TMI Tax Updates - e-Newsletter
November 21, 2019

Case Laws in this Newsletter:

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

Articles

1. CLASSIFICATION OF REACTOR USED IN HAND PUMP FOR WATER DISINFECTION

   By: DR.MARIAPPAN GOVINDARAJAN

News

1. Streamlining of GST

2. India - E29 are Beacons of Growth in a Slowing World; E29 gateway for Indian Products to Europe: Piyush Goyal

3. Industrial Corridors

4. Export-Import of Agricultural Products

5. Tax Exemptions to Indian Exporters

6. Facilities for New Start-Ups

7. Infusion of capital to PSBs

8. Strategic disinvestment of State-owned companies

Notifications

Companies Law

1. G.S.R. 859 (E) - dated 19-11-2019 - Co. Law

Corrigendum - Notification No. G.S.R. 776(E), dated the 11th October, 2019

GST - States

2. EXN-F(10)-20/2019 - dated 14-11-2019 - Himachal Pradesh SGST

CORRIGENDUM - Various Notifictions.

3. 50/2019-State Tax - dated 14-11-2019 - Himachal Pradesh SGST

Amendment in the Notification of the Government of Himachal Pradesh No. 21/2019- State Tax, dated the 30th May, 2019.

4. 49/2019-State Tax - dated 1-11-2019 - Himachal Pradesh SGST

The Himachal Pradesh Goods and Services Tax (Sixth Amendment) Rules, 2019.

5. 47/2019-State Tax - dated 1-11-2019 - Himachal Pradesh SGST

Notify the registered persons whose aggregate turnover in a financial year does not exceed two crore rupees and who have not furnished the annual return.

6. 46/2019-State Tax - dated 1-11-2019 - Himachal Pradesh SGST

Extends the time limit for furnishing the details of outward supplies in FORM GSTR-1 registered persons having aggregate turnover of more than 1.5 crore rupees.

7. 45/2019-State Tax - dated 1-11-2019 - Himachal Pradesh SGST

Notify the registered persons having aggregate turnover of up to 1.5 crore rupees in the special procedure as mentioned below for furnishing the details of outward supply of goods or services.

8. 44/2019-State Tax - dated 1-11-2019 - Himachal Pradesh SGST

Payment of taxes for discharge of tax liability as per FORM GSTR-3B.

Circulars / Instructions / Orders

SEBI

1. CIR/HO/MIRSD/DOP/CIR/P/2019/139 - dated 19-11-2019

Collection and reporting of margins by Trading Member (TM) /Clearing Member (CM) in Cash Segment

DGFT

2. 44/2015-2020 - dated 20-11-2019

Enlistment under Appendix 2E to issue Certificate of Origin (Non-Preferential) and change of name from FTAPCCI to FTCCI

3. Trade Notice No. 39/2019-20 - dated 19-11-2019

Incorrect Data in certain IECs - corrective action required from exporters

Highlights / Catch Notes

GST

• Avoid Arresting Accountants or Advocates Without Corroborative Evidence Linking Them to Offenses They Didn't Benefit From.

  Case-Laws - HC : Arrest of Chartered Accountant or Advocates who had filed returns or otherwise assisted in business but are not beneficiary or part of fraud merely on the basis of statement without any corroborative evidence linking the professional with alleged offence should be avoided.
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• Manufacturers Paying Taxes Shouldn't Be Arrested Without Evidence of Major Evasion Before Tax Liability is Assessed.

  Case-Laws - HC : The persons who are having established manufacturing units and paying good amount of direct or indirect taxes; persons against whom there is no documentary or otherwise concrete evidences to establish direct involvement in the evasion of huge amounts of tax, should not be arrested prior to determination of liability and imposition of penalty
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Income Tax

• Application for 'Nil' Tax Deduction u/s 197 and Revision Request u/s 264 Sent Back for Review.

  Case-Laws - HC : Application for ‘Nil’ rate of tax deduction certificates u/s 197 - the application for revision u/s 264 of the Act would be in the nature of an Appeal from Caesar to Caesar - Matter restored before AO
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• Assessment Reopened u/s 147 for Failure to Scrutinize Investment in Share Capital by Pranetta Industries Ltd.

  Case-Laws - HC : Reopening of assessment u/s 147 - AO while making the regular assessment did not undertake the scrutiny that he should have undertaken in respect of the investment into the share capital of the petitioner by Pranetta Industries Ltd. Though the identity of the investor Pranetta Industries Ltd. stood established, neither the financial capacity/ creditworthiness of the said investor companies, nor the genuineness of the transaction was examined. - Reopening sustained.
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• Capital Gain Calculation: Agreement vs. Transfer Date Impact on Stamp Duty Valuation in Fiscal Years 2009-10 & 2011-12.

  Case-Laws - AT : Computation of capital gain - relevant date for stamp value - agreement to sell entered during the FY 2009-10 and got registered - Actual transfer took place during FY 2011-12 - The stamp duty valuation authority would not object payment of higher stamp duty at the end of the vendees. - No addition could be made.
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• Land Sale Taxation: No Need to Prove Agricultural Use for Tax Benefits, Focus on Land's Nature.

  Case-Laws - AT : Nature of land sold - sale of agricultural land or not - it is nowhere necessary for an assessee to prove carrying out actual agricultural activity of the land
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• Government Agency in Jamnagar Qualifies for Tax Exemptions under Income Tax Act Section 11 for Charitable Activities.

  Case-Laws - AT : Benefit of exemptions u/s.11 - the assessee is a Government agency and is engaged in co-ordinate and planned development of Jamnagar region which is pre-dominant object of the authority - general public utility services and amenities provided by such authorities would fall within the meaning of ‘charitable purposes’ as contemplated u/s 2(15)
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• Section 263 Revision Overturned: Essential Expenses for Habitable Flat Justify Exemption Claim u/s 54F.

  Case-Laws - AT : Revision u/s 263 - claim of exemption u/s.54F - The expenses are necessary to suitably live in that particular flat. These expenses are necessary for habitation in that particular flat. They do not pertain to any decoration item rather they are all essential to make a flat fit for living. - Exemption was rightly allowed - Revision order is not correct.
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• Assessing Officer Fails to Prove Suppressed Sales; No Income Addition for Assessee's Lower Yield.

  Case-Laws - AT : Lower yield declared by the assessee - excessive consumption of electricity / power / furnace - variation in consumption of electricity, furnace oil vis-à-vis production of finished goods - AO has not brought on record any evidence stating lower or suppression of sales by the assessee - No addition can be made.
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• Assessment Reopening Valid u/s 147 for Deemed Dividends if AO Receives Tangible Information on Income Escapement.

  Case-Laws - AT : Reopening of assessment u/s 147 - Deemed dividend - AO might have received aforesaid tangible information as to escapement of income chargeable to tax from records itself before it but the same is valid for invocation of provisions of Section 147 as there is no estoppel against law, more-so provisions of Section 147 are invoked within four years from the end of assessment year and proviso to Section 147 is not applicable .
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• Additional CIT Criticized for Approving u/s 153A Without Independent Judgment, Citing Time Constraints as a Reason.

  Case-Laws - AT : Assessment u/s 153A - mechanically Approval - the Additional CIT has been taking excuse of limitation and has chosen to grant approval without application of his own mind but on the undertaking of the AO - In our view such a practice is required to be deprecated and we deprecate the same.
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• Unaccounted Sales: No Extra Additions if Declared Income Exceeds Justified Amount Per Section 145(3).

  Case-Laws - AT : Rejecting the books of accounts u/s 145(3) - unaccounted sales - When the income voluntarily offered to tax on the basis of material on record is far more than income, strictly speaking, legally justified on that basis, there cannot be any good reasons to make separate additions on the basis of the same material.
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• Assessee with multiple houses denied Section 54F exemption; deemed owner for tax purposes.

  Case-Laws - AT : Deduction u/s 54F - assessee is having more than one house - for all practical purposes, the assessee is the owner of the said houses, and therefore, is not entitled to claim exemption u/s.54F - the exemption u/s.54F has been rightly denied by the AO.
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Customs

• Settlement Commission's Penalty on Petitioner Upheld; No Error Found in Decision Record.

  Case-Laws - HC : Imposition of penalty by the Settlement Commission - It cannot be said that the decision, of the Settlement Commission, to impose penalty on the petitioner, suffers from any error apparent on the face of the record.
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• Testing Authority Finds Samples Not Copper, Lacks Evidence to Classify as Brass; Non-Conformity Alone Doesn't Justify Reclassification.

  Case-Laws - AT : While the testing authority did opine that the samples were ‘other than copper residue’, we find no elaboration commencing therefrom which could lead to the conclusion that the goods are ‘brass’. Mere conclusion of non-conformity to declared declaration does not sanction the adoption of an alternative classification which has not even been proposed.
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DGFT

• DGFT Updates: FTAPCCI Renamed to FTCCI; Changes in Appendix 2E for Non-Preferential Certificates of Origin Issuance.

  Circulars : Enlistment under Appendix 2E to issue Certificate of Origin (Non-Preferential) and change of name from FTAPCCI to FTCCI
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• Exporters Must Correct IEC Data Errors as Directed by DGFT to Ensure Compliance and Avoid Trade Issues.

  Circulars : Incorrect Data in certain IECs - corrective action required from exporters
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Indian Laws

• Bank Claims Former Directors' Guarantee Bonds Still Valid Despite New Personal Guarantees and Property Mortgage by New Directors.

  Case-Laws - HC : Mortgage of property - execution of guarantee deeds of the retired director - There is no occasion for the Bank to plead that although the new directors and surety executed the personal guarantee bonds dated 22nd July, 1995 and an immovable property worth much more than the value of loan/limits was given in mortgage, still earlier personal guarantee bonds executed by two erstwhile Directors and Petitioner No.2 are still in force
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• Courts Warn Against Misuse of Cheque Dishonor Laws: Legitimate Claims Only u/s 138 of Negotiable Instruments Act.

  Case-Laws - HC : Dishonor of Cheque - section 138 of NI Act - It is necessary to note that one who comes to the court, must come with clean hands. More often than not, process of the Court is being abused. Unscrupulous persons from all walks of life find the court-process a convenient lever to retain the illegal-gains indefinitely.
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SEBI

• New Rules for Margin Collection and Reporting by Trading and Clearing Members in Cash Segment to Ensure Market Integrity.

  Circulars : Collection and reporting of margins by Trading Member (TM) /Clearing Member (CM) in Cash Segment
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Central Excise

• Assessees entitled to interest on CENVAT Credit refund from original deposit date if reversed under coercion, not voluntarily.

  Case-Laws - AT : Interest on refund - Time limitation - reversal of CENVAT Credit by coercion - if the amount is not voluntarily paid by the assessee and later on the case is decided in favour of the assessee, then he is entitled to interest from the date of deposit made by the assessee.
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• Settlement Commission's Powers Don't Make It an Adjudicating Authority in Tax Matters.

  Case-Laws - HC : The conferment, on the Settlement Commission, of the “powers of a Customs officer”, or the “powers of the Central Excise Officer” would not, ipso facto, result in the Settlement Commission metamorphosing into an adjudicating authority. - The Settlement Commission does not, by the conferment of such power, become a parallel adjudicating authority, adjudicating the Show Cause Notice
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Case Laws:

• GST

• 2019 (11) TMI 944
  Release of detained goods - Section 129 of the CGST/SGST Act - the reason for detention was that the transportation of the goods was not accompanied by valid documents as prescribed under the GST Act - HELD THAT:- The detention is held to be prima facie justified, the writ petition is disposed, by directing the respondent to release the goods and the vehicle to the petitioner on the petitioner furnishing a bank guarantee for the tax and penalty amount determined by the respondent in Ext.P2 notice. Petition disposed off.

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• 2019 (11) TMI 943
  Release of detained goods - detention on the ground that the value quoted in the invoice that accompanied the goods was low when compared to the Maximum Retail Price (MRP) of the goods - It is the contention of the learned counsel for the petitioner that the reasons given in Ext.P2 order of detention do not justify a detention of the goods under Section 129 or under Section 130, and therefore, a direction ought to be issued to the respondents to immediately release the goods belonging to the petitioner. HELD THAT:- None of the reasons stated in Ext.P2 order justify detention of the goods. There is no provision under the GST Act which mandates that the goods shall not be sold at prices below the MRP declared thereon. Further, there is nothing in Ext.P2 order that shows that, on account of the alleged wrong classification of the goods there was any difference in the rate of tax that was adopted by the assessee - In my view when the statutory scheme of the GST Act is such as to facilitate a free movement of goods, after self assessment by the assessees concerned, the respondents cannot resort to an arbitrary and statutorily unwarranted detention of goods in the course of transportation. The respondents are directed to forthwith release the goods belonging to the petitioner on the petitioner producing a copy of this judgment before the said authority - petition allowed.

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• 2019 (11) TMI 942
  Refund of IGST - dummy owners - power to arrest - pleaded case of the Petitioners is that Petitioner No. 1 as an Advocate, on behalf of four exporters who had retracted their statements made at the first instance filed Writ Petitions before Delhi High Court against DGGI - Petitioners contends that it is case of vendetta and there is no evidence against Petitioners to connect them with fraud if any committed by alleged four dummy exporters or alleged owner Ramesh Wadhera - arrest during investigation - HELD THAT:- It is consistent opinion of courts that power of arrest should be resorted in exceptional circumstances and with full circumspection. The maximum sentence prescribed under GST is 5 years and it is directly linked with quantum of evasion of tax. Prosecution of any person is directly linked with determination of evasion of tax because if there is no evasion of tax, there cannot be criminal liability - The determination of tax liability does not fall within realm of criminal courts whereas liability of tax and penalty is determined by adjudicating authority under GST Act which is subject to challenge before Tribunal and Courts. To record statement under CGST Act, 2017 summons are served and if any person complies with summons, the mandate of Section 41 and 41A of Criminal Procedure Code should be taken care of. The provisions of CGST Act are not subject to exclusion of Criminal Procedure Code rather Section 67(10) as well Section 69(3) borrow provisions of Code of Criminal Procedure, 1973. As per Section 41(1)(b) as amended by Code of Criminal Procedure (Amendment) Act, 2008 applicable w.e.f. 01.11.2010, a person may be arrested if he has committed a cognizable offence punishable with imprisonment which may be less than 7 year or may extent to 7 year if conditions specified therein are satisfied. As per Section 41A of Cr.P.C., a notice shall be issued to the person against whom complaint has been made or creditable information has been received or reasonable suspicion exists and he shall not be arrested if he complies with the notice. The persons who are having established manufacturing units and paying good amount of direct or indirect taxes; persons against whom there is no documentary or otherwise concrete evidences to establish direct involvement in the evasion of huge amounts of tax, should not be arrested prior to determination of liability and imposition of penalty - Similarly, arrest of Chartered Accountant or Advocates who had filed returns or otherwise assisted in business but are not beneficiary or part of fraud merely on the basis of statement without any corroborative evidence linking the professional with alleged offence should be avoided. It is well known that if top brass of a running concern is arrested, there are all possibilities of closure of unit which results into unemployment and wastage of precious natural resources. It is case of some mis-understanding between Petitioners and officers of Respondent/DGGI who now want to implicate Petitioner and his family members. The investigation is going on for last couple of months and Respondents are unable to produce any evidence showing direct involvement of Petitioners. The Respondent did not record statement while both the Petitioners were in judicial custody for a week in FIR dated 15.8.2019 lodged at the instance of DGGI, and till date no statement of Petitioner No. 2 has been recorded though he is in judicial custody since 13.9.2019. The Respondent-DGGI handed over Petitioner No. 2 to DRI after recording his statement and there is nothing on record to show that he made any confession - Intention of Respondents seems only to arrest Petitioner No. 1, one way or the other, which is evident from the fact that Petitioner No. 2 was handed over to DRI without concluding investigation at least qua petitioner no.2 and there is nothing contained in different affidavits of Respondent, filed before this Court, indicating that involvement of Petitioner No. 2 is apparent from his statements. The Petitioner No. 2 was handed over to DRI on 12.9.2019 and since 13.9.2019 he is in judicial custody, hence no direction is warranted qua him, however qua Petitioner No. 1 (Akhil Krishan Maggu), we deem it appropriate to direct to Respondent not to take him in custody without prior approval of this court - Petition disposed off.

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• 2019 (11) TMI 941
  Validity of Form GST TRAN-2 - HELD THAT:- View expressed by a learned judge of Karnataka High Court in Yokogawa India Limited vs. Union of India [ 2019 (5) TMI 170 - KARNATAKA HIGH COURT] is that revision of contents in such form cannot be denied on technicality. He hands up copy of letter dated 26th September, 2019 to demonstrate service upon Commissioner of CGST and Central Excise, Haldia Commissionarate. The letter is handed back. Petitioner is directed to cause service or demonstrate that such is not a requirement - List on 8th November, 2019.

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• Income Tax

• 2019 (11) TMI 940
  Condonation of delay - delay of 1754 days - HELD THAT:- The appellant(s) had asserted that they had no knowledge about passing of order dated 29.12.2003, until they were confronted with the auction notices in June 2008 issued by the competent authority. Soon thereafter, the appellant(s) filed appeal(s) accompanied by the subject application(s) on 19.07.2008. Notably, the respondent(s) did not expressly refute the stand taken by the appellant(s) - that they had no knowledge about passing of order dated 29.12.2003 until June, 2008. Unless that fact was to be refuted, the question of disbelieving the stand taken by the appellant(s) on affidavit, cannot arise and for which reason, the High Court should have shown indulgence to the appellant(s) by condoning the delay in filing the concerned appeal(s). This aspect has been glossed over by the High Court. Accordingly, these appeals are allowed. We set aside the impugned order of the High Court and relegate the parties before the High Court, by allowing the civil application(s) filed by the appellant(s) for condonation of delay in filing the concerned appeal.

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• 2019 (11) TMI 939
  Application for Nil rate of tax deduction certificates u/s 197 - assessee-in-default u/s 201(1) and 201(1A) - HELD THAT:- It is not disputed before us that the impugned Certificates had been issued by the Respondent No.2 Dy. Commissioner of Income Tax, after having obtained an approval for issuance of the same at lower rates and not at Nil rates after obtaining approval from the Commissioner of Income Tax. In these circumstances, the application for revision u/s 264 of the Act would be in the nature of an Appeal from Caesar to Caesar. As the basis of the impugned Certificates dated 10th September, 2019 being the orders dated 9th September, 2019 of the Income Tax Officer, have been set aside, the impugned Certificates and the order sheet which gives basis of working out the deduction in the impugned Certificates are also set aside. The Petitioner s application dated 14th August, 2019 is restored to the AO for fresh consideration and passing of the order on the same, after following the principle of natural justice, within a period of two weeks from the date this order is uploaded on the High Court web site. In the meantime, the Petitioner s client/ customers would continue to deduct tax in terms of the Certificate issued on 4th June, 2019 (which was set aside in TLG INDIA PRIVATE LIMITED VERSUS DCIT [ 2019 (8) TMI 303 - BOMBAY HIGH COURT ] will be the rate which will apply. However, it is made clear that if, the Income Tax Officer comes to the conclusion that the Petitioner is liable to pay tax under Sections 201 201(1A) of the Act in respect of the show cause notice. In the above eventuality, the Respondent No.2 herein would be entitled to cancel/substitute the Certificates issued under Section 197 of the Act within two weeks of this order being uploaded on the website of this Court.

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• 2019 (11) TMI 938
  Revision u/s 263 - claim for the benefit of section 80-IB(10) - Revenue s appeal before the Tribunal was dismissed on the ground that on merits itself the order under section 263 of the Act was set aside and, therefore, the impugned assessment order for the assessment year 2006-07 passed under section 143 of the Act read with section 263 would not survive - HELD THAT:- Appellant is not able to point out to us whether or not any appeal has been filed against the order of the Tribunal dismissing Revenue s appeal arising from the order of the Assessing Officer giving effect to order passed under section 263 of the Act. If no appeal is filed against the said order, then prima facie, the entire exercise of admitting this appeal would become academic. Mr.Pinto seeks time to take instructions whether on not any appeal has been filed from the impugned order of the Tribunal to the extent it dismisses the Revenue s appeal from the order of the CIT(A) arising from the order of assessment under section 143 read with section 263 of the Act for the assessment year 2006-07. Appeal is adjourned to 25 November 2019.

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• 2019 (11) TMI 937
  Reopening of assessment - petitioner seek an opportunity of an oral hearing - HELD THAT:- Since the appellant-writ petitioner themselves seek an opportunity of an oral hearing, and to put forth their additional submissions before the Assessing Authority, suffice it, in so far as the Assessment Year 2005-06 is concerned, to extend the period for passing the re-assessment order by a further period of eight weeks. The Assessing Authority shall inform the appellant-writ petitioner of the date of oral hearing, and it is open to the appellant-writ petitioner to appear before the Assessing Authority and put forth their submissions, both oral and written, before him.

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• 2019 (11) TMI 936
  Revision u/s 264 - first respondent has chosen to reject the revision filed by the petitioner under Section 264, as barred by limitation - HELD THAT:- This Court, is of the view that a decision taken is not communicated, it should be treated that no such decision is taken in the eye of law. However, as it is communicated through the impugned proceedings dated 12.06.2018 that the Revision Application filed by the petitioner was already rejected on 03.03.2016, this Court is of the view that it is better for the first respondent to consider the matter afresh including the question of limitation by giving an opportunity of hearing to the petitioner. Needless to say that it is for the first respondent, if satisfied that the revision was filed in time, to consider the revision on merits and pass orders in accordance with law. Accordingly, this writ petition is disposed of, by directing the first respondent to take the Revision Application filed by the petitioner in respect of the Assessment Years 2000-01 to 2012-13 on file and dispose the same once again, after giving an opportunity of hearing to the petitioner also by considering the question of limitation, if any.

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• 2019 (11) TMI 935
  Reopening of assessment u/s 147 - addition u/s 68 - HELD THAT:- Person/ entity found to be indulging in the activity of providing accommodation entries, may have entered into some genuine transactions as well. It would be essential for the AO of such third party/ parties to find a live-link, i.e. a link which is actionable between the person/ entity indulging in the activity of providing accommodation entries and such third party/ Assessee. The person who has undertaken such financial transaction(s) with such a person/ entity (the bogus entry provider) cannot avoid further scrutiny of such a transaction by laying a challenge to the re-opening of the assessment u/s 147/148 when the re-opening is, otherwise, within the period of limitation. In the present case, the live-link between the said material information, and the formation of the belief that taxable income has escaped assessment is the fact that the petitioner, admittedly, received Rs. 3 crores from M/s Prraneta Industries Ltd., now known as M/s Adhar Venture India Ltd. This live-link is actionable as it was found and acted upon within the period of limitation under the proviso to Section 147 of the Act. A serious and well founded doubt about the genuineness of the transaction would justify formation of the reasonable belief that taxable income has escaped assessment in the light of the scheme of Section 68 of the Act, which provides that cash credits which, in the opinion of the AO are not satisfactorily explained, would be charged to income tax as the income of the assessee. The subsequent acquisition of knowledge that the monetary transaction (including of the kind discussed above) undertaken by the assessee was with a bogus entity/ person such as an accommodation entry provider which knowledge was not available to the Assessing Officer at the time of completion of the scrutiny assessment, would be a material change of circumstances, and the formation of belief that taxable income has escaped assessment would not suffer from the taint of simplicitor change of opinion. One cannot lose sight of the fact that once the proceedings are reopened, the assessee would have full opportunity to meet the material/ evidence that the Assessing Officer may seek to rely upon to re-compute the taxable income in accordance with law. Moreover, an assessment order passed by the Assessing Officer would be open to challenge in appeals under the Act. AO while making the regular assessment did not undertake the scrutiny that he should have undertaken in respect of the investment into the share capital of the petitioner by Pranetta Industries Ltd. Though the identity of the investor Pranetta Industries Ltd. stood established, neither the financial capacity/ creditworthiness of the said investor companies, nor the genuineness of the transaction was examined. We have already extracted herein above the assessment order passed by the AO during regular assessment. Since the investor company Pranetta Industries Ltd. (now known as Aadhar Venture India Limited) has been found to be an entry provider, most certainly, there was reasonable cause for belief that the monies received by the petitioner from Pranetta Industries Ltd. may also be part of the bogus entries provided by Pranetta Industries Ltd. and, consequently, the taxable income of the petitioner had escaped the assessment. No merit in the present petition, so far as the challenge to the issuance of notice under Section 148 of the Act is concerned, on the ground of wrong assumption of jurisdiction. The notice dated 29.03.2019 is sustained. Grievance raised by the petitioner is that along with the reasons to believe, the petitioner was not provided with any material on the basis of which the reasons are recorded - submission is that due to the relevant material and documents not being provided, the right of the petitioner to raise objections has been effectively curtailed - The right vested in the assessee to raise objections and invite an order thereon, has been conferred by the Supreme Court on the assessee by its decision in M/s GKN Driveshafts (India) Ltd Vs ITO [ 2002 (11) TMI 7 - SUPREME COURT ]. The purpose of such an opportunity appears to be, to explore the possibility of the re-assessment proceedings being dropped, even if validly re-opened, after consideration of objections that the assessee may have. The said right cannot be reduced to an empty formality. Therefore, we set aside the order dated 30.08.2019, passed by the respondent disposing of the objections of the petitioner. We permit the petitioner to raise its objections in the light of the documents provided by the respondent today in Court within seven days from today. No further time shall be granted for that purpose. The Assessing Officer shall decide the objections that may be raised within two weeks from today.

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• 2019 (11) TMI 934
  Deduction u/s 80-IA - initial assessment year - Whether Tribunal was right in holding that the decision reported in the case of Velayudhaswamy Spinning Mills [ 2010 (3) TMI 860 - MADRAS HIGH COURT ] is applicable to the facts of the present case and thereby allowing the deduction on windmill income u/s 80IA? - HELD THAT:- Division Bench of this court in Principal Commissioner of Income Tax-3, Coimbatore v. Prabhu Spinning Mills (P) Ltd. [ 2016 (3) TMI 1309 - MADRAS HIGH COURT ] held Once such initial assessment year has been opted for by the assessee, he shall be entitled to claim deduction u/s 80IA for ten consecutive years beginning from the year in respect of which he has exercised such option subject to the fulfillment of conditions prescribed in the section. Hence, the term initial assessment year would mean the first year opted for by the assessee for claiming deduction u/s 801A. However, the total number of years for claiming deduction should not transgress the prescribed slab of fifteen or twenty years, as the case may be and the period of claim should be availed in continuity. The Assessing Officers are, therefore, directed to allow deduction u/s 80IA in accordance with this clarification and after being satisfied that all the prescribed conditions applicable in a particular case are duly satisfied. Pending litigation on allowability of deduction u/s 80 IA shall also not be pursued to the extent it relates to interpreting initial assessment year as mentioned in Sub-Section (5) of that section for which the Standing Counsel/DRs be suitably instructed.

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• 2019 (11) TMI 933
  Addition in respect of receipt for supply of software as held to be royalty income - Addition in royalty income distributor of software products developed by the other companies, and it merely purchased and re-sold the off the shelf software without acquiring or transferring any right to use the copyright in the software. Thus, it could not be possibly have transferred any copyright - HELD THAT:- From the submissions of the Ld. AR it is observed that Avnet Asia and its parent company are all distributors of software and hardware products of various manufacturers, but whether they provide the services which include the royalty component or not, this major aspect was neither verified by the Assessing Officer as well as DRP. AO and the DRP has not looked into the aspect of the assessee and its group companies whether they merely buy and sell software products developed by other companies or acquire any right in the said products which involves the royalty components. The case laws referred by the Ld. AR though seem to be on the issue but in the present case the facts were not properly verified by the Revenue authorities. Therefore, it will be appropriate to remand back this issue to the file of the Assessing Officer for proper adjudication of this aspect in light of the decisions mentioned by the Ld. AR. Needless to say, the assessee be given opportunity of hearing by following principles of natural justice. Ground No. 2 to 2.4 are partly allowed for statistical purpose. Selling warranties, upgrades and similar service packages on behalf of manufacturers of the software without providing any actual service - AR submitted that the assessee was not providing technical service at all - HELD THAT:- We have heard both the parties and perused all the relevant material available on record. From the perusal of the assessment order it can be seen that the Assessing Officer should have verified the nature of service packages and direct sale of provision of services relating to FTS. This fact is not disputed by the Ld. AR that the nature of services are not properly verified by the Assessing Officer. Therefore, it will be appropriate to remand back this issue to the file of the Assessing Officer for proper adjudication. Needless to say, the assessee be given opportunity of hearing by following principles of natural justice. Ground Nos. 3 to 3.3 are partly allowed for statistical purpose.

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• 2019 (11) TMI 932
  Reopening of assessment u/s 147 - allowability or exemption u/s. u/s.10(23C)(iiiab) - HELD THAT:- In the present case, there is no new tangible material, which had come into the possession of the AO, therefore, reopening on the same material amounts to mere change of opinion, which is not permissible under the law. Similarly, the ld.Counsel has placed reliance in the case of Oriental Insurance Company Vs. CIT [ 2015 (9) TMI 757 - DELHI HIGH COURT ] wherein it was held that it cannot be disputed that the exemption claimed by the AO in respect of the profit on sale /redemption of investment was duly disclosed and the AO has also opined on the merits of taxability of profits of sale / redemption of investment. The income from profit on sale/redemption of investments is now sought to be taxed as income, which had escaped assessment. Thus, in our view, clearly represents a change in the opinion with regard to the taxability of the income in question. It was well settled that the power under Section 147 of the Act is not a power of review but a power to reassess. Permitting reopening of assessment on a change of opinion as to the taxability of the income of the Assessee is, thus, outside the scope of Section 147. We further find that the reopening has been done in the present case on the basis of Revenue Audit Objection which does not constitute an information for the purpose of reopening of assessment as held by the Hon ble Supreme Court in the case of CIT Vs. Lukas TVS Ltd. [ 2000 (12) TMI 102 - SC ORDER ] wherein it was held that an audit opinion in regard to the application or interpretation of law cannot be treated as information for reopening of the assessment u/s.147 - Decided in favour of assessee

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• 2019 (11) TMI 931
  Addition u/s 68 - principal amount received as unsecured loan (plus interest due thereon) from M/s Matribhumi Fincap India Limited on the ground that the same is a shell company and is having criminal/ prosecution case U/s 220(1) (2) of Companies Act by Chief Judicial Magistrate, Shillong - HELD THAT:- Before going into the merits of the case, we calculated as to why the assessee has still not changed the name in the HDFC bank till date of hearing and still he is doing transactions through this bank account. This transaction needs to be examined by the AO. We also noted that the loan amount of Rs. 1 crores taken in two instalments as stated supra has also been credited in this bank account. These facts need to be examined at the level of AO. Therefore, we think it appropriate to send back the disputed issue to the file of AO for examining of actual ownership of this bank account and why the assessee has not changed the name of the account in the name of M/s Pasa Resources Pvt. Ltd. in place of M/s Pasa Sales and Marketing Ltd. even after merging w.e.f. 01.04.2014. Needless to say, the assessee shall be given reasonable opportunity of hearing and the assessee is directed to cooperate with the AO for early disposal of the case. This ground is allowed for statistical purposes.

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• 2019 (11) TMI 930
  Computation of capital gain - relevant date for stamp value - agreement to sell entered during the FY 2009-10 and got registered - Actual transfer took place during FY 2011-12 - determination of full sale consideration for a sale of capital asset on the basis of which capital gain required to be computed - HELD THAT:- In the present case, stamp duty valuation authority has not adopted the value. It is the party who agreed to pay stamp duty at an enhanced value of Rs. 6,47,14,285/-. The payments of higher stamp duty at the end of the vendee was not effecting any rights of the assessee. They were not under any financial obligation. The stamp duty valuation authority would not object payment of higher stamp duty at the end of the vendees. Had they disclosed a lower value, probably they would have adopted a higher value according to the rates notified by them. The stamp duty payment at the end of the vendee is roughly 6% to 8% of the value so mutually agreed by them. But that mutual agreement would not authorise the AO to deem it full sale consideration. The full sale consideration is to be deemed at the value which is assessable by the stamp duty valuation authorities, and if the rates notified by the stamp duty valuation authority are taken into consideration, then such value would come far less than the value disclosed by all the appellants, while computing the capital gain. The area sold by the appellant was 24,888 sq.yards. If it is multiplied by Rs. 250/- then it comes out to roughly Rs. 62.22 lakhs. If it is multiplied by Rs. 300/-, then it comes to Rs. 74,66,400/-. The sale consideration disclosed jointly by all the appellants is Rs. 1,10,00,000/-, which is far more than the value ought to be adopted for the purpose of stamp duty. Therefore, we are of the view that no addition deserves to be made in the hands of the appellants on account of long term capital gain. - Decided in favour of assessee.

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• 2019 (11) TMI 929
  Disallowance of deduction claimed u/s 54F deduction u/s 54 - as argued assessee had invested the long term capital gain on purchase of residential plot and remain invested for more than three years - HELD THAT:- It is an undisputed fact that, firstly, the assessee has earned capital gain and has invested the same in purchase of a residential plot; secondly, the assessee has made a total investment of Rs. 63,03,005/- which is more than the exemption of Rs. 52,90,424/- claimed by her; and lastly, the assessee made this investment within the prescribed period. This payment was made to the developer Omaxe Chandigarh Extension Developers Pvt. Ltd. Consequent to that, the developer issued allotment letter and also entered into an agreement dated 05.07.2011. As per the agreement the developer was supposed to hand over the possession of plot within 18 months from the date of allotment letter - developer did not deliver the possession. Hence, the assessee could not complete the construction within the prescribed period of 3 years. This delay in construction was not attributable to the assessee. AO and the CIT (A) have denied the exemption in view of the provision of section 54 and 54F. The AO and the CIT (A) both have ignored the fact that the assessee has made a full payment to the developer and such payment was more than the amount of the deduction claimed by the assessee. Since, the delay was not on the part of the assessee but on the part of the developer and thus it was beyond the control of the assessee. In such circumstances, we are of the view that benefit of deduction cannot be denied to the assessee. Case followed SHRI VARUN SETH VERSUS ACIT, CIR-47 (1) , NEW DELHI [ 2019 (7) TMI 1410 - ITAT DELHI ] - Decided in favour of assessee

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• 2019 (11) TMI 928
  Disallowance u/s 14A read with Rule 8D - suo moto disallowance by assessee - absence of a speaking order by the Assessing Officer - HELD THAT:- Assessing Officer can invoke Rule 8D of I.T. Rules only after establishing with detailed reasons, through a speaking order, that the amount disallowed suo moto by the assessee is not satisfactory. The Assessing Officer having failed to do this, there is justification for applying Rule 8D is completely absent. In the absence of a speaking order by the Assessing Officer on why he invoked the jurisdiction under Rule 8D of Income Tax Rules, we are of the view that further disallowance made by the Assessing Officer lacked statutory credentials under section 14A(2) of Income Tax Act.

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• 2019 (11) TMI 927
  Addition u/s 68 - unexplained cash credit - HELD THAT:- We find before CIT(A) the assessee filed certain additional evidences based on which the Ld. CIT(A) called for a remand report from the AO and after considering the same deleted the addition of Rs. 6 lacs being loan obtained from Sh. Tarun Jain Rs. 2 lacs and Mrs. Shivani Jain Rs. 4 lacs on the ground that the assessee has submitted the requisite information which was examined by the AO and no adverse comment regarding their creditworthiness was made by the AO in the remand report. He further noted that a perusal of the bank accounts of the above two persons reveals that there is no credit either by way of cash deposit or transfer immediately before giving loans to the assessee company. Both of them have shown substantial income in their returns of income for which he deleted the addition of Rs. 6 lacs pertaining to Mr. Tarun Jain and Mrs. Shivani Jain. So far as the balance amount of Rs. 31,55,000/- is concerned he sustained the addition on the ground that the assessee company has not been able to prove that the remaining creditors had the capacity to advance money to the assessee company. Further, the AO after examination of the balance sheets and the computation of their total income found that these parties are having meager income. No infirmity in the order of the CIT(A) on this issue. So far as the deletion of Rs. 6 lacs being loan obtained from Mr. Tarun Jain and Mrs. Shivani Jain are concerned we find the AO in the remand report has not made any adverse comments regarding the creditworthiness of the said persons. Further their income tax returns show substantial income have been declared by them, a finding given by the CT(A) and not controverted by the Ld. DR. CIT(A) has also given a finding that their bank accounts do not reveal any credit either by way of cash deposit or transfer immediately before giving loans to the assessee company. We, therefore, find no infirmity in the order of the CIT(A) in deleting the addition of Rs. 6 lacs made by the AO. Addition u/s 68 - HELD THAT:- In the instant the assessee has merely filed the PAN number of M/s. Rishi Promoters alongwith their confirmation and the ledger account of M/s. Rishi Promoters Private Limited in the books of the assessee. Although the assessee has filed the audited accounts of M/s. Rishi Promoters showing advance against property at Rs. 6,14,25,000/-, however, it is very difficult to find out from the same as any advances given to the assessee company especially when such advances were shown at Rs. 8,43,31,716/- in the preceding year and the assessee has failed to file any documentary evidences as to what were the unavoidable circumstances for which the proposed sale had to be cancelled. The assessee could not bring any other material before us other than the material placed before the CIT(A) so as to take a contrary view other than the view taken by the CIT(A) on this issue. We, therefore, uphold the order of the CIT(A) on this issue and ground appeal No.4 by the assessee is dismissed. Disallowance u/s.14A - HELD THAT:- No disallowance u/s. 14 A can be made where the assessee has not received any exempt income. Addition being the advance received from SNS Trading, DMCC, Dubai - the said parties are related concerns of the assessee and although the amount was received as advance, however, no such sale was made till the year end and the assessee failed to file requisite details - HELD THAT:- We find the assessee during the appeal proceedings has produced the copy of FIRC issued by the foreign exchange division of Canara Bank wherein the purpose for which money has been received by the assessee has been clearly stated as advance against supply of goods. CIT(A) has also given the finding that money in question has been received by the assessee through banking channels and due disclosures in this regard had been made by the company before the concerned authorities namely the foreign department division of Canara Bank which deals with the remittances of foreign currency from overseas. Merely because said parties are related concern the same in our opinion cannot be a ground for making the disallowance. In this view of the matter and in view of the detailed reasonings given by the CIT(A) on this issue we do not find any infirmity in the same. Accordingly, the grounds of appeal raised by the revenue on this issue are dismissed. Addition being the interest paid to the directors of the company - HELD THAT:- A perusal of the order of the CIT(A) shows that he has no where examined the availability of the own funds with the assessee for extending such huge interest free advances whereas assessee is paying interest to the directors and their relatives on advances received from them. Although the assessee has filed voluminous paper book, however, the audited accounts of the assessee company have not been filed. We, therefore, deem it proper to restore the issue to the files of the AO with a direction to find out the own capital and free reserves of the assessee company. In case the own funds and free reserves of the assessee company are more than the interest free advances given to the sister concerns namely M/s. KMG Investment Private Limited and M/s. KMG Milk Foods Private Limited, the AO is directed to delete the disallowance of interest Grievance of the revenue that the Ld. CIT(A) has admitted the additional evidence under rule 46 A of the IT Act - HELD THAT:- A perusal of the order of the CIT(A) shows that he has given justifiable reasons as to why the assessee was prevented by sufficient cause from submitting the requisite details/ documents. He had given a categorical finding that the AO has passed the order without giving sufficient time to comply with the various requirements made by him on the dates of hearing immediately preceding the assessment order. We find the Ld. CIT(A) has forwarded all those details to the AO for his comments and remand report. Therefore, the revenue should not have any grievance on this issue

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• 2019 (11) TMI 926
  Disallowance of interest - CIT(A) restricted the disallowance proportionately to the exempt income as well as taxable income for which the unsecured loans were contributed as investment - AR submitted that the entire expenditure cannot not be allocated proportionately to the income earned on two different streams since, the income earned not only on account of capital contribution, but also on account of various services rendered by the firm therefore, requested to make the reasonable disallowance for capital contribution and also for other activities of earning the income - HELD THAT:- We have carefully considered the submissions of the Ld.AR and unable to convince with the argument of the Ld.AR, since, the share of profit is directly related to the capital contribution made by the assessee. For other services mentioned by the Ld.AR, the assessee is free to draw salary or remuneration as provided in the partnership deed. The Hon ble Special Bench also confirmed the disallowance of expenditure in the ratio of income earned that is exempt and the taxable income. Therefore, we hold that the Ld.CIT(A) has fairly restricted the disallowance proportionately on the basis of income earned by the assessee with regard to exempt income as well as the taxable, thus, we do not find any reason to interfere with the order of the Ld.CIT(A) and the same is upheld. - Decided against assessee

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• 2019 (11) TMI 925
  Nature of land sold - sale of alleged agricultural land - Lower authorities held that the assessee s land to be a capital asset u/s 2(14) - HELD THAT:- The assessee s detailed paper book reveals that the land in issue in sale had been shown as agricultural as per the relevant records as on 26.02.2019. Coupled with this, we find that this is not also the Revenue s case that the land itself during assessee s possession had ever been converted to industrial use. Hon ble Bombay high court s decision in CIT vs. Debbie Alemao and 2. Joaquim Alemao [ 2010 (9) TMI 560 - BOMBAY HIGH COURT ] holds that it is nowhere necessary for an assessee to prove carrying out actual agricultural activity of the land in issue is agricultural. Both the lower authorities have erred in law and on facts in treating the assessee s agricultural land sold as industrial giving rise to capital gains in issue. We therefore accept assessee s former twin substantive grounds to this effect. Deemed dividend addition u/s 2(22)(e) - HELD THAT:- We find no reason to agree with the impugned addition. Case file indicates that the assessee had executed an MoU with M/s Spac Martix Pvt. Ltd. on 07.10.2009 agreeing for extending security in the form of assignment or hypothecation of personal assets for securing loan for the company and the latter in turn had to give mutual financial accommodation to the former. The assessee thereafter pleas on record all the relevant details regarding its personal guarantee and collateral security provided to the bank in favour of M/s Space Martix Pvt. Ltd. Page 158 of the paper book reveals that the latter entity had deficient figures of Rs.43,87,70,364/- and Rs.47,36,60,894/- as on 27.03.2012 and 31.03.2012; respectively. Be that as it may, hon ble jurisdictional high court s judgment in Pradip Kumar Malhotra vs. Commissioner of Income Tax, West Bengal-V [ 2011 (8) TMI 16 - CALCUTTA HIGH COURT ] hold long back that such a case does not attract the deeming friction of dividend u/s 2(22)(e). We therefore direct the Assessing Officer to delete the instant latter addition as well

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• 2019 (11) TMI 924
  Benefit of exemptions u/s.11 - Charitable purpose u/s 2(15) - planned development in a particular region - whether the activity of the assessee company is in the nature of advancement of any other object of general public utility ? - whether the nature of activity is commercial and akin to trade, commerce or business etc.? - HELD THAT:- The object of the assessee authority is to engage in advancing of objects of public utility is not in dispute. The dispute relates to the second limb i.e. whether such object of advancement of general public utility also acquires the character of trade, commerce or business with commercial intent or whether the authority exists solely for advancement of object of public utility and do not exist with a motive to make profit in a commercial spirit. As observed, the assessee is a Government agency and is engaged in co-ordinate and planned development of Jamnagar region which is pre-dominant object of the authority. The authority has been granted registration under s.12A of the Act for claiming deduction/exemption under s.11 of the Act. On similar facts, the in Ahmedabad Urban Development Authority vs. ACIT [ 2017 (5) TMI 1468 - GUJARAT HIGH COURT] held that general public utility services and amenities provided by such authorities would fall within the meaning of charitable purposes as contemplated under s.2(15) of the Act and consequently, the assessee is entitled to claim exemption of income under s.11 of the Act. The issue has already been adjudicated in favour of the assessee in other assessment years by the co-ordinate bench as noted above. We thus see no error in the conclusion drawn by the CIT(A) in favour of the assessee. Once the activity is considered to be charitable in nature, the assessee would be entitled to all consequential benefits flowing to income generated from such activity including the benefits provided under s.11(2) of the Act and 11(1)(a) of the Act towards accumulation of profits without any demur.

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• 2019 (11) TMI 923
  Revision u/s 263 - claim of exemption u/s.54F - as per CIT necessary enquiry were not conducted and whether cost of interior decoration was allowable or not, these were not specifically enquired into by the Assessing Officer while framing assessment - HELD THAT:- The issue on which 263 jurisdiction was assumed by the Ld. Pr. Commissioner of Income Tax, to those issues, the Assessing Officer has enquired into and replies were also filed in detail by the assessee in response thereto. In such scenario, the Ld. Pr. Commissioner of Income Tax could not have assumed the jurisdiction u/s.263. That further, regarding contentions of the Ld. DR that section 54F pertains to the cost of acquisition of the new assets and it does not cover the cost of interior decoration, in this regard, as evident from the agreement entered into between the promoter and the assessee therein certain essential items as mentioned herein above in the order were to be carried out by the assessee himself. These expenses are necessary to suitably live in that particular flat. These expenses are necessary for habitation in that particular flat. They do not pertain to any decoration item rather they are all essential to make a flat fit for living. Reverting to the facts of the present case, expenses were incurred on floor, bathrooms fittings and electrifications etc. which are necessary to live in that flat. In view of the aforesaid examination of the facts and legal parameters, we are of the considered view that the revisionary order passed by the Ld. Pr. Commissioner of Income Tax is not correct within the legal framework, rather arbitrary, un-judicious, bad in law and liable to be quashed. - Decided in favour of assessee.

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• 2019 (11) TMI 922
  Lower yield declared by the assessee - excessive consumption of electricity / power / furnace - variation in consumption of electricity, furnace oil vis- -vis production of finished goods - yield declared by the assessee and information regarding yield declared by other assesses, as received from the DCIT-1(2), Raipur was compared with reference to the uniform and standard yield adopted by the Assessing Officer and the result of the comparison so made are on record - HELD THAT:- CIT(A) had made exercise to bring out the percentage of yield declared by the other assessee engaged in similar line of business and nowhere the yield was 89%. AO also gave no basis for its calculation of the yield at 89%. There was no scientific or logical basis in the exercise conducted by the AO. The submissions made by the assessee, were also summarily rejected by the AO which is therefore, not in accordance with judicial principle as herein above enshrined in the various judicial pronouncements. We have also observed in the case of ACIT-1(1) Raipur Vs. Ramesh Steel Industries [ 2014 (12) TMI 1353 - ITAT RAIPUR] the AO made addition as he noted that in the year under appeal, the assessee had consumed more units of power as compared to the last two assessment years. The Tribunal observed that consumption of power in itself is not an evidence to prove or disprove the production of finished goods. We further observe that in the case Sulabh Marbles (P.) Ltd. [ 2006 (7) TMI 653 - HIGH COURT OF RAJASTHAN] has held that disparity in electricity consumption cannot be the criteria for rejection of accounts and for making ad-hoc additions. The assessee had maintained regular books of account and the AO had not come across any unaccounted purchase or suppressed sale. In these circumstances, only on the basis of power consumption, no addition could be or sustained. It is apparent from the records that the Assessing Officer has not brought on record any evidence stating lower or suppression of sales by the assessee. He tried to support his case by showing deficiency in power consumption by the assessee. But the Hon ble High Courts have held without any direct corroborative evidences on low yield or suppressed sales, the disparity of power consumption cannot be the sole ground or reason for making addition by the Assessing Officer. CIT(A) is absolutely correct and therefore, the same does not call for any interference. Thus, ground relating to issue of the lower yield declared by the assessee in all the appeals for all the assessment years are therefore dismissed. Giving credit of cash seized during the course of search operation u/s.132 as prepaid taxes while computing tax liability of the assessee - HELD THAT:- In the computation of tax such adjustment was not there and therefore, it was right for the Ld. CIT(A) to direct the Assessing Officer for such adjustment to be made in the hands of the assessee while determining tax liability. In view of the matter, we sustain the relief provided to the assessee by the Ld. CIT(A)

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• 2019 (11) TMI 921
  Reopening of assessment u/s 147 - assigning proper reasons and justification - Deemed dividend addition u/s 2(22)(e) - HELD THAT:- AO is in possession of tangible incriminating material that assessee had received loans/advances from its subsidiary company namely M/s Empee Distilleries Limited in which assessee held 41.78% shares and the said subsidiary company possessed accumulated profits to the tune of Rs. 6,69,15,506/- , during year under consideration , thus, the assessee has infringed provisions of Section 2(22)(e) - assessee on its part has not included in its return of income , the aforesaid amount as deemed dividend as its income chargeable to tax being hit by provision of Section 2(22)(e) - AO might have received aforesaid tangible information as to escapement of income chargeable to tax from records itself before it but the same is valid for invocation of provisions of Section 147 as there is no estoppel against law, more-so provisions of Section 147 are invoked within four years from the end of assessment year and proviso to Section 147 is not applicable . Thus, in our considered view, the AO has rightly invoked provisions of Section 147 of the 1961 Act in reopening the concluded assessment and we uphold reopening of the concluded assessment by the AO on legal ground. Deemed dividend addition u/s 2(22)(e) - Profit on sale of profits on sale of Palakkad unit shall be included while computing accumulated profits for making disallowance u/s 2(22)(e) unless it falls into exception as provided under Explanation 1 to Section 2(22)(e). Thus, we direct AO to verify this limited point as to whether capital gains on sale of Palakkad unit falls in the exempted period per Explanation 1 to Section 2(22)(e) of the 1961 Act or not and then to bring to tax said amount in the hands of the assessee u/s 2(22)(e). Thus, on our considered view, the assessee does not have any case on merit too . The assessee fails in this appeal. We order accordingly.

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• 2019 (11) TMI 920
  Assessment u/s 153A - it is submitted that, so-called approval as granted by the Learned Additional Commissioner of Income Tax, Central Range, Kanpur u/s 153D is no Approval in the eye of law as the purported Approval been granted without due application of mind and such a mechanically granted Approval vitiates the Assessment order rendering it to be held illegal and void ab-initio - HELD THAT:- In the case at hand despite availability of time, the Additional CIT has been taking excuse of limitation and has chosen to grant approval without application of his own mind but on the undertaking of the AO that while completing the assessment as per the draft assessment order, all the observations made in the appraisal report relating to examination/investigation as also the issues identified in the course of examination of seized material have carefully considered. In our view such a practice is required to be deprecated and we deprecate the same. We hold that if the approval is granted by the superior authorities in mechanical manner without application of mind then the very purpose of obtaining approval is defeated. Moreover, where 4 clear days time was available with the administrative authority, it was a half-hearted approval and as such held as no approval in the eyes of law. Accordingly, we have no hesitation in declaring that the Approval granted by the Additional CIT, Central, Kanpur on 27.03.2015 is no approval in the eyes of law and therefore, the assessment made by the AO based on such an approval is also declared to be null and void. We therefore, quash the Assessment orders under section 153A of the Act

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• 2019 (11) TMI 919
  Sale of agriculture land in rural area - income from other sources - capital asset u/s 2(14) - HELD THAT:- We note that assessee s claim is that assessee s agricultural land which was sold for a consideration of Rs. 26,96,250/- cannot be taxed as a Capital Asset as per the definition given under sec. 2(14) of the Act. According to the assessee the land he sold was agricultural land which was about 3 kms (aerially) away from the Municipal boundaries of Dankuni Municipality. And since the population of Dankuni Municipality as per the latest Census of Year 2011 was only 94,936, which is below one lakh population which was a condition precedent to qualify as a Capital Asset, the assessee s agricultural land sold in the A.Y cannot be treated as Capital Asset and the sale consideration cannot be taxed. We are satisfied with the claim of the assessee that the sale consideration received from sale of agricultural land in the facts narrated above if found factually correct should not be taxed. Since the AO/CIT(A) has not examined the veracity of the documents filed we remand this issue back to the file of AO for the limited purpose of verification of documents and if found correct, then the claim that Rs. 26,96,250/- to be allowed as not taxable. If the assessee fails in the verification of the facts discussed [supra], the consideration the assessee received for sale of agricultural land in any way cannot be taxed under the head income from other sources and then only capital gain to be levied in accordance to law after hearing the assessee. Appeal of the assessee is allowed for statistical purposes.

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• 2019 (11) TMI 918
  Reopening of assessment u/s 147 - rejection of claim of loss suffered by the assessee due to modification of Client Code by the stock broker - HELD THAT:- As rightly submitted by assessee, on the basis of the information said to be received by the AO with regard to fictitious claim of loss by misusing the modification of Client Code facility offered by the Stock Exchange, the Assessing Officer reopened the assessment. Therefore, this Tribunal is of the considered opinion that the assessment has been validly reopened by the Assessing Officer. Hence, this Tribunal do not find any reason to interfere with the order of the lower authority and accordingly the same is confirmed. Merit of the claim of disallowance made by the Assessing Officer, as rightly submitted by the Ld.counsel for the assessee, the transaction was made with M/s Inventure Growth Securities Ltd. by the assessee. In the list received by the Assessing Officer, the assessee s name is also found to be one of the beneficiaries who claimed bogus fictitious loss due to Client Code modification. Therefore, this Tribunal is of the considered opinion that the matter needs to be re-examined by the Assessing Officer as decided by this Tribunal in the case of Late Ugama Kavar [ 2019 (7) TMI 1536 - ITAT CHENNAI] - Thus set aside to the file of the Assessing Officer. Appeal filed by the assessee is partly allowed.

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• 2019 (11) TMI 917
  Capital gain - transfer of property in assessment year under appeal - HELD THAT:- Agreement to sell was executed and registered on 16.01.2009 whereby the part possession of the property in question have been handed over to the purchaser subjected to part payment. Therefore, transfer of capital asset completes in preceding A.Y. 2009- 2010. This fact is further strengthened by the fact that registered sale deed was executed between the parties on 31.03.2009 whereby the entire terms and conditions are satisfied. The full sale consideration have been paid and possession of the property have been handed over to the purchaser. This fact is further strengthened by Section 47 of the Registration Act whereby it is provided that registered document shall operate from the date of its execution. We hold that transfer of capital asset had taken place in preceding A.Y. 2009-2010. Therefore, capital gain tax would not be chargeable in assessment year under appeal i.e., 2010-2011. The initiation of reassessment proceedings are illegal and beyond jurisdiction of A.O. We, therefore, set aside the Orders of the authorities below and delete the entire addition. In this view of the matter, there is no need to decide the other issues involved in the present appeal. We would like to make it clear that since assessee has declared capital gain in the return of income filed for assessment year under appeal and paid self assessment taxes, therefore, assessee would not be entitled to retract from the statement so made in the return of income - Appeal of Assessee allowed.

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• 2019 (11) TMI 916
  Addition u/s 68 - unexplained capital introduced by members of AOP - on perusal of the partners/members capital account for the year ended 31st March, 2011, AO observed that members have introduced huge amount of capital in the assessee s business - HELD THAT:- We find that the AO has given adequate opportunity to the assessee during the course of assessment proceedings to furnish the documentation in support of the capital introduction by Sh. Yogindra Singh Chouhan - notice u/s 133(6) was also issued which remained uncomplied with and even during the remand proceedings, there is nothing which has been filed or brought on record in support of the substantiating the source of capital contribution by Sh. Yogindra Singh Chouhan. There is movement in his personal account maintained with the assessee s AOP, however, the fact of the matter is that the explanation regarding the source of the capital introduction by way of cash and the creditworthiness of Sh. Yogindra Singh Chouhan remained unsubstantiated till date and initial onus cast on the assessee is not satisfied in the instant case. No infirmity in the action of the lower authorities. Hence, the addition of Rs. 13,00,000/- is hereby sustained. In respect of Sh. Bhanwar Singh Makori who has contributed Rs. 15,00,000/- towards his capital contribution, the ld. CIT(A) has not accepted the contention of the assessee stating that the assessee has failed to prove his creditworthiness. Before us, it was submitted that he was produced for verification and his statement was also recorded during the course of remand proceedings where he has accepted to have given an amount of Rs. 15,00,000/- in cash by way of his capital contribution. On perusal of his financial statement for the year ended 31.03.2011, we find that he has a capital of over Rs. 1 crore and in the said financial statement, he has also reported his investment in the assessee s AOP. We therefore find that the assessee has discharged the necessary burden cast on it in terms of satisfying the creditworthiness of Sh. Bhanwar Singh and the addition of Rs. 15,00,000 so made is hereby directed to be deleted. In respect of Sh. Mota Ram Saini, the ld. CIT(A) has rejected the contention of the assessee stating that he was neither produced in person nor any confirmation was filed before the Assessing Officer. In this regard, the ld. AR submitted that Sh. Mota Ram Saini has filed an affidavit by way of confirmation wherein he has stated that he has agriculture land holding of 20 bighas and his agriculture income is about Rs. 50,000/- per annum and he has yearly income of about Rs. 1,50,000/- for F.Y 2010-11 and out of his current year income and past savings, he has contributed Rs. 2,00,000/- towards his share in the capital of the assessee s AOP. We find that the contents of the affidavit have not been disputed by the Revenue and considering the same, the addition of Rs. 2 lacs is directed to be deleted. Regarding the capital contribution Sh. Iqbal and Sh. Iqram, it is noted that they were produced for verification during the remand proceedings and in their statement, they have confirmed to have given an amount of Rs. 1,00,000/- each as capital contributions and have also explained the source of their capital contribution by way of income and past savings. In the light of the same, the addition so made is hereby directed to be deleted. - Decided partly in favour of assessee

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• 2019 (11) TMI 915
  Interest paid on late deposit of TDS - Allowable deduction u/s 37(1) - in the nature of penal interest or not - additions towards interest on late deposit of TDS confirmed on the ground that despite being asked by him, the assessee did not file any reply to justify its claim - HELD THAT:- CIT(A) confirmed the disallowance made by the AO on the ground that interest on late payment of TDS is not an allowable expenditure u/s 37(1) as it was in the nature of penal interest. It is the submission of the ld. counsel that in view of the various decisions of the coordinate Benches of the Tribunal on this very issue, such disallowance is uncalled for. It is also his alternate submission that the matter may be restored to the file of the Assessing Officer since various decisions relied on by the assessee have not been considered - restore the issue to the file of the Assessing Officer with a direction to give one more opportunity to the assessee to substantiate its claim of allowability of interest paid on late deposit of TDS. The ground raised by the assessee is accordingly allowed for statistical purposes. Demurrage charges deducted by the customers for not completing the project in time - HELD THAT:- CIT(A) upheld the action of the AO. It is the submission of the ld. counsel for the assessee that the same is not for violation or infraction of any statutory provisions and the same is compensatory in nature for not completing the project in time. I find merit in the above argument of the ld. counsel. A perusal of the paper book page 83 shows that as per the terms and conditions for undertaking the work awarded by National Institute of Electronics and Information Technology, Gangtok, the assessee is liable to pay penalty @ 0.10% of the quoted rate per day for non-completion of the project within six weeks from the date of receiving the work order. The same, in my opinion, is not for violation of any statutory law, but, will amount to compensatory in nature. Pune bench of the Tribunal in the case of Shanti Commodities [ 2014 (12) TMI 344 - ITAT PUNE ] has held that penalties paid for violation of rules laid by Forward Market Commission being in the nature of civil liability similar to compounding fees and not fee for any serious violation of provisions of law was to be allowed u/s 37(1) - CIT(A) is not justified in sustaining the addition. Disallowance of being the amount of Pooja Expenses - Allowable revenue expenses - HELD THAT:- In the instant case, has failed to prove the nexus. While the expenses incurred on the occasion of its fifth anniversary day is an allowable expenditure, however, the day-to-day pooja expenses in the office of the company, in my opinion, cannot be allowed as an allowable expenditure. However, the nature of bifurcation is not available - restore the issue to the file of the AO with a direction to give an opportunity to the assessee to give a bifurcation and the puja expenses incurred on the fifth anniversary day of the company may be allowed as an expenditure whereas the day-to-day pooja expenses cannot be allowed as an expenditure. The Assessing Officer shall decide the issue as per fact and law, after giving due opportunity of being heard to the assessee.

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• 2019 (11) TMI 914
  Disallowance of sales promotion expenses - CIT(A) restricting the estimated disallowance to 20% of the total expenditure claimed as against 50% disallowed by the AO - HELD THAT:- The assessee claimed sales promotion expenses. On perusal of the paper book, we find that most of the payments were made in cash even though the payments are within the monetary limits of section 40A(3) of the Act and while the details in respect of some schools were produced, the assessee could not produce official receipts for all the schools. In fact, the genuineness of the claim of the assessee was not disputed by the Revenue, the Assessing Officer allowed 50% of the claim as genuine and the balance expenditure was brought to tax. After considering the written submissions and since the assessee could not produce official receipts for all the schools, the ld. CIT(A) restricted the disallowance to 20% of the total claim of expenditure and partly allowed the ground raised by the assessee. No infirmity in the order passed by the ld. CIT(A), who has given reasonable relief to the assessee. Thus, the ground raised by the assessee stands dismissed.

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• 2019 (11) TMI 913
  Gain on sale of land - year of taxation - HELD THAT:- The year of taxation is the year of transfer of possession of land by the transferee from the custody of the transferor. The said decision is relevant for the ratio that the transfer is not complete and the gains are not taxable in that assessment year 2011-12 when the possession of the land is with the transferor till the entire consideration is paid, which happened in the assessment year 2012-13 in this case. Thus, the year of possession of land, payment of entire consideration and the compliance to the conditions stated in the agreement are the relevant factors that decides the year of taxation. In the present case, these events happened only in the assessment year 2011-12 and not in the current assessment year 2008-09. Accordingly, we are of the opinion that the year of taxation in the assessment year 2011-12 offered by the assessee and not assessment year 2008-09 as considered by the Assessing Officer in the assessment. Therefore, the relevant issue is decided in favour of the assessee in respect of year of taxation. Proper Head of Income Capital Gains OR Business Income - HELD THAT:- It is undisputed fact that the assessee never offered any business income on trading of land either in the past or in future assessment years. It is also born out of the records that the said asset has been consistently shown as fixed asset and not as stock-in-trade. Regarding the Assessing Officer s claim that the said transaction constitutes an adventure in nature of the trade , we are of the opinion, test laid down in the case of G. Venkataswami Naidu [1958 (11) TMI 5 - SUPREME COURT] in matters of dispute relating to the adventure in the nature of trade, we find the CIT(A) analyzed the said judgement and gave a finding that the said test laid down is not applicable to the facts of the present case. Therefore, in our view, the transaction in question does not constitute adventure in the nature of trade Consolidated transaction on sale of land together with his wife constitute an adventure in the nature of trade. It is also submission of the assessee that the similar claim in his wife s case, co-owner of the property, was accepted by the concerned Assessing Officer taxing the gain under the head income from capital gains. Therefore, we are of the opinion that change in the head of income is unsustainable and not in tune with the relevant judgment in the case of G. Venkataswami Naidu [ 1958 (11) TMI 5 - SUPREME COURT] . Accordingly, the relevant grounds raised by the Revenue are dismissed. Taxation of income from let out properties - HELD THAT:- It is settled legal proposition that so long as Municipal values are available the same becomes bindings and therefore, the decision of the AO in calculating the rental value based on any other method is unsustainable in law. Therefore, the above conclusion drawn by the CIT(A) on this issue is fair and reasonable and it does not call for any interference. Accordingly, the grounds raised by the Revenue are dismissed.

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• 2019 (11) TMI 912
  Rejecting the books of accounts u/s 145(3) - unaccounted sales - GP estimation - HELD THAT:- Addition made in the present case is in respect of the unaccounted sales are far in excess of the actual sales made by the assessee. In the working shown above, the profit is estimated at 25% and yet the seed capital is taken at 80%. Obviously, when the profit rate is 25%, the cost of goods, and entire related costs, cannot be more than 75%, and yet the seed capital is taken is more than 75%. The outstanding debtors, which are in respect of the sale itself, are also taken separately. The total income computed, after taking into account the estimated profit, seed capital and debtors, is far less than the actual amount offered on the basis of application theory at Rs. 2.19 crores. When the income voluntarily offered to tax on the basis of material on record is far more than income, strictly speaking, legally justified on that basis, there cannot be any good reasons to make separate additions on the basis of the same material. In these circumstances, separate addition on account of income, as profit or as seed capital or for any other related factor, is clearly unwarranted. Addition on account of low GP - assessee has given detailed explanations for the fall in the gross profit rate, on 12.9.2013 22.11.2013, 9.1.2014 and 20.1.2014. The copies of all these submissions are placed before us in the paper-book. The Assessing Officer has referred to, in the impugned assessment order, the submissions dated 12.9.2013 and has not even referred to, or apparently looked at, the other submissions. Without dealing with these submissions, it was not open to reject the stated reasons for fall in the GP rate. In any case, the variation is only 1.04% - we hold that there are no legally sustainable reasons to disturb the GP rate of 18.96% as show by the assessee. This plea is also, therefore, upheld. Addition on account of Gold Jangad Stock - HELD THAT:- Jangad gold jewellery of 402 .56 gms received from Kalindi jewellers were later on purchased by Invoice No . 114 dated 1 .12 .2010 and entire amount of the said bill was paid through banking channel. The said purchase of gold is duly reflected on 17 .12 .2010 in the purchase register at Page No .173 of PB. However, the Assessing Officer has, without verifying purchase register available on record and invoices thereof produced during the assessment proceedings, has made addition of the value of 402.56 gms on account of jangad jewellery in the name of Kalindi Jewellers. In the light of these discussions, the addition in respect of 402.56 gms of jangad stock received from Kalaindi Jewellers cannot be sustained either. In view of these discussions, as also bearing in mind entirety of the case, the entire addition of Rs. 1, 90, 21, 318 in respect of jangad stock must stand deleted. Addition on account of Silver Jangad Stock - HELD THAT:- No dispute that Chopra Brothers had issued bill no 151 dated 25.10.2010 and bill no. 152 dated 27.10.2010, which suitably explain the purchase transaction, but the assessee s explanation that as the updation in the stock registers are done at the month end, these two entries could be made therein, cannot be disregarded. In any case, in the cross enquiries conducted by the Assessing Officer with Chopra Brothers, this aspect has been confirmed and the said confirmation is placed on record. One such an exercise is carried out by the Assessing Officer, it has to be taken to the logical conclusion and it cannot be ignored by the Assessing Officer because the conclusion of the enquiry does not favour his stand. All the material in respect to this transaction were duly before the AO and he did not probe the matter further, yet, because of his doubts, the addition has been made. Similarly, so far as jangad stock of 8.250 kgs received from Mohanlal Sons is concerned, the transaction has been confirmed by the partner of that concern, which was subjected to the survey proceedings at the same point of time when the assessee was subjected to survey. In view of these discussions, as also bearing in mind entirety of the case, we delete this addition

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• 2019 (11) TMI 911
  Disallowance u/s 14A read with rule 8D - HELD THAT:- Undoubtedly the assessee has earned any exempt income of RS . 55564000/ . Claim of the assessee is that it is received on investments of Rs. 8,00,000/- in an Group Real Estate Company. However the assessee has made total investment as per balance sheet, at the beginning of the year of Rs. 114992691/ and at the close of the year of INR 127320663/ . Therefore it is apparent that assessee has huge non-interest-bearing funds available with it for the purpose of making an investment. Thus, we do not find any reason to uphold the disallowance u/s 14 A of the income tax act on account of interest. With respect to the disallowance of expenditure at the rate of 0.5% assessee has received dividend only on the investment of INR 800,000 from the company. As in case of ACB India Ltd vs Asst Commissioner of income tax [ 2015 (4) TMI 224 - DELHI HIGH COURT ] held that the value of investment for working out average value of investment, only those investments are required to be taken from which the assessee has earned exempt income during the year. In the present case the assessee has earned exempt income only from the investment of INR 800,000 which is outstanding at the beginning of the year ended the close of the year. AO is directed to delete the disallowance on account of the interest expenditure u/s 14A and to restrict the disallowance on account of expenditure under that section to the extent of 0.5% of INR 800,000 only. Accordingly the orders of the lower authorities are set aside to that extent. In the result the ground number 2 of the appeal of the assessee is partly allowed. Disallowance being 10% of the vehicle repairs and maintenance expenditure - AO has given a reason that the assessee has incurred the above expenditure is personal expenditure as the director does not own any motor car nor have they shown any income as perquisites on account of the use of the motor car - HELD THAT:- We do not find the above reasons appropriate for making the disallowance because assessee is a company which cannot have any personal expenditure. Further if any addition is required to be made on account of perquisites , the same is required to be made in the hands of the director , if they have used it for their own benefit and not for the purposes of the business of the company. In view of this, we reverse the finding of the learned lower authorities and direct the learned assessing officer to delete ad hoc disallowance made on account of vehicle running and maintenance expenditure. Accordingly ground number 3 of the appeal of the assessee is allowed.

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• 2019 (11) TMI 910
  Penalty u/s 271(1)(c) - deduction u/s 80IAB - Tribunal has reversing the decision of the AO and Commissioner (Appeals) has treated the interest income earned by the assessee from the fixed deposits and advances given to the contractor as well as lease rental from SEZ as income from business, hence, allowed assessee s claim of deduction u/s 80IAB - HELD THAT:- Undisputedly, on the basis of the aforesaid additions made by the AO, penalty under section 271(1)(c) was imposed. Therefore, when the additions on the basis of which the penalty under section 271(1)(c) was imposed have been deleted and assessee s claim of deduction under section 80IAB of the Act in respect of such income has been allowed by the Tribunal, penalty imposed under section 271(1)(c) of the Act cannot survive. Revenue s appeal is dismissed.

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• 2019 (11) TMI 909
  Deduction u/s 54F - AO denied the claim on the date of transfer, the assessee is having more than one house, therefore he is not eligible for claim of section 54F - HELD THAT:- As observed by the AO, himself in the Return of Income filed by him. Therefore, there is no merit in the contention that the Income from these properties is being taken by the mother of the assessee, and that she is not willing to fore go this advantage, which is available to her as per the will. Further, it is seen that the Municipal tax receipt is in the name of the assessee, Shri T.Peddiraju, which shows that the two houses are in the name of the: assessee in the records of Municipal Corporation. All these facts are sufficient to show that for all practical purposes, the assessee is the owner of the said houses, and therefore, is not entitled to claim exemption u/s.54F. It is therefore held that the exemption u/s.54F has been rightly denied by the AO. The addition made is therefore confirmed and all grounds related to this issue are dismissed. Appeal filed by the assessee is dismissed.

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• Customs

• 2019 (11) TMI 908
  Imposition of penalty by the Settlement Commission - Rejection of rectification application - error apparent on the face of record or not - misdescription and undervaluation of imported goods - signage materials - evasion of duty - Section 127B of the Customs Act, 1962 - HELD THAT:- Observing that, the petitioner had fully and truly disclosed it s liability, and had deposited the same and cooperated with the proceedings, the Settlement Commission held that the petitioner was entitled to have the case settled, under Section 127C(5) of the Customs Act. Accordingly, the case was settled. Imposition of penalty - only contention, seriously advanced by Mr. A.K. Seth, appearing for the petitioner, was that the decision, of the Settlement Commission, to award a penalty to the petitioner, was vitiated, as it had been taken on the basis of an erroneous finding, regarding the petitioner having consciously chosen to spread out the imports through the various Ports, with a view to test his chances of success in evasion of duty at different ports - HELD THAT:- The decision, of the Settlement Commission, to award penalty, is not based on any particular finding, but is premised on the overall merits of the case. The Settlement Commission has chosen to pentfurcate the total quantum of penalty, depending on the quantum of imports effected at different ports and, in doing so, we do not see that the Settlement Commission committed any rectifiable error. It cannot be said that the decision, of the Settlement Commission, to impose penalty on the petitioner, suffers from any error apparent on the face of the record. Consequently, the impugned decision, of the Settlement Commission, to reject the petitioner s application for rectification, too, does not suffer from any such infirmity, as would call for interference by this Court, in exercise of its writ jurisdiction. Immunity from penalty can be granted, by the Settlement Commission, either in whole or in part. The Show Cause Notice, dated 24th March, 2017 supra, proposed imposition of penalty, on the petitioner, under Sections 112 and 114AA of the Customs Act. The quantum of penalty, as awarded by the Settlement Commission, is only 10% of the duty evaded by the petitioner, and is, therefore, much less than the penalty which the petitioner might have had to suffer, had the matter proceeded to adjudication. It cannot, therefore, be said that the penalty imposed, by the Settlement Commission, on the petitioner, was unreasonably high - there is no substance in the writ petition filed by the petitioner. It is clarified that applications under Section 127B(5) have to be heard in open Court by the Settlement Commission, and orders, disposing of such applications, are required to be reasoned. Petition dismissed.

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• 2019 (11) TMI 907
  Release of imported goods from Pakistan - rate of duty - Vires of N/N. 5/2019-Customs dated 16.02.2019 - clearance/release of their goods, imported/originating from Pakistan and detained at the customs station Attari Border - payment of duty applicable on the date/time of filing of Bill of Entry - stay of auction proceedings - HELD THAT:- Issue decided in the case of M/S RASRASNA FOOD PVT. LTD. VERSUS THE UNION OF INDIA AND ORS. [ 2019 (8) TMI 1400 - PUNJAB AND HARYANA HIGH COURT ] where it was held that Without going into vires of impugned notification, it is held that all the Petitioners would be liable to pay duty as was applicable at the time of filing of bill of entry coupled with the fact of the imported goods having entered territory of India on 16.02.2019 prior to the issuance of the impugned notification. The Respondent shall release goods within seven days on payment of duty as declared and assessed, if not already paid, ignoring the impugned N/N. 5/2019. It is directed that the Customs Department shall immediately issue the detention memos to facilitate the release of detained goods lying in the godowns of respondent No.4. It is further directed that in case the detained goods have been auctioned for the lack of any stay order till today, the sale proceeds of the same, in view of the detention memos issued by the Customs Department shall be released to the petitioners. Assessment order set aside - petition allowed.

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• 2019 (11) TMI 906
  Valuation of imported goods - prohibited goods or not - import of old and used Digital Multifunction Printers/Devices - hazardous goods or not - rejection of transaction value -Confiscation - imposition of redemption fine and penalty - HELD THAT:- The issue decided in the case of PARAG DOMESTIC APPLIANCES, ATUL AUTOMATION PVT LTD, KETAN KAMDAR DIRECTOR VERSUS COMMISSIONER OF CUSTOMS COCHIN-CUS [ 2017 (10) TMI 812 - CESTAT BANGALORE ] where it was held that the importation of the impugned goods is in violation of Import Policy of the relevant time and also of some of the conditions of Hazardous Waste Rules 2016. The violation of Hazardous Waste Rules is with reference to country of origin certificate. The impugned order confiscating the MFDs is not sustainable in law and therefore, we set aside the same and the impugned goods are allowed to be redeemed on payment of redemption fine. Quantum of redemption fine - HELD THAT:- In the case of Parag Domestic Appliances and Atul Automation Pvt. Ltd., the Tribunal imposed redemption fine of 10% of the value of the goods - By considering the precedent decisions and by following the same, we also hold that the appellant is liable to pay redemption fine of Rs. 50 lakhs for the consignments imported by them. Imposition of penalties - HELD THAT:- This Tribunal in the earlier case have imposed the penalty of 5% of the assessable value under Section 112(a) of the Customs Act, 1962. Keeping in view the consistent practice followed as held in various cases as discussed by the Tribunal in the case of Parag Domestic Appliances and Atul Automation pvt. Ltd.. Therefore applying the ratio of those decisions, we find that the ends of justice shall be met if the penalty imposed under Section 112(a) is reduced to Rs. 25 lakhs (Rupees twenty five lakhs only) for the appellant M/s. Pypye Techserve Private Ltd.. Penalty on the Managing Director Shri Pratik Babaria - HELD THAT:- We uphold the penalty of Rs. 5 lakhs (Rupees five lakhs only) imposed under Section 112(a) of the Customs Act, 1962. Appeal disposed off.

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• 2019 (11) TMI 905
  Principles of Natural Justice - denial of cross-examination - right to cross-examine a deponent though the statement has been used to their detriment - whether the appellants had been placed on notice of proposal, along with reasons thereon, to reclassify the imported goods? - Valuation - rejection of transaction value. HELD THAT:- The proposal in the notice for rejection of declared value, which is empowered under the prescribed Rules, indicates an intent to redetermine the value on an accepted classification. The impugned order has not taken this proposal to its logical conclusion but resorted to section 14(2) of Customs Act, 1962 which is nothing but an alternative proposed in the notice. This alternative proposal should have been preceded by a proposal to reclassify the imported goods and such a proposal is markedly absent. The conclusions derived from the test reports are not unambiguous. While the testing authority did opine that the samples were other than copper residue , we find no elaboration commencing therefrom which could lead to the conclusion that the goods are brass . Mere conclusion of non-conformity to declared declaration does not sanction the adoption of an alternative classification which has not even been proposed. Such non-conformity, even if acceptable, does not empower the invoking of tariff value without undergoing the test of conformity with the description to which such tariff value should be applied. The lack of proposal to subject the goods to an alternative classification and the leap, so to speak, over the unabridged chasm of applicability of the notification for assessment on tariff value renders the impugned order to be unsustainable. Appeal allowed - decided in favor of appellant.

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• Corporate Laws

• 2019 (11) TMI 904
  Seizure of liquidation proceedings - recovery of dues - priority of claims - attachment of bank accounts - HELD THAT:- These two writ petitions can be disposed since Bombay High Court is seized of liquidation of M/s Madras Petrochem Limited and the issue regarding the priority of the claims has to be settled by the Bombay High Court in the pending liquidation proceedings subject to the outcome of SLP filed by the Assistant Commissioner (CT). All questions relating to the prioritising of rival claims as well as approving of the claims is to be undertaken by the Official Liquidator, attached to the Bombay High Court. The petitioner/ICICI Bank shall keep all the 8 (eight) Fixed Deposits renewed pending such exercise. The writ petitions are disposed off relegating the parties to make their submissions before the Official Liquidator, attached to Bombay High Court in accordance with law. The Official Liquidator, attached to Bombay High Court, will examine the same in accordance with the provisions of the Companies Act.

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• Insolvency & Bankruptcy

• 2019 (11) TMI 903
  Initiation of CIRP - Approval of Resolution Plan - Section 30 (6) of Insolvency and Bankruptcy Code, 2016 read with Regulation 39(4) of The Insolvency and Bankruptcy Board of India (Insolvency Resolution Process of Corporate Persons) Regulations, 2016 - whether the plan approved by CoC meets the requirements as referred to in sub-section (2) of Section 30 of the Code, or not? - eligibility conditions of proposed resolution applicant are fulfilled or not? - HELD THAT:- Section 31(1) (2) of the Code deals with the approval or rejection of the resolution plan by the Adjudicating Authority as approved by the CoC. Before approving the Resolution Plan, the Code mandates the Adjudicating Authority to ensure that: (A) the Resolution Plan meets the requirements of Section 30(2) of the Code and (B) the resolution plan has provisions for its effective implementation, as laid down in proviso to Section 31(1) - In respect of compliance of Section 30(2)(a) there is provision in the resolution plan as at Clause 5.4(a), which provides for payment of CIRP costs in priority over payments to any other creditors. The clause inter alia provides that each holder of such priority claim shall be unimpaired under the Resolution Plan and would be paid CIRP Costs (estimated at INR 2.0 Crores) in full as per the prevailing Code and CIRP Regulations from the Effective Date prior to payments to all other Creditors. The Resolution Professional has confirmed in the compliance certificate given in Form H that the Resolution Plan provides for the payment of Insolvency Resolution Process costs. Section 30(2)(a) stands satisfied and it is made clear that Insolvency Resolution Process cost shall be paid in its entirety by the resolution applicant in priority to other debts of the corporate debtor. As per Section 30(2)(b) of the Code, the Resolution Plan must provide for the payment of the debts of operational creditors in such manner as may be specified by the Board which shall not be less than the amount to be paid to the operational creditors in the event of a liquidation of the corporate debtor under Section 53. In this connection Regulation 38(1) of CIRP Regulations provides for payment to the operational creditor in priority to the financial creditors. The requirements as per the Code and regulations have been complied with. Moreover, the Resolution Plan has been approved by the requisite majority of the members of CoC and has been submitted in compliance of Section 30 of the Code for approval. Resolution Professional has confirmed that the Resolution Plan is compliant to sub-section (a) to (f) of Section 30(2) of the Code and also comply Regulation 38 of Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) Regulations, 2016. In absence of any discrimination or perverse decision, it is beyond purview of the Adjudicating Authority to modify the Plan. As per the provisions of the Code, the CoC with the requisite super majority is the competent authority to decide on the rights of various stakeholders by approving a resolution Plan. Adjudicating Authority is not expected to substitute its view, with the unanimous commercial wisdom of the CoC nor should deal with technicality and merits of Resolution Plan unless it is found contrary to the express Provisions of law and goes against the public interest - Admittedly the revival of the corporate debtor company would certainly enhance the interest of all the stakeholders in view of the plan offering higher value than liquidation, the maximization of assets is endeavoured to be achieved which falls in the line to achieve the object of the Code. Approval of Resolution Plan shall confer change in management and ownership of the corporate debtor and the entire control of the Corporate Debtor shall vest with the new management. The RP is directed to hand over all records, assets, paper proceedings and all other belongings of Corporate Debtor to the Resolution applicant within 7 days without any demur - the period spent under adjudication and it is declared that the moratorium order passed by this Bench under Section 14 of the Code shall cease to have effect from the date of this order.

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• 2019 (11) TMI 902
  Approval of Resolution plan - exclusion of 135 days period from 27th August, 2018 to 8th January, 2019 and in addition to the period of 147 days starting from 9th November, 2018 to 4th April, 2019 from the Corporate Insolvency Resolution Process - HELD THAT:- In the present case, we find that during the Corporate Insolvency Resolution Process i.e. completion of 180 days, 3 Mining Leases were renewed by the Government of Telangana. It is true that the Mining Leases are the assets of the Corporate Debtor and Information-Memorandum should have been reflected the assets. It is informed that the aforesaid asset was reflected in the Information-Memorandum but in view of the fact that the Mining Leases were not responsible to have renewed at the end of 180 days. However, we find because of the fact that it was renewed at the time of end of 180 days i.e. on 8th January, 2019, the Adjudicating Authority allowed further 90 days on 10th January, 2019 for completion of the process. Even during the extended period of 90 days, there was nothing to suggest that Committee of Creditors took any step for calling of fresh resolution plan, though it was open to them to call for fresh resolution plan or information that mining lease, which is reflected in the Information-Memorandum , has already been renewed. 90 days having already allowed, we find no ground is made out to exclude any period for completion of the resolution process and in view of the fact that 270 days have already been passed, the Adjudicating authority has no other option but to pass order of liquidation. If proceedings u/s 230 of the Companies Act, 2013 is taken up, it will be open to the Liquidator to take up with creditors or class of creditors (who was the Financial Creditors) and if any of the resolution plan has filed or may be called for following the same procedure of I B Code , may accept such plan as one of the scheme taking into consideration if it is viable and feasible. Appeal disposed off.

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• Service Tax

• 2019 (11) TMI 896
  CENVAT Credit - input services - common input services being used exclusively for providing taxable services or were being commonly used for providing both the types of services - Revenue entertained a view that they are required to pay 10% of value of the exempted services - HELD THAT:- It is well settled law that provisions of Rule 6 (3) would become invocable in case where an assessee avails the Cenvat credit on various inputs or input services which stands utilized by him commonly for providing exempted as well as taxable activities. However, if the assessee reverses the proportionate credit availed in respect of various inputs/input services, which stands utilized for exempted output activities, it has to be held as if no credit was ever availed by them in respect of such exempted activities and the provisions of Rule 6(3) become non-applicable. In the present case, the appellant had taken a categorical stand that not only the proportionate credit but the entire credit availed in respect of the said services stands reversed by them as the appellant intends to buy peace with the revenue. Primarily the allegation against the appellant, was in respect of seven services detailed in the preceding paragraphs and the appellant s plea before the adjudicating authority also revolved around the said seven services only. As such, we are in agreement with learned Counsel that the dispute should revolve only around the disputed seven services which were subject matter of the show cause notice. The fact that the entire credit availed in respect of the said seven services stands reversed by appellant, is required to be verified by the lower authority, for which purpose, we set aside the impugned order and remand the matter to the Original Adjudicating Authority for doing the needful. Appeal allowed by way of remand.

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• Central Excise

• 2019 (11) TMI 900
  Application to Settlement Commission - recovery of short paid duty - Clandestine removal - undervaluation of manufactured goods - it was prayed that the settlement application be rejected, as it did not contain a full and true disclosure of duty liability of Respondents No.1 and 2 - HELD THAT:- Section 32I, which deals with the powers and procedure of the Settlement Commission, provides that, on an application being allowed, by the Settlement Commission, to be proceeded with, under Section 32F, the Settlement Commission would, during the pendency of the application, have, subject to the provisions of Section 32F(4), exclusive jurisdiction to exercise powers and perform functions of any Central Excise Officer, under the Act, in relation to the case. The subjection, of the power so conferred, on the Settlement Commission, to don the mantle of a Central Excise Officer, qua the case before it by Section 32I(1) and (2), to Section 32F(4), is obviously intended to ensure that, buoyed by the said power, the Settlement Commission does not transmute itself into an adjudicating authority, in respect of the case before it. The conferment, on the Settlement Commission, of the powers of a Customs officer , or the powers of the Central Excise Officer would not, ipso facto, result in the Settlement Commission metamorphosing into an adjudicating authority. The powers of a Central Excise Officer , or the powers of the Customs officer , conferred on the Settlement Commission, are so conferred to further its aims and objectives, i.e. to further the process of settlement, and assess whether there has, or has not, been full and true disclosure of liability by the applicant before the Settlement Commission. The Settlement Commission does not, by the conferment of such power, become a parallel adjudicating authority, adjudicating the Show Cause Notice - We are aware that the specific statutory stipulation, in Section 32F(1) of the Act, providing for complexity of the investigation , as a specific ground for the Settlement Commission to decide or to reject the application filed before it, does not find place in Section 32F, as substituted by Section 122 of the Finance Act, 2007. This, however, does not change the legal position, and amounts, basically, to deletion of a statutory superfluity. A perusal of the case, predicated by the respondents before the Settlement Commission, reflects that they questioned the manner in which available evidence had been appreciated, in the Show Cause Notice, dated 16th January, 2013. The repeated refrain, of the respondents, before the Settlement Commission, was that the evidence in the Show Cause Notice was insufficient to make out a case of clandestine removal or undervaluation, to the extent alleged therein - These very submissions, by themselves, indicate that the Settlement Commission ought not to have proceeded with the case, let alone settle it for less than one-tenth of the demand proposed in the Show Cause Notice. Having not chosen to submit themselves to adjudication, the contention that the Revenue had not been able to produce evidence, to support its case of clandestine removal and under valuation, against Respondents No.1 and 2 , to the extent alleged in the Show Cause Notice, was entirely unavailable to the respondents. The Act does not contemplate any such exercise by the Settlement Commission. Wealth of evidence stands cited, in the Show Cause Notice, against the respondents, though, unquestionably, the bulk thereof relates to the data contained in the computer printouts, recovered from the premises of Respondents No.1 and 2 , and retrieved in the presence of the personnel of the said respondents - The extent to which the effect of such evidence could be ignored, in the light of Section 36B of the Act, is also an aspect which could been examined if the respondents choose to subject themselves to adjudication. The findings recorded in the impugned Final Order, in fact, amount to a truncated adjudication of the Show Cause Notice, without the trappings of the regular adjudicatory process, which would have included admission of the evidence cited in the Show Cause Notice, rebuttal thereof by the respondents, adducing of evidence by the respondents in their favour and rebuttal thereof by the Revenue. Such a summary adjudication, as has been undertaken by the Settlement Commission, is unknown to the Act, or to any other law governing the field. The Settlement Commission fell into serious error of jurisdiction, in settling the case arising from the Show Cause Notice, dated 16th January, for an amount of Rs. 11,80,12,105/-, along with interest, as it has chosen to do - petition allowed.

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• 2019 (11) TMI 897
  Interest on refund - Time limitation - reversal of CENVAT Credit by coercion - calculation of interest after the expiry of three months from the date of receipt of application under Section 11B (1) of the Central Excise Act i.e. 10/10/2017 - HELD THAT:- The Department in fact compelled the appellant to reverse the credit in spite of stay in his favour though the appellant informed the Department that they have got the extension of stay but they could not produce the copy of the stay in time and therefore the Department coerced the appellant to reverse the credit. Further, in the present case the deposit made by the appellant was totally unauthorized because the CESTAT has given him complete waiver - Further it has been consistently held by the Tribunal that if the amount is not voluntarily paid by the assessee and later on the case is decided in favour of the assessee, then he is entitled to interest from the date of deposit made by the assessee. The assessee is entitled to interest from the date of deposit till the date of refund - Appeal allowed - decided in favor of appellant.

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• CST, VAT & Sales Tax

• 2019 (11) TMI 898
  Refund of payment with interest - delay in submitting TDS certificates - finalization of assessments got delayed - HELD THAT:- It is evident that assessments for the years 2009 till 2014 i.e. five assessment years, have been finalized vide various orders, three of which are dated 04.11.2019. It has further been averred in the chart that for the remaining two years i.e. 2014-15 and 2015- 16, the assessment orders are likely to be finalized by 31.12.2019. Still further, it has been averred that notice has been issued and served upon the respondents to fix the hearing for 18.11.2019, for finalization of the above assessments of two financial years. Respondents No.1 to 4 are directed to ensure that the amount so ordered to be refunded to the petitioner in the assessment orders for assessment years 2009-10 upto 2013-14, be released forthwith, maximum within three weeks from the date of receipt of certified copy of this order by the respondents - petitioner is directed to co-operate with the authorities in finalization of the assessment proceedings for the years 2014-15 and 2015-16, by not only being present on 18.11.2019 (the date fixed for the same), but also to supply desired documents required for verification by the Assessing Officer.

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• Indian Laws

• 2019 (11) TMI 901
  Mortgage of property - execution of guarantee deeds of the retired director - extension of loan facility and change of the terms of loan to respondent company after the retirement of director - immovable property given as collateral security or not - it is the case of petitioner is that the bank had failed to prove the execution of guarantee deeds - HELD THAT:- It is to be noticed that DRT had framed issues in the OA pending before it. After going through all the documents and evidence on record the DRT had reached to a reasoned conclusion that the issue be decided in favour of the Bank as the Bank was able to prove that present Respondent No.3 company had availed the credit facility through present Petitioner No.1 and Respondent No.4, who also stood guarantors alongwith present Petitioner No. 2. Whether the agreements with D2 and D3 after 21.07.1995 discharged D4, D5, and D6? - What is the extent of liability of D4, D5 and D6? - HELD THAT:- The DRT was cautious of the fact that it was the Bank which had produced on record copy of resolution dated 24th July, 1995 of the Company for creating enhanced credit facility and the said resolution was signed by the new directors, namely, Rajan Mehta and Geetha Mehta who are Respondent Nos. 5 and 6 herein. The Petitioners and Respondent No.4 had taken a stand before DRT that their signatures were obtained on blank papers and that appears to be a correct stand and these personal guarantee bonds were filled later on without even mentioning the names of the persons or addresses of the persons who had allegedly executed the said personal guarantees. In the present case there is no denial of the fact that initially the loan was taken by the Respondent No. 3 Company on the basis of the documents executed by the Petitioners and Respondent No. 4. As the Petitioner No.1 and Respondent No.4 are concerned, they were also Directors; Petitioner No.2 is wife of Petitioner No.1 and she stood surety; the collateral security was of the India Development Bonds pledged by the Respondent No.4. In June, 1995, the entire set of Directors changed and the Respondent Nos.5 and 6 were inducted as new Directors of Respondent No. 3 company and the Petitioner No.1 and Respondent No 4 resigned as Directors of the company - the Petitioner No. 2 requested the Bank for releasing her from her personal guarantee and Respondent No. 4 also requested the Respondent No.1 Bank to return his Bonds which was given as collateral security. It is pertinent to note here that all these documents have been produced on record by none else but the Respondent No.1 Bank itself. There is material of change in the amount being financed by the Respondent No.1 on execution of new set of documents in between the bank and Respondent No.3 company acting through Respondent Nos.5 and 6, the new directors. There is no occasion for the Bank to plead that although the new directors and surety executed the personal guarantee bonds dated 22nd July, 1995 and an immovable property worth much more than the value of loan/limits was given in mortgage, still earlier personal guarantee bonds executed by two erstwhile Directors and Petitioner No.2 are still in force - The DRT was right in coming to the conclusion that the Respondent No. 1 Bank has a right to recover its dues from Respondent No.3 company as well as from Respondent Nos.5 and 6, i.e., new set of Directors and it also has the right to proceed against the property mortgaged by Respondent No.7 and all of them are jointly and severely liable. Petition disposed off.

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• 2019 (11) TMI 899
  Dishonor of Cheque - section 138 of NI Act - Cheque was issued only for guarantee - acquittal of the accused, i.e., respondent - HELD THAT:- It is settled law that the important ingredient for the offence punishable under Section 138 is that cheque must have been issued for the discharge in whole or in part of any debt or other liability. If the cheque is not issued for the discharge of any debt or other liability, Section 138 can not be invoked. The complainant in his cross examination has admitted that the cheque issued was only for guarantee - The important ingredient for the offence punishable under Section 138, therefore, has not been dealt with. On this ground itself the impugned judgment has to be upheld. Further, the fact that the complainant has been giving different dates on which the cheque has been issued also shows that he is economical with truth. It is necessary to note that one who comes to the court, must come with clean hands. More often than not, process of the Court is being abused. Unscrupulous persons from all walks of life find the court-process a convenient lever to retain the illegal-gains indefinitely. Appeal dismissed.

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