause notice - Service tax demand along with interest and equal amount as penalty u/s 78 of the Finance Act - there was no proposal to demand service tax under works contract service in the SCN and Demand was proposed under commercial and industrial construction service HELD THAT:- The undisputed facts are that the appellant had entered into contracts for providing services along with the materials, and therefore all their contracts were in the nature of works contracts. This fact was also noted in the Tribunal's order in the first round of litigation. The impugned order also does not dispute this fact. It is for this reason, that in the impugned order the Commissioner set aside the demand for the period prior to 1st June, 2007 following the judgement of the Supreme Court in Larsen Toubro Ltd. [ 2015 (8) TMI 749 - SUPREME COURT ] Commissioner confirmed the demand for the period after 1st June, 2007 under the head works contract service . There was no proposal to demand tax in the SCN under this head, nor has the appellant been given an opportunity to defend itself against tax liability under this head. Therefore, as the impugned order clearly travelled beyond the SCN it needs to be set aside on this ground alone. It is a well-settled legal position that any order which travels beyond the scope of the show cause notice cannot be sustained. Appeal allowed.
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Central Excise
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2024 (11) TMI 828
Area based exemption - condition of commencement of commercial production not later than 31-3-2010 - Benefit of Notification No. 50/2003-C.E., dated 10-6-2003 - It was held by CESTAT that 'The commercial production by the clinker plant by this new cement unit thus does not mean commercial production by the cement unit which is meant/required to commercially produce cement. Further commercial production of clinker by the clinker plant of this cement unit is not germane to the issue also because clinker figures in the negative list (Annexure-I referred to earlier) and therefore provisions of Notification No. 50/2003 do not even apply to the commercial production by clinker plant of new cement unit.' - HELD THAT:- It is not required to interfere in the matter. The Civil Appeals are dismissed.
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2024 (11) TMI 827
Condonation of delay of 157 days in filing this Special Leave Petition - Disallowance of CENVAT Credit - capital goods on which the CENVAT credit was availed were used to manufacture only exempted goods (electricity) - Rule 6(4) of the CENVAT Credit Rules, 2004 - Suppression of facts or not - time limitation - Jurisdiction of the Revenue authority when the show cause notice was issued - it was held by High Court that 'The impugned order set aside' - HELD THAT:- Though there is a delay of 157 days in filing this Special Leave Petition, learned senior counsel for the petitioner is heard. It is not required to interfere in the matter - The Special Leave Petition is hence, dismissed on the ground of delay as well as on merits.
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