TMI Tax Updates - e-Newsletter
November 21, 2024

Case Laws in this Newsletter:

GST Income Tax Customs Corporate Laws Insolvency & Bankruptcy Service Tax Central Excise Indian Laws

Articles

1. Electronic Liability Register

   By: DR.MARIAPPAN GOVINDARAJAN

2. From Inception to Exit- A Complete Guide to LLP Registration, Closure, and GST Compliance

   By: Vivek Ranjan

3. Appeal filed beyond condonable period after writ proceedings disposal not maintainable

   By: Bimal jain

4. Common Mistakes to Avoid While Making Income Tax Payments

   By: Ishita Ramani

News

1. 83 meetings of Network Planning Group held so far with projects worth Rs 15.89 lakh cr

2. Statement on the resumption of India-UK Free Trade Agreement Negotiations

3. The Board’s Role in Navigating Transformation (Special Address by Shri Swaminathan J, Deputy Governor, Reserve Bank of India - November 18, 2024 - at the Conference of Directors of Private Sector Banks in Mumbai)

Notifications

Central Excise

1. 28/2024 - dated 19-11-2024 - CE

Effective Rate of Duty of excise - Amendment in Notification No. 11/2017-Central Excise, dated the 30th June, 2017

GST - States

2. 25/2024—STATE TAX - dated 5-11-2024 - Maharashtra SGST

Seeks to amend notification No. 50/2018- State Tax dated 18th November, 2018

3. 24/2024-State Tax - dated 5-11-2024 - Maharashtra SGST

Seeks to amend notification No. 5/2017- State Tax dated 21st June, 2021

4. 23/2024-STATE TAX - dated 5-11-2024 - Maharashtra SGST

Seeks to provide waiver of late fee for late filing of NIL FORM GSTR-7

5. 22/2024-State Tax - dated 5-11-2024 - Maharashtra SGST

Seeks to notify the special procedure under section 148 of the MGST Act for rectification of demand orders issued for contravention of section 16(4) of the said Act.

6. 21/2024-State Tax - dated 5-11-2024 - Maharashtra SGST

Seeks to notify date under sub-section (1) of Section 128A of MGST Act.

Income Tax

7. 120/2024 - dated 19-11-2024 - IT

Exemption from specified income U/s 10(46) of IT Act 1961 – ‘National Aviation Security Fee Trust’

8. 119/2024 - dated 19-11-2024 - IT

Exemption from specified income U/s 10(46) of IT Act 1961 – ‘District Legal Service Authority’

Circulars / Instructions / Orders

FEMA

1. No. II/ 21022/ 23(04)/ 2024/ FCRA-II - dated 8-11-2024

Denial/Refusal of Applications of Registration and Renewal – Reasons for denial/refusal

2. No. II/21022/23(03)/2024-FCRA-II - dated 25-10-2024

Permission to FCRA associations to file another application in Form-6E for intimating change of committee members even if their one application is already pending on FCRA portal

3. II/21022/36(0158)/2023-FCRA-II - dated 27-8-2024

Advisory against fake/ fraud emails/documents being circulated in the name of officials of Ministry of Home Affairs

Highlights / Catch Notes

GST

• Court Upholds GST Audit Notice for De-Registered Entity; Highlights Compliance Post De-Registration.

  Case-Laws - HC : The High Court dismissed the writ petition challenging the notice issued u/s 65 of the Maharashtra Goods and Services Tax Act, 2017 for conducting an audit for the financial year 2020-21, even though the petitioner had ceased to be registered on the date of ordering the audit. The Court held that the provisions of Section 65 dealing with audit would apply to a person who was registered under the CGST Act for the period for which an audit is ordered, irrespective of subsequent de-registration. The preliminary audit report had found excess input tax credit claimed, improper reversal of input tax credit, and short disclosure of other income, resulting in a total tax plus interest liability. The Court observed that a person cannot escape audit proceedings by claiming de-registration, as obligations u/s 65(5) must be complied with, and Section 29(3) requires discharge of obligations even after cancellation of registration. Obstructing audit proceedings by taking such a plea would be improper if the assessee has defaulted in tax payment, wrongly availed input tax credit or refund.
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• High Court Quashes Orders Exceeding U.P.G.S.T. Act Time Limits; Orders De-freezing of Petitioner's Accounts.

  Case-Laws - HC : The case pertains to the jurisdiction of impugned orders under the U.P.G.S.T. Act, 2017, and the time limitation u/s 73 and Section 44 of the Act. The key points are: the retrospective effect of notifications, the time limit prescribed for issuing orders u/s 73(9) based on the due date of filing annual returns u/s 44(1), and the validity of the impugned orders in light of this time limit. The due date for filing the annual return for the financial year 2017-18 was extended to 05.02.2020 via notifications. Consequently, the three-year time limit u/s 73(10) for issuing orders ended on 05.02.2023. However, the impugned orders were dated 05.10.2024 and 02.12.2023, beyond the prescribed time limit. Therefore, the High Court held that the impugned orders were beyond jurisdiction, being barred by the time limit u/s 73(10). Consequently, the writ petition was allowed, the impugned orders were quashed, and the petitioner's frozen accounts were ordered to be de-frozen.
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• Excessive delay in issuing show cause notice & adjudication order violates natural justice; notice quashed, proceedings restrained.

  Case-Laws - HC : Inordinate, unexplained delay in issuing show cause notice and adjudication order violates principles of natural justice. The Court, citing precedents, quashed the show cause notice and restrained the Respondents from proceeding further with the inordinately delayed adjudication. The impugned order was set aside, preventing further steps or proceedings arising from it. The petition was allowed.
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• HC grants interim relief in GST show cause notice case, extends reply time.

  Case-Laws - HC : The High Court granted interim relief to the petitioners challenging an order issued u/s 74 of the Central/West Bengal Goods and Services Tax Act, 2017. Considering the prima facie case and the clarification issued by the Central Board of Indirect Taxes and Customs, the petitioners were entitled to limited protection. The Court extended the time for responding to the show cause notice by three weeks and granted liberty to mention the matter after the exchange of affidavits. The respondents were also granted liberty to apply.
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• Rectification: Show Cause Notice quashed for period pre 9/10/2018 due to Notification 54/2018's prospective application.

  Case-Laws - HC : The High Court rectified its previous order, holding that Notification No. 54/2018 Central Tax shall apply prospectively from 9th October 2018 only. Consequently, the show cause notice dated 31.03.2023, issued on the basis of retrospective operation of the said Notification for the period prior to 9.10.2018, was quashed as being without jurisdiction. The amount quantified towards alleged erroneous refund for the period before 9.10.2018 would not survive, as the Notification would be applicable prospectively. The petition was disposed of accordingly.
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• GST appeals allowed despite cash payment shortfall, awaiting Supreme Court's verdict.

  Case-Laws - HC : Notification 53/2023 issued by the Ministry of Finance permitted filing delayed appeals beyond Section 107 of GST Act, stipulating payment of 12.5% of pending amounts, with 20% paid from Electronic Cash Ledger. This implied the 10% prescribed by statute could be paid from Electronic Credit Ledger. The High Court initially rejected the appeal on grounds of payment from Electronic Cash Ledger. However, as the Supreme Court stayed the Division Bench judgment, the High Court opined that pending Supreme Court's decision, the appeal should be considered on merits. Consequently, the order rejecting the appeal was set aside, and the petition was allowed.
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• Aggregator Must Collect GST on Full Invoice Amount for Lab Services, Not Just Margin, and Is Not Exempt as an E-commerce Operator.

  Case-Laws - AAR : The applicant, acting as an aggregator for diagnostic and lab services provided through third-party diagnostic labs, is liable to collect GST on the entire invoice amount raised on companies/insurance companies/insurance brokers, not merely on the margin. The applicable tax rate is based on the services being diagnostic services covered under healthcare services, classified under SAC 9993. The applicant does not qualify as an e-commerce operator or a clinical establishment eligible for exemption. Therefore, the applicant must collect GST on the diagnostic and lab services provided to clients. The applicant also does not fall under the definition of an "Insurance Agent" when invoicing insurance companies, and must raise invoices as per other companies. The issue of collecting Tax Collected at Source (TCS) is redundant since the applicant is not an e-commerce operator.
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Income Tax

• Taxpayer Entitled to Foreign Tax Credit Despite Late Form 67 Filing, Upholding India-Sri Lanka Double Taxation Agreement.

  Case-Laws - AT : Section 90 of the Income Tax Act allows relief from double taxation by granting foreign tax credits (FTCs) on foreign income taxed in both India and the other country. The India-Sri Lanka DTAA mandates granting FTCs to avoid double taxation. Denying FTC due to a procedural delay in filing Form 67 goes against the DTAA's objective of mitigating double taxation. The assessee fulfilled the substantive requirement of paying taxes in Sri Lanka and subsequently claimed FTC as per DTAA u/s 90. Filing Form 67 during the rectification stage demonstrated a good faith effort to comply with procedural requirements. Courts and tribunals have held that procedural delays should not hinder substantive relief when the claimant has met other substantive requirements. As the assessee complied with substantive requirements and the objective of Section 90 and the DTAA is to mitigate double taxation, procedural technicalities should not compromise this objective when substantive compliance is evident. The assessee is entitled to FTC on foreign tax paid.
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• Tax Officer's Error in Income Inquiry Upheld; Appeal Dismissed for Lack of Evidence on Unexplained Income Claims.

  Case-Laws - AT : Section 263 revision - Unexplained income u/s 69A read with Section 115BBE - Cash seized shown as 'income from other sources' - Whether to be treated as unexplained income u/s 69A read with Section 115BBE? Held: For invoking Section 263, the Assessing Officer's order should be erroneous and prejudicial to revenue interests. As per Explanation 2(a) to Section 263, an order is deemed erroneous if passed without making required inquiry or verification. In this case, the assessee's claim was unsupported by contemporaneous evidence, and the Assessing Officer failed to verify the same. Hence, there was a failure to make necessary inquiry/verification, rendering the order erroneous and prejudicial to revenue interests. Therefore, the invocation of Section 263 by the Principal Commissioner of Income Tax was as per law. Accordingly, the assessee's appeal on this ground is dismissed.
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• Long-term capital gains tax bonds u/s 54EC require a 5-year lock-in, prohibiting transfer or early redemption.

  Case-Laws - HC : Capital gains tax exemption bonds issued u/s 54EC of the Income Tax Act, 1961, are long-term specified assets with a mandatory lock-in period of 5 years. The legislative intent behind this lock-in period is to ensure long-term capital allocation and financial stability. The bonds cannot be transferred, converted into money, or used as security for a loan within the lock-in period, as it would violate the statutory purpose and contractual terms. Premature cancellation or redemption of these bonds is not permissible, even if the capital gains exemption is not claimed or the investor is willing to forgo interest. Allowing such premature redemption would undermine the object and purpose of the bond scheme and contravene statutory obligations u/s 54EC. The terms and conditions governing the bonds are binding on both parties, and cannot be unilaterally altered or modified through judicial intervention under Article 226 of the Constitution.
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• Tribunal Invalidates PCIT's Order for Fresh Assessment, Supports AO's Original Evaluation of Undisclosed Funds.

  Case-Laws - AT : Assessee received funds from four parties, which were not considered by the Assessing Officer (AO) during assessment proceedings u/s 147 read with Section 144. The Principal Commissioner of Income Tax (PCIT) cancelled the assessment framed by AO and directed to frame assessment afresh after verifying the funds received. However, the Appellate Tribunal held that the assessment framed by AO cannot be considered erroneous or prejudicial to the revenue's interest as the AO was unaware of these funds during assessment proceedings. Invoking Section 263 by PCIT is invalid as per the Supreme Court's judgment in Malabar Industries Limited case, which mandates that for invoking Section 263, the assessment order must be erroneous and prejudicial to revenue's interest. Assessee's appeal allowed.
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• Company proves genuineness of share premium; tax can't treat it as unexplained income.

  Case-Laws - AT : Non-proving identity, creditworthiness, and genuineness of share premium received cannot be treated as unexplained income if sufficient documentary evidence is provided. Once a company proves existence and authenticity of shareholders, it discharges burden u/s 68. Share premium is a matter of business prerogative, and revenue cannot question its quantum without evidence of collusion or mala fide intent. If an assessee sufficiently establishes identity, creditworthiness, and genuineness of share capital transaction, addition u/s 68 as unexplained cash credit is unsustainable and should be deleted by the Assessing Officer.
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• Brokerage Income Not Subject to TDS: Tribunal Rules in Favor of Broker on Commodity Transactions.

  Case-Laws - AT : The assessee, acting as a broker and intermediary, facilitated commodity transactions on the National Spot Exchange (NSEL) platform on behalf of clients. The transactions were carried out under the guise of commodity trading without ensuring actual delivery. The Revenue sought to treat the profits earned by the assessee as interest income, invoking TDS provisions u/s 194A. However, the Tribunal held that Section 194A cannot be invoked against the assessee as it was not responsible for paying interest to the clients. The assessee's role was limited to earning brokerage income, which was duly offered for taxation. The Tribunal relied on judicial precedents stating that TDS provisions cannot be applied to intermediaries/agents acting on behalf of clients. Furthermore, a SEBI order placed the primary responsibility on NSEL, not the brokers. Consequently, the Tribunal upheld the CIT(A)'s order, dismissing the Revenue's grounds regarding TDS u/s 194A.
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• Tribunal Upholds CIT(A) Decision: Assessee's Cash Deposits During Demonetization Explained, Revenue's Appeal Dismissed.

  Case-Laws - AT : The assessee's unexplained cash credits u/s 68 were deleted by the CIT(A) after accepting the submissions that the cash receipts from various sources like cash sales, realization of outstanding debtors, and current year debtors matched with the VAT returns. The Tribunal noted that the assessee explained the cash deposits in specified bank notes (SBNs) received during demonetization, arising from cash sales during the relevant assessment year, realization of outstanding debtors from previous years, and current year debtors, as per the books of accounts. The assessee reconciled the cash sales, outstanding debtors with the VAT returns. Although the turnover increased significantly, the cash realization through sales and debtors was not abnormal. The assessee filed confirmed account statements before the Tribunal. Since the books of accounts and VAT returns were accepted, and no defect was found in the cash generation before November 8, 2016, the Tribunal held that the cash deposited in SBNs during demonetization stood explained. Relying on a precedent, the Tribunal ruled that SBNs cannot be added when the source of cash is explained. Consequently, the CIT(A)'s order was upheld, and the Revenue's appeal was dismissed.
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• Tribunal Upholds Reduced Tax Additions and Deductions, Dismisses Revenue's Claims Due to Insufficient Evidence.

  Case-Laws - AT : CIT(A) restricted addition on account of accommodation entries to 15% instead of 100%, as the Assessing Officer failed to establish that work was not actually performed. The Tribunal concurred with CIT(A)'s disallowance rate of 15% and rejected Revenue's contention to restore 100% disallowance. Regarding commission expenses of INR 8,81,3000/-, the Tribunal upheld CIT(A)'s deletion in the absence of material to substantiate the allegation of 1% commission payment. CIT(A) correctly allowed the claim of deduction u/s 80-IA based on the Assessing Officer's remand report. Concerning disallowance u/s 14A, the Tribunal upheld CIT(A)'s findings as the assessee had suo moto disallowed a higher amount of 1% of average investment as administrative expenses compared to the Assessing Officer's disallowance of 0.5%. The Tribunal dismissed the Revenue's grounds on all issues.
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• Income reclassified by tax officer as technical fees instead of royalty, contrary to tribunal order.

  Case-Laws - AT : The assessing officer (AO) exceeded jurisdiction by reclassifying income as fees for technical services (FTS) instead of royalty, contrary to the limited remand order from the Tribunal. The Tribunal's remand was restricted to examining chargeability under the Act/DTAA as royalty, not FTS. The AO should have sought an open remand from the Tribunal to consider FTS taxation. An AO cannot go beyond a limited remand's scope and examine matters outside the appeal's subject matter, affirmed in S.P. Kochhar and Bhagwandas Associates cases. The impugned addition was deleted on technical grounds as the AO overstepped the Tribunal's limited directions by taxing income as FTS instead of examining royalty chargeability per the remand order.
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Customs

• Goods Reclassified as 'Low Aromatic White Spirit': Tribunal Overturns Confiscation and Penalty Due to Lack of Testing.

  Case-Laws - AT : The appellant imported goods declared as 'Low Aromatic White Spirit' classifiable under Customs Tariff Heading (CTH) 2710 1990, while the adjudicating authority reclassified them as 'Kerosene' under CTH 2710 1910, alleging mis-declaration. The goods were confiscated u/ss 111(m) and 111(d) of the Customs Act, 1962, for violating the Foreign Trade Policy and Petroleum Rules. The Tribunal observed that no test was conducted to determine if the goods met the requirements of 'Low Aromatic White Spirit'. It discussed the characteristics, manufacturing process, and international classification of such products under the Harmonized System Nomenclature. Based on the technical literature, the Tribunal held that the imported goods were rightly classifiable as 'Low Aromatic White Spirit' under CTH 2710 1990, not 'Kerosene'. Consequently, there was no violation of the Foreign Trade Policy or Petroleum Rules, and the goods were not liable for confiscation u/ss 111(m) and 111(d). The penalty imposed u/s 112(a)(i) was also set aside.
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• Meat Exporter's Penalties Annulled Due to Insufficient Evidence and Procedural Missteps in Customs Investigation.

  Case-Laws - AT : The appellant, HAIL, was engaged in slaughtering animals and exporting meat during the relevant period. It availed the benefit of the VKGUY scheme, which provides incentives in the form of scrips for exporters of agricultural and village industry products. The department alleged that HAIL exported meat using pre-signed and pre-stamped veterinary certificates without actual inspection of animals. The Show Cause Notice (SCN) relied on 22 documents, including 14 statements recorded u/s 108 of the Customs Act. However, as per Section 138B, these statements can only be relevant if the persons are dead, cannot be found, or are examined as witnesses. The adjudicating authority did not follow this procedure. Without the statements, the remaining 8 documents did not establish that HAIL exported meat using pre-signed certificates. Consequently, the penalties imposed on HAIL and individuals could not be sustained, and the impugned order upholding the Order-in-Original needed to be set aside.
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• Tribunal Rules on Customs Duty Dispute Over Car Imports and Transaction Value; Finds 21.125% Price Increase Unwarranted.

  Case-Laws - AT : Adjudication of a customs duty dispute involving the import of cars and the determination of the 'transaction value' u/s 14 of the Customs Act, 1962. The key points are: The appellate tribunal found discrepancies and lack of evidence regarding the supplementary invoices raised by the supplier, Bentley Motors Ltd., on the importer, Exclusive Motors Pvt. Ltd. The credibility of these invoices, purportedly adjusting freight and insurance costs, was questioned due to inconsistencies in record-keeping, unavailability of invoices for certain shipments, and lack of proof of payment through banking or informal channels. The tribunal also questioned the reliance on export declarations filed with HMRC (UK) to treat the contract as FOB terms, as these were mere statistical reports without legal consequences. The contract terms between the parties were found to be CIP/DAP, placing the risk liability on the supplier until import into India. Altering the terms to FOB would require evidence of risk liability transfer, which was lacking. The tribunal held that the customs authorities failed to discharge the burden of establishing that freight and insurance were excluded or unascertainable, as required under the Customs Valuation Rules, 2007. Consequently, the enhancement of the declared price by 21.125% to arrive at the 'transaction value' was foun.
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Corporate Law

• Appointment of adjudicator for corporate penalties u/s 454 of Companies Act; order communication mandated.

  Case-Laws - CGOVT : This order pertains to the appointment of an Adjudicating Officer u/s 454 of the Companies Act, 2013, for adjudicating penalties. It invokes Rule 3(9) of the Companies (Adjudication of Penalties) Rules, 2014, as amended in 2019, mandating that a copy of this order be sent to the defaulting company, its director in default, the Regional Director (Eastern Region), and the Ministry of Corporate Affairs. The summary covers the legal provisions involved and the parties to whom the order must be communicated, without mentioning specific names or providing additional commentary.
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• Penalty imposed on company & directors for non-compliance with securities allotment rules.

  Case-Laws - CGOVT : The Registrar of Companies, Chennai, acting as the Adjudicating Officer u/s 454(1) of the Companies Act, 2013, found non-compliance with Rule 14(6) of the Companies (Prospectus and Allotment of Securities) Rules, 2014 by the company and its directors. Consequently, a penalty of Rs. 10,000 was imposed on the company and Rs. 10,000 on the officers in default, totaling Rs. 20,000, as prescribed u/s 450 of the Companies Act, 2013. The penalty amount is to be paid online within 90 days of receiving the order, and proof of payment is to be submitted to the office.
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IBC

• Security Interests Over Corporate Debtors Must Defer to IBC's Asset Distribution Rules During Insolvency Proceedings.

  Case-Laws - HC : The High Court ruled that security interests over assets of a corporate debtor to secure amounts due under a judgment or decree must give way to the provisions of the Insolvency and Bankruptcy Code (IBC). The IBC governs insolvency and bankruptcy proceedings, which may lead to an approved resolution plan or liquidation. The interplay between rights of a judgment creditor and implications of insolvency law as existed earlier cannot apply when the IBC governs the field. The court clarified that a previous ruling releasing funds deposited by a corporate debtor to a judgment creditor is limited to that case, as the Supreme Court has conclusively released the ICICI Guarantee in the present case based on similar pleadings. Considering the IBC provisions and their implications for decree holders, the monies deposited by the corporate debtor appellant constitute its assets, though not in its possession. The appellant is permitted to withdraw the appeal and the amounts deposited, along with accrued earnings, as continuing with the deposit serves no meaningful purpose given the IBC's waterfall mechanism for distribution in liquidation proceedings.
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Indian Laws

• Reinstatement of land-loser's son-in-law at Kaiga Atomic Power Project upheld by Supreme Court.

  Case-Laws - SC : The appellant challenged the Labour Court's award regarding his employment as a land-loser's son-in-law in the Kaiga Atomic Power Project. The Writ Court erred in ignoring evidence of the appellant's marriage and disregarding the Labour Court's factual findings without compelling reasons. The Supreme Court held that the appellant is entitled to relief per the Labour Court's award with consequential service benefits. However, backwages from when the Single Judge set aside the award till reinstatement are disallowed. The appellant must be reinstated within four weeks, and the gap period considered for other service benefits. The appeal is allowed.
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Case Laws:

• GST

• 2024 (11) TMI 912
  Challenge to notice issued u/s 65 of the Maharashtra Goods and Services Tax Act, 2017 (SGST Act) in Form No. GST ADT-01 read with Rule 101 of the Goods and Services Tax Rules, 2017 (GST Rules) by which the respondents seek to conduct an audit for the financial year 2020-21 - whether the provisions of Section 65 of the SGST Act dealing with audit would apply to a person who was registered under the CGST Act for the period for which an audit is ordered but who ceases to be registered on the date the audit is ordered? - HELD THAT:- In the instant case, the preliminary findings of the audit as per its report dated 11 October 2024 is that the petitioner has claimed an excess input tax credit of Rs.3,60,44,378/- which is ineligible under the provisions of the Act. Furthermore, there is also a prima-facie finding that in the absence of proper documentation reversal of input tax credit (Rs.10,36,950/- + Rs.1,17,75,353/- + Rs.1,17,75,353/-) amounting to Rs.2,45,87,656/- is not in accordance with the law. Preliminary audit reports also suggest short disclosure of other income, resulting in the short payment of tax. The preliminary audit report prima facie has found a total tax plus interest liability of Rs.7,01,31,710/- for the period 2020-21. In our view, the petitioner cannot escape non-facing audit proceedings in the light of these prima facie findings of the audit conducted by the authorities by taking a plea that since they have now been de-registered they are not covered by the provisions of Section 65 of the SGST Act. There is an obligation cast on a person in whose case of audit is conducted to comply with the directions of the tax authorities under Section 65(5) and these obligations are not affected even if registration is subsequently cancelled. This is made clear from the provisions of Section 29(3) of the SGST Act. If the contention of the petitioner that because they are de-registered, they are not covered by the provisions of Section 65 is accepted, then it would lead to provisions of Section 29(3) dealing with discharge of obligation under the Act or the Rules redundant. It is a settled position that any interpretation that will make the Act s provisions redundant or nugatory cannot be accepted. Instead, we must adopt an interpretation that gives meaning to all the provisions taken together, if necessary, by resorting to a harmonious construction. It is also important to note that provisions of Section 65 of the SGST Act, read with Rule 101, give sufficient and adequate opportunity to a noticee to explain his case before any audit report is prepared. If an assessee has complied with all the provisions of the Act or Rules and has not defaulted in payment of tax or has not made short-payment of tax or has not wrongly availed input tax credit or refund, then there should not be any hesitation on the part of the noticee to make his submissions and come clear rather than to obstruct the audit proceeding by taking the plea which is canvased. The provisions of Section 65 of the SGST Act would be applicable for conducting the audit of a financial year when a person was registered, although, on the date of ordering the audit, such a person ceases to be registered voluntarily or otherwise. This writ petition, challenging the impugned notice dated 21 August 2024 (Exhibit-A) and preliminary audit findings dated 11 October 2024 (Exhibit-B), is dismissed.

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• 2024 (11) TMI 911
  Jurisdiction of impugned orders under U.P.G.S.T. Act, 2017 - time limittaion u/s 73 and Section 44 of the Act - retrospective effect of notifications - impugned order passed beyond the time limit prescribed therein as calculated from the due date of filing annual returns prescribed in Section 44 (1), which was extended to 05.02.2020 and the time limit of three years ended on 05.02.2023 but the impugned orders are dated 05.10.2024 and 02.12.2023 - HELD THAT:- Ordinarily the due date for filing annual return is 31st December of the end of the Financial Year, which in the case of financial year 2017-18 would be 31.12.2018, however, this due date for filing annual return, was extended vide notification of the Central Board of Direct Taxes and Customs dated, 03.02.2018 to 05.02.2020 and this notification was adopted by the State of U.P. vide notification dated 05.02.2020. Based on this notification, the period of three years mentioned in sub Section 10 of Section 73 would end on 05.02.2023 meaning thereby, an order under sub Section 9 of Section 73 for the financial year 2017-18 could have been passed by 05.02.2023 but not after it. Apparently the impugned orders are beyond the time limit prescribed under sub Section 10 of Section 73 as applicable for the financial year 2017-18 and therefore the impugned orders are beyond jurisdiction being barred by the time provided in the said provision, therefore, the writ petition is allowed and the impugned orders dated 05.10.2024 and 02.12.2023 issued by the Deputy Commissioner, State Tax, Sector 05, Lucknow quashed. The accounts of the petitioner which have been freezed shall be de-freezed - petition allowed.

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• 2024 (11) TMI 909
  Seeking interference by restoration of the appeal - petitioner could not respond to the notices for prosecuting his appeal because he was unwell - HELD THAT:- Considering petitioner was unwell and under medical treatment at the time notices referred to in impugned order regarding the appeal were served upon him, it is required to interfere. Impugned order is set aside and quashed only on the ground that petitioner appears to have been prevented from prosecuting his appeal. The writ petition is disposed of.

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• 2024 (11) TMI 908
  SCN issued beyond time limitation - HELD THAT:- It was pointed out by learned advocate that the audit ultimately concluded on 2nd August, 2024 which is beyond the period prescribed under the provisions of Section 65(4) of the GST Act and consequently, the impugned show-cause notices issued by the respondent-Authorities in response to each paragraph of the audit report are without jurisdiction. Issue Notice, returnable on 4th December, 2024. In the meanwhile, the proceedings pursuant to the impugned show-cause notice may continue, however, no final order shall be passed without permission of this Court during pendency of this petition.

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• 2024 (11) TMI 907
  Violation of principles of natural justice - cancellation of registration without providing reasons in the order - petitioner was not submitting his quarterly return - HELD THAT:- Since in the present case, the basis for initiating action was non-filing of return, as alleged in the show cause notice, subsection (2) of the Section 29 is applicable. The proper officer is empowered to cancel registration of a person if he is satisfied that any of the conditions stipulated in Section 29(2)(b) are attracted - The order impugned is completely non speaking and does not record and reason why the registration has been cancelled. The impugned order is set aside. Case is remanded to concerned authority for consideration afresh and to pass appropriate order(s) in accordance with law - Petition is allowed by way of remand.

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• 2024 (11) TMI 906
  Challenge to order issued under Section 74 of the Central /West Bengal Goods and Services Tax Act, 2017 - HELD THAT:- Having considered the materials on record and taking note of the clarification issued by the Central Board of Indirect Taxes and Customs dated 17th July, 2023, the writ petition raises jurisdictional issue. The writ petition is required to be heard. Taking note of the prima facie case made out by the petitioners, inter alia, including the clarification offered by the Central Board of Indirect Taxes and Customs dated 17th July, 2023, the petitioners are entitled to a limited protection, especially since a show cause notice dated 30th July, 2024 has already been issued. Liberty granted to the petitioner to respond to the show cause dated 30th July, 2024. Since the time to respond has already expired during the pendency of the writ petition on 5th September, 2024, the same is extended by three weeks from date - Liberty to mention for inclusion in the list after expiry of the period for exchange of affidavits. Liberty to the respondents to apply.

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• 2024 (11) TMI 905
  Recovery of refund - petitioner objected to the proposed demand by pointing out that Notification No. 54/2018 Central Tax was prospectively introduced w.e.f. 9.10.2018 and therefore refund prior to such date ought not to be recovered - rectification of order - HELD THAT:- This Court while considering the mistakes pointed out in Misc. Civil Application No.1 of 2020 in Special Civil Application No. 15833 of 2018 has passed the rectification order holding that Notification No.54 of 2018 shall apply prospectively with effect from 9th October, 2018 only. The impugned show cause notice dated 31.03.2023 issued on the basis of retrospective operation of Notification No.54 of 2018 dated 09.10.2018 is held to be without jurisdiction. The impugned notice is therefore, quashed and set aside as Notification No.54/2018 would be applicable prospectively with effect from 09.10.2018 and therefore, the amount quantified for the period prior to 09.10.2018 towards alleged erroneous refund would not survive. Petition is disposed of.

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• 2024 (11) TMI 904
  Adjudication of challenge to appellate order - short payment of Goods and Services Tax - HELD THAT:- The first Division Bench directed a quantum of deposit with liberty to parties inasmuch as, petitioner could avail of its remedy upon constitution of the Tribunal and in event petitioner does not do so within time provided upon reconstitution, the department would be free to proceed. The writ petition is disposed of.

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• 2024 (11) TMI 903
  Challenge to order regarding tax demand based on defects highlighted by Audit Department for assessment year 2017-18 - mismatch between GSTR-3B and GSTR-2A leading to tax demand - lack of personal hearing before passing orders by the respondent - HELD THAT:- A perusal of the impugned order, dated 30.12.2023 would reveal that the respondent has once again confirmed the very same demand which was already demanded vide order dated 19.12.2023 on the similar defect, which is nothing but overlapping the earlier issue and it was the subject matter of W.P.No.7855 of 2023, which was disposed of by this and remanded the matter for fresh consideration while setting aside the earlier impugned assessment order dated 19.12.2023. This Court is inclined to set aside the present impugned assessment order dated 30.12.2023 and remanded the matter for reconsideration. The respondent is directed to reconsider this matter and pass orders afresh after affording an opportunity of personal hearing to the petitioner. Petition disposed off.

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• 2024 (11) TMI 902
  Grant of anticipatory bail - non-existent Firm/Entity carried out transactions - claim of Input Tax Credit without there being actual movement of goods and as such has defrauded the government exchequer of due taxes - HELD THAT:- Regard being had to the background facts of the case, in which, the assessment has already been quashed and the matter has been remanded back to the assessment authority apart from the quashment of the criminal case instituted in Bokaro Steel City relating to a similar nature of offence, it is required to extend the privilege of anticipatory bail to the petitioner. The petitioner accordingly is directed to surrender before the learned court below within a period of four weeks and on her surrender, she shall be released on bail on furnishing bail bond of Rs. 10,000/ with two sureties of the like amount each to the satisfaction of learned Judicial Magistrate, Jamshedpur in connection with Telco P.S. Case No. 104/2018, corresponding to G.R. Case No. 2027/2018, subject to the conditions as laid down under Section 438(2) of the Code of Criminal Procedure. Application allowed.

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• 2024 (11) TMI 901
  Rejection of appeal on the ground that the ten per cent has to be paid from the Electronic Cash Ledger - HELD THAT:- N/N. 53/2023 dated 02.11.2023 issued by the Ministry of Finance, Department of Revenue (Central Board of Indirect Taxes and Customs), which permitted filing of delayed appeals even beyond the period provided under Section 107 of the GST Act, that the stipulation was of paying an amount of 12.5 per cent of the amounts pending and due to be paid to the Department as against the 10 per cent prescribed by the statute. In the said Notification issued by the Central Government on the recommendation of the GST Council, it has been specifically stated that at least 20 per cent of the 12.5 per cent remaining due and payable should be paid from the Electronic Cash Ledger. Hence, even the GST Council understood the ten per cent to be enabled for payment through the Electronic Credit Ledger. It is noticed that the Hon ble Supreme Court has stayed the Division Bench judgment and in such circumstances, especially since consideration of the appeal on merits is the question raised, it is opined that pending decision of the Hon ble Supreme Court, the appeal should be considered on merits. The order in appeal dated 14.01.2023 is set aside - petition allowed.

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• 2024 (11) TMI 900
  Challenge to adjudication order dated 19th October, 2023 - rejection of petition on the ground of time limitation - HELD THAT:- Revenue submits, there is no dispute with regard to facts in relation to filing of the appeal. Impugned order dated 24th April, 2024 is set aside since, thereby petitioner stood deprived of hearing - the writ petition is disposed of.

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• 2024 (11) TMI 899
  Requirement to collect GST on the diagnostic and lab services provided through third party diagnostic labs - GST has to be collected for the whole invoice amount or on the margin on the supply alone? - applicable tax rate and which SAC to be used - collection of TCS - assesse fall under the definition/meaning of an Insurance Agent if invoiced to an insurance company or not. Whether the assesse need to collect GST on the diagnostic and lab services provided through third party diagnostic labs? If yes, Whether GST has to be collected for the whole invoice amount or on the margin on the supply alone and what will be the applicable tax rate and which SAC to be used? - HELD THAT:- The applicant, with regard to taxability of diagnostic and lab services provided through third party diagnostic labs, contends that they act as an aggregator for the said services for companies/insurance companies/insurance brokers; they provide access to the digital platform and digital tools, for companies/insurance companies/insurance brokers, to manage the workflows for availing the services of the said diagnostic labs / clinical establishments for their employees or group of people; as per Notification 12/2017-Central Tax, services by way of health care services by clinical establishment are exempted and thus the service is being provided by the clinical establishment to the persons using the digital platform of the applicant and the applicant is only working as an aggregator; the service mentioned by the applicant comes under the definition of e-commerce and hence the applicant is not required to collect the tax under GST. Whether the applicant qualifies to be an e- commerce operator or not? - HELD THAT:- In the instant case the applicant owns a digital platform / mobile App. The employees or group of people of companies / insurance companies / insurance brokers i.e. recipients of service having contract with the applicant, selects the diagnostic labs or wellness providers and books specific date time, from the list provided on the digital platform / App. Once the tests are done the diagnostic labs or wellness providers raise invoice on the applicant and the applicant in turn raises the invoice on the companies after retaining their margin - The applicant merely provided the platform for the recipients so as to enable them to select the lab from whom the services are to be procured. Once the selection is over, the labs after the tests provide the reports directly to the recipients. The invoices are raised by the labs on the applicant. Thus the applicant doesn t qualify to be an e- commerce operator. The applicant, admittedly, adds mark up on the cost of the services procured from the diagnostic labs / wellness providers and raises invoices on their clients with the marked up value. In this scenario, the applicant has to charge GST on the whole invoice amount, being the transaction value but not merely on the mark-up value, in terms of Section 15(1) of the CGST Act 2017 - In the instant case, the services being provided by the applicant are by way of diagnosis for illness etc., in a recognised system of medicines in India and hence the impugned services being diagnostic services are covered under healthcare services and thus gets covered under SAC 9993. Rate of GST applicable to the impugned services - HELD THAT:- In the instant case, applicant does not qualify to be a hospital, nursing home, clinic, sanatorium or any other institution by, whatever name called, that offers services or facilities requiring diagnosis or treatment or care for illness, injury, deformity, abnormality or pregnancy in any recognised system of medicines in India as the applicant, admittedly, is not a hospital or nursing home or clinic or sanatorium or any other similar institution, but an aggregator procuring the services from diagnostic labs. Thus the applicant do not qualify to be a clinical establishment. Therefore the second condition is not fulfilled and hence the applicant is not entitled to avail the aforesaid exemption. Thus the applicant is liable to collect GST on the diagnostic and lab services provided through third party diagnostic labs to their clients. Collection of TCS by the applicant - HELD THAT:- As the applicant does not qualify to be an e-commerce operator, the instant question becomes redundant. Whether the applicant falls under the definition / meaning of Insurance Agent, if invoiced to an insurance company and if yes, how the GST is applicable? - HELD THAT:- In the instant case, the services being provided by the applicant are not connected, not even remotely, with the sale of insurance policies and hence the applicant does not fall under the definition / meaning of the Insurance Agent . Therefore the applicant has to raise invoice on par with the other companies.

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• Income Tax

• 2024 (11) TMI 917
  Correct head of income - True character of the income - Income from leasing or letting out the properties in shopping-cum-entertainment Mall - income from business or income from house property - ITAT held that where the letting out the property is the main object of a company, its income is to be computed under the head income from business and it cannot be treated as income from house property , affirmed the order passed by the CIT (A) As decided in HC [ 2024 (4) TMI 753 - MADHYA PRADESH HIGH COURT] order passed by A.O. nowhere shows that the entire income or substantial income of the assessee was from letting out of the properties, which is admittedly not the principal business activity of the assessee. Therefore, we do not find any perversity in the findings recorded by the ITAT as well as the CIT (A) HELD THAT:- Having heard the learned Additional Solicitor General appearing for the petitioner and having gone through the materials on record, we see no reason to interfere with the impugned order passed by the High Court of Madhya Pradesh at Indore. Special Leave Petition is, accordingly, dismissed.

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• 2024 (11) TMI 916
  Denial of foreign tax credit ( FTC ) on tax paid on foreign income in Sri Lanka - non-filing of Form 67 at the time of filing of original return - procedural v/s mandatory provision - HELD THAT:- Article 23 of the India-Sri Lanka DTAA mandates that reliefs should be provided to avoid double taxation and FTCs should be granted when tax is paid in both the countries. Denying of FTC due to procedural delay in filing Form 67 goes against the DTAA s objectives. Section 90 allows relief in cases of double taxation. Although Rule 128(9) requires Form 67, the assessee s compliance within this rule during the rectification stage demonstrated a good faith or effort to fulfil procedural requirement. Hon ble Courts and Tribunal has often held that procedural delay should not be hindered substantive relief when the claimant has made all other substantive requirement. As the assessee fulfils the substantive requirement of paying taxes in Sri Lanka and subsequently claimed FTC as per DTAA u/s 90 of the Act and filing of the Form 67 during rectification process suffices as a procedural compliance to the claim of FTC. Moreover, the objective of the Article 23 of the DTAA and section 90 to mitigate double taxation which should not be compromised by procedural technicalities when substantive compliance is evident. We find that the assessee is entitled to FTC on foreign tax paid. Appeal of the assessee is allowed.

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• 2024 (11) TMI 915
  Revision u/s 263 - unexplained income u/s. 69A r.w.s. 115BBE - whether the seized cash shown by the assessee under the head income from other sources will be treated as unexplained income u/s. 69A r.w.s. 115BBE of the Act or not? - HELD THAT:- On perusal of section 263, it is abundantly clear that for invoking section 263 of the Act, the order of the Ld.AO should be erroneous and should be prejudicial to the interest of revenue. As per Expln.2(a) of section 263 of the Act, any order shall be deemed to be erroneous in so far as it is prejudicial to the interest of revenue, if the order is passed without making enquiry or verification which should had been made. In the instant case, as submitted by DR the claim of the assessee was not supported by any contemporaneous demonstrable evidences. Assessee did not provide the list of persons from whom he received the income and to whom he provided the services. AO failed to verify the same. Therefore we are of the considered view that, there was failure on the part of the AO to make necessary enquiry / verification, hence the order of the Ld. AO is erroneous in so far as it is prejudicial to the interest of revenue. Therefore, in our opinion the invocation of section 263 by the PCIT(C) is as per law. Accordingly, we dismiss this ground of appeal of the assessee.

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• 2024 (11) TMI 914
  Reopening of assessment u/s 147 - assessee claimed to be not engaged in any business activities and had purchased two residential properties - Disallowance of deduction u/s 54F - assessee had claimed deduction in respect of capital gains against the entire sale consideration for purchase of properties during the year and the AO was not satisfied with the purchases of two properties and held that benefit of section 54Fcan be given in respect of a residential house , which means one residential house therefore, capital gain was recalculated and addition - HELD THAT:- On the basis of admitted facts it comes up that investment was made in two floors of the same building which assessee was using for residence. This aspect that the two floors of the same building were purchased from the same seller is not disputed. Interpretation of a residential house u/s 54F - AO has allowed relief only in respect of one floor and before us several decisions have been referred to by learned AR wherein it is settled that the expression a residential house in section 54F(1) has to be understood in the sense that the building should be of residential nature and a should not be understood to indicate a singular number. Thus, even in case of purchases of two residential flats assessee is entitled to exemption u/s 54F. Thus, we are inclined to sustain ground no. 1 in favour of the assessee. Addition of cash deposit - We find that during assessment proceedings the assessee had filed an affidavit, wherein it was deposed that during financial year relevant to the present assessment year assessee was not involved in any business activity. We find that without any piece of evidence to the contrary the AO has inferred on the basis of cash/credit entries in the bank account that assessee must have been engaged in business activities and such approach itself is not justified for making the addition. AO discarding the claim of assessee that he was not engaged in any business activity - We find that AO has taken into consideration the credit of the cheque disowned of Rs. 5,72,500/- as business receipts; cash receipt of Rs. 19,37,500/- on sale of property as established by the copy of sale-deed, available at pages 66 of the paper book. There were receipt of Rs. 35,50,000/- by the assessee from his real brother through banking channel as a share of the compensation received on acquisition of ancestral rural agricultural land; and assessee himself had received Rs. 14,02,500/- from the Government of U.P. on the acquisition of ancestral rural agricultural land. Learned AR has also established that certain credit entries of Rs. 44,00,000/- which AO has treated as business receipts were counter entries of repayment of loan given/ debit in bank account during the same financial year from various persons. AO has extended too far his jurisdiction of reassessment to examine the cash deposits and treating it as business receipts, without any effective enquiry from the assessee. Assessee appeal allowed.

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• 2024 (11) TMI 913
  Bogus purchases - estimation of profit - AR submitted that the assessee has made purchases after due verification of the bonafides of the GST Registration of the impugned two suppliers - HELD THAT:- Where the related sales were accepted, the amount of bogus purchases in its entirety cannot be added to the returned income and only certain percentage of profit embedded in such tainted purchases is to be added as additional income and further, the estimation of profit is over and above the profit already declared by the assessee in the return of income, we feel appropriate to arrive at the profit margin of 10% on the bogus purchases and thus, addition to the extent/partly is deleted. Thus, appeal of the Revenue is dismissed.

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• 2024 (11) TMI 898
  Stay of demand - direction as called upon the writ petitioner to make a pre-deposit of 20% - As decided in PPK NEWSCLICK STUDIO PVT. LTD [ 2024 (8) TMI 888 - SC ORDER] admitted fact that 30% of the demand has already been recovered by the respondent. ITAT shall consider the appeal of the appellant in accordance with law on its own merits HELD THAT:- There is omission on the part of the ICICI Bank which has not complied with the order of this Court dated 09.08.2024 and instead is seeking to comply with the communication dated 15.12.2023 issued by the Office of the Deputy Commissioner of Income Tax, Central Circle 1, Delhi to them. It is needless to observe that the order of this Court dated 09.08.2024 is subsequent to the aforesaid communication. Direction is issued to the Branch Manager, ICICI Bank, E-30, Saket, New Delhi to comply with the order of this Court dated 09.08.2024 both in letter and spirit forthwith. Miscellaneous Application has been filed seeking the following reliefs: (i) Set aside the notice dated 15.12.2023 bearing No.ITBA/COM/F/17/2023-24/1058789726(1) sent by the Respondent to ICICI Bank, Saket Branch; AND (ii) Direct that any amount credited in the Petitioner s bank accounts with the ICICI Bank, Saket Branch, bearing Account Nos.017105010200 and 017105009185, shall not be debited to the Income Tax Department, pursuant to their letter dated 15.12.2023; AND (iii) Direct that normal banking operations shall resume in the Petitioner s bank accounts with the ICICI Bank, Saket Branch, bearing Account Nos.017105010200 and 017105009185; AND (iv) Pass such further orders as this Hon ble Court may deem fit in the facts and circumstances of the case. The prayers stated above at (ii) and (iii) are granted. Consequently, the Miscellaneous Application stands disposed of in the aforesaid terms and the application for appropriate Orders/Directions is allowed.

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• 2024 (11) TMI 897
  Validity of Reopening of assessment u/s 147 - As decided by HC [ 2023 (10) TMI 1454 - BOMBAY HIGH COURT] this is not a fit case to exercise our discretionary jurisdiction under Article 226 of the Constitution of India. At the same time, Petitioner may raise all grounds which Petitioner has before the AO in reply to the notice u/s 148. The officer shall consider the objections and points raised by Petitioner and pass such order as he deems fit HELD THAT:- On instructions, respondents states that the respondents have no objection to the notices issued u/s 148 being quashed, as the transaction in question was between a mother and son. In view of the aforesaid position, the impugned judgment/order is set aside, quashing the aforesaid notices. The appeal is allowed. The writ petition will be treated as allowed.

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• 2024 (11) TMI 896
  Deduction u/s 54EC - premature cancellation of the bonds - Petitioner sought to cancel PFC bonds to utilize the sale proceeds for a property purchase in Noida, claiming mistaken advice regarding tax benefits - legislative intent behind the bonds, lock-in period of 5 years as integral to ensuring long-term capital allocation and financial stability. HELD THAT:- The PFC bonds, are known as 54EC Capital Gain Tax Exemption Bonds Series VIII . This is a type of investment instrument authorized by the Income Tax Act, 1961. These bonds provide an opportunity for individuals to save on long-term capital gains taxes incurred from the sale of property or assets. By investing in these bonds, one can defer the payment of capital gains tax and enjoy the potential benefits of a reliable investment option. Such investment is held for 5 years and the bonds so acquired cannot be transferred or converted into money or any loan and neither can an advance be taken on security of such bond within 5 years from date of acquisition. Any such action would result in withdrawal of the capital gain exemption benefit. Thus, the subject bonds issued by the Respondent fall within the category of long-term specified assets , in terms of notification dated 8th June, 2017 issued by the Ministry of Finance, and as defined in Section 54EC of the Act to mean any bond, redeemable after five years and issued on or after the 1st day of April, 2018 . The long term specified assets/bonds can be redeemed only after 5 years from the date of the issuance due to the lock-in period under Section 54EC of the Act as amended by Section 21 of the Finance Act, 2018. Furthermore, this information with regard to the lock-in period is mentioned in Clause 13 of the information memorandum issued by the Respondent regarding the subject bonds. In the opinion of the Court, having regard to the statutory scheme and the terms and conditions of the subject instrument, the Petitioner s request for cancellation or redemption, cannot be accepted. The funds raised through the 54EC bonds are specifically intended to support Respondent s financial objectives. The Object of the Issue of the PFC Capital Gain Tax Exemption Bonds is to augment resources of PFC for meeting fund requirement . These funds are in the nature of long term funds borrowing. This intent, combined with the five year lock-in period, imposes a clear embargo on premature redemption, as it ensures that the investments remain committed to Respondent s financial stability and to meet the object of the Issue. This lock-in period is not a mere formality but a substantive requirement, integral to the legislative intent behind Section 54EC. Terms and conditions governing the bonds, stipulated by the Respondent clearly restrict any withdrawal, redemption, or transfer of these bonds before the completion of the mandated 5-year period. This restriction applies regardless of whether the Petitioner has claimed the capital gains exemption or not, and regardless of any willingness on the Petitioner s part to forgo interest, as these bonds are essentially bound by legislative and contractual rigidity. Permitting any deviation from the stipulated lock-in period would compromise the object and purpose underlying these bonds, creating an avenue for circumventing statutory obligations under Section 54EC. The statutory framework does not just seek to incentivize tax savings but to ensure that these savings result in actual, long-term capital allocation. Allowing premature redemption through judicial intervention would not only be against the contractual terms, but also contravene the statutory intent of encouraging long-term investment. Thus, it is beyond the scope of this Court, particularly under the writ jurisdiction under Article 226 of the Constitution, to modify or rewrite the conditions stipulated for allocation of bond. Court is of the view that the judgment in Major Amandeep Singh [ 2015 (8) TMI 1585 - DELHI HIGH COURT] 3does not apply to the present case. Upon issuance of the bonds to the Petitioner, the rights and obligations of both parties are governed by the specific terms of the financial instrument. Neither party can alter the same unilaterally. Any attempt would not only contravene the contractual terms, but would also be against the statutory purpose underlying the bond scheme. Although not expressly argued, and only vaguely alluded to, the Petitioner s claim for cancellation appears to stem from an alleged mistake of fact and reliance on misguided financial advice. Such grounds, in the opinion of the Court, do not create any enforceable right and cannot be adjudicated under Article 226 of the Constitution.

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• 2024 (11) TMI 895
  Revision u/s 263 - assessee to be a beneficiary on account of funds received from four parties - PCIT cancelled the assessment framed u/s 147 r.w.s. 144 by directing AO to frame the assessment afresh after doing necessary verification - HELD THAT:- The assessment framed by AO cannot be said to be being erroneous nor prejudicial to the interest of revenue as these items of so-called bogus loans of Rs. 3,13,000.- from four parties did not come to the notice of the AO during the assessment proceedings warranting the addition by the AO. Therefore, we are inclined to hold that the jurisdiction exercise by ld. PCIT is bad in law. In our opinion the assessment framed by the AO u/s 147/144 of the Act is neither erroneous nor prejudicial devoid of which the jurisdiction u/s 263 of the Act cannot be invoked. The case of the assessee is supported by the judgment of Malabar Industries Limited [ 2000 (2) TMI 10 - SUPREME COURT] wherein it has been held that in order to invoke jurisdiction u/s 263 of the Act, the assessment order passed has to be erroneous as well as prejudicial to the interest of revenue and even if one of the two conditions are satisfied, even then section 263 by ld. PCIT cannot be invoked. Appeal filed by the assessee is allowed.

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• 2024 (11) TMI 894
  Addition u/s 68 - unexplained cash credit - non proving in identity, creditworthiness, and genuineness of the share premium received by the assessee - HELD THAT:- Hon ble Supreme Court in the case of CIT vs. Kamdhenu Steel Alloys Ltd. [ 2012 (9) TMI 950 - SC ORDER] held that mere non-appearance of director cannot be held to be justified in treating the share premium and share capital as unexplained income if sufficient documentary evidences are provided. In the present case of the assessee, the shareholders were scrutinised u/s 143(3)/147 of the Act, further detailed evidences were submitted to establish genuineness of the transactions. In this regard, we rely on the decision of Lovely Exports (P) Ltd. [ 2008 (1) TMI 575 - SC ORDER] wherein, it was held that once company proves the existence and authenticity of shareholders, it had discharged its burden u/s 68 of the Act. We find merit in the contention of the ld. AR. That the premium is matter of business prerogative as held in the Coordinate Mumbai Bench of the Tribunal in the case of M/s Greek Infra Ltd. [ 2013 (12) TMI 949 - ITAT MUMBAI] and in the case of Trident Shelters Pvt. Ltd. [ 2014 (1) TMI 1224 - ITAT HYDERABAD] That revenue cannot question the quantum of share premium in the absence of evidence of collusion or mala fide intent. We hold that the addition made by the AO as unexplained cash credit u/s 68 of the Act is unsustainable since the assessee has sufficiently established the identity, creditworthiness and genuineness of the transaction relating to the share capital received during the relevant financial year. We, therefore, direct the Assessing Officer to delete the addition u/s 68 - Appeal of the assessee is allowed.

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• 2024 (11) TMI 893
  Levy of penalty u/s. 271(1)(c) - defective notice u/s 274 - omnibus notice - Non mentioning of charge for which penalty is to be levied - HELD THAT:- An examination of the first notice reveal that it is in a preprinted performa, wherein both limbs of section 271(1)(c) of the Act have been mentioned. AO has not struck off irrelevant clauses in the preprinted performa. The omnibus notice is vague. The subsequent notice is equally ambiguous as the AO has not mentioned any of the limbs of section 271(1)(c) of the Act in the notice for which the penalty is to be levied. Non mentioning of charge for which penalty is to be levied makes the notice as much defective as non striking of irrelevant clauses in the notice. Both make the notice ambiguous and vague. Hence, the proceedings arising from defective notice are vitiated. Hon ble Jurisdictional High Court in the case of PCIT vs. Sahara India Life Insurance Company Ltd. [ 2019 (8) TMI 409 - DELHI HIGH COURT] following the decision rendered in the case of CIT vs. Manjunatha Cotton Ginning Factory [ 2013 (7) TMI 620 - KARNATAKA HIGH COURT] deleted penalty where the AO failed to clearly specify the limb of section 271(1)(c) of the Act for levy of penalty in the notice. Also in the case of Mohd. Farhan A Shaikh [ 2021 (3) TMI 608 - BOMBAY HIGH COURT (LB)] has held that where assessment order records satisfaction for imposing penalty on one or other or both grounds mentioned in section 271(1)(c) of the Act, a defect in notice in not striking of irrelevant matter would vitiate penalty proceedings. An omnibus notice suffers from the vice of vagueness. Assessee appeal allowed.

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• 2024 (11) TMI 892
  TDS u/s 194A - Demand u/s. 201(1) r.w.s. 201(1A) - TDS on profits earned from commodity transactions treated as interest income - Forward Market Commission directed NSEL to stop launching contracts after the payment default and this led to the closure of NSEL in July 2013 - As per the findings of the Investigation agencies, the brokers had sold the commodities on the floor of National Spot Exchange to the clients by assuring them fixed returns and transactions on the exchange were carried out in the guise of commodity trading without ensuring delivery of the commodity traded on the exchange HELD THAT:- As borne out from the records and also from the finding of the lower authorities that assessee was acting as a broker and intermediary as the entire set of transactions carried out by the assessee was on behalf of the client of NSEL platform. The assessee had undertaken the transactions only to earn brokerage and such income from brokerage have duly been offered to tax. Section 194 is attracted when a person is responsible for payment of interest other than income by way of income and securities. However, in the case of the assessee, assessee being a broker of certain exchange cannot be held to be a person who has been paying any interest to the clients and therefore, we hold that provision of Section 194A cannot be invoked in the case of the assessee because it cannot be reckoned as a person responsible for payment of income by way of interest to the clients. Ld. Counsel has referred few judgments of CIT vs. Hardarshan Singh [ 2013 (1) TMI 314 - DELHI HIGH COURT ] and CIT vs. Cargo Linkers [ 2008 (3) TMI 619 - DELHI HIGH COURT ] wherein as held that provision of TDS cannot be applied in case of intermediary / agents acted on behalf of its clients and intermediary cannot be held to be person responsible for the purpose of TDS provisions. Though these decisions have been rendered in the case of CNF agents, however, the same principle will apply in the present case also because assessee was also an intermediary between the clients and the NSEL and was never party to any counter party members. CIT(A) has referred to SEBI order dated 29/11/2022 and in that order SEBI in para 28 held that the primary responsibility was on NSEL and not the brokers. In short there was and adequate collateral to secure the sale orders posted on its platform. The entire responsibility has been put on to the exchange and not of the brokers facilitating these transactions. Thus, the order of the ld. CIT (A) holding that assessee is not required to deduct TDS u/s. 194A is upheld and consequently, the grounds raised by the Revenue are dismissed.

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• 2024 (11) TMI 891
  Unexplained cash credit u/s. 68 - taxation under the provisions of section 115BBE - CIT(A) deleted the addition by accepting the submissions of the assessee that the cash receipt by various sources i.e., cash sales, debtors outstanding realization and debtors of current year realized is matching with the VAT returns and hence, he accepted the cash deposited during the year before demonetization - HELD THAT:- As noted that the assessee has explained the cash deposit in SBNs received during demonetization period on account of cash sales during the relevant assessment year, realization of debtors outstanding in previous years and also debtors during current year which is a fact as per books of accounts. Admittedly, there are amount received on account of current debtors from specified parties - assessee has also reconciled the cash sales, debtors outstanding, viz-a-viz VAT returns. Admittedly, the assessee s turnover during the year is Rs. 810 crores as compared to last year turnover of Rs. 383 crores, which means that the turnover has jumped 211.48% during the year. These facts show that the cash realized through cash sales, debtors is not abnormal and the AO could not point out any defect in the same. Admittedly, these parties, from whom the assessee has realized the debts, the confirmation was received late and assessee now before us filed the confirmed account statement, which were filed before CIT(A). Once there is no defect in the books of accounts and the VAT returns which accepted as it is and corresponding sale is also not disturbed, we find no infirmity in the generation of this cash on or before 08.11.2016. This cash generation is over the period from 01.04.2016 to 08.11.2016. Out of total cash available in assessee s books of accounts as on 08.11.2016 of Rs. 3,09,45,227/-, a sum of Rs. 3,05,14,820/- is in demonetized currency i.e., Specified Bank Notes. As the cash is explained and sources are recorded in books of accounts and books of accounts are not rejected by AO and there is no iota of evidence that the assessee has introduced unaccounted cash, the cash deposited by assessee during demonetization period in SBNs stands explained. Further, we find that this issue is covered by the decision of TamilNadu State Marketing Corporation Ltd [ 2024 (10) TMI 1614 - ITAT CHENNAI] wherein it is held that simpliciter the SBNs will not be added when the source of cash is explained. Thus, no fault in the order of CIT(A) and hence, the same is confirmed. Accordingly, this appeal of Revenue is dismissed.

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• 2024 (11) TMI 890
  Disallowance u/s. 36(1)(iii) - advance to related parties - Since the reserves and surplus of the assessee was less than the advance given to related parties, the AO made a disallowance u/s. 36(1)(iii) - assessee contended that the advance was not given during the year under consideration and that the balance shown is the outstanding carried forward from earlier years - HELD THAT:- We notice that there was an opening outstanding balance of Rs. 10,47,87,979/- as on 01.04.2011 and the assessee had given an advance of Rs. 28 crores during the financial year relevant to AY 2012-13. We further notice that the balance is the reserve and surplus stood at Rs. 61,60,35,571/- as on 31.03.2012. We also notice that the outstanding balance in the impugned advance account has been decreasing YoY. Therefore there is merit in the contention of the ld AR that no new advance is extended to sister concern and that the revenue did not bring anything on record to controvert the said contention. See Brindavan Beverages Pvt. Ltd [ 2016 (10) TMI 1242 - KARNATAKA HIGH COURT] . AO is not correct in making the disallowance u/s. 36(1)(iii) of the Act and direct the AO to delete the disallowance made in this regard. Decided in favour of assessee.

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• 2024 (11) TMI 889
  Validity of reopening assessment u/s 147 - materials unearthed relating to and belonging to the assessee during the course of search conducted on Third party - HELD THAT:- Keeping in view this particular legal aspect of the matter as certain documents unearthed/found and seized during the course of search in the residential as well as other premises related of Shri Surendra Kumar Jain and Shri Virendra Kumar Jain, on the basis of which the additional income was to be assessed in the hands of the assessee, such addition can only be made taking recourse of the provision of Section 153C and no proceeding can be initiated u/s 147, 148, 153 and 151 of the Act. In the instant case, therefore, reopening of proceeding u/s 148 has no legs to stand upon particularly when the reason to believe is on the basis of search conducted on a third party and on the basis of documents unearthed during search of the said third party namely Shri Surendra Kumar Jain group of companies. The initiation of proceeding in the case in hand u/s 148 on the basis of materials unearthed relating to and belonging to the assessee during the course of search conducted on Jain brothers is found to be not sustainable in the eyes of law. The assessment is void-ab-initio and thus, quashed. Assessee s appeal is allowed.

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• 2024 (11) TMI 888
  Addition on account of accommodation entries - CIT(A) restricting the addition to only 15% instead of 100% - HELD THAT:- The Coordinate Bench in [ 2024 (6) TMI 1416 - ITAT MUMBAI] for AY 2011- 12, had the occasion to consider an identical issue f ind merit in the contention advance on the behalf of the Appellant that the Assessing Officer has failed to bring any material on record to establish that the work was not actually performed and therefore, disallowance of 100% payments made to sub-contractors is not warranted in the facts and circumstances of the present case. We are not inclined to interfere with the order passed by CIT(A) restricting the disallowance to 15% of payments made to sub-contractors. There is nothing on record to persuade us to take a view that disallowance at a higher rate was warranted in the facts and circumstances of the present case. We have already rejected the contention of the Revenue to restore the disallowance at the rate of 100% of payments made to sub-contractors. We also concur with the CIT(A) that in absence of any material to substantiate the allegation that Assessee had paid commission at the rate of 1%, the addition made in respect of commission expenses of INR 8,81,3000/- cannot be sustained merely on assumptions and guess work. Decided against revenue. Additional deduction u/s 80IA - denial of claim of deduction u/s 80-IA because the said claim was not made in the original return of income - HELD THAT:- CIT(A) called for a remand report from the AO who in his remand report fairly conceded that the claim of deduction has been allowed in all subsequent assessment years. Therefore, the ld. CIT(A) also allowed the claim of deduction u/s 80-IA of the Act correctly. Decided against revenue. Disallowance u/s 14A - assessee has suo moto disallowed amount being 1% of the average investment as on 31/03/2016 - HELD THAT:- The undisputed fact is that the assessee borrowed funds from Shapoorji Pallonji and Company Ltd., and it is also not in dispute that the said borrowings were interest free and the shares were purchased out of such interest free borrowings. Therefore, no merit in the addition on account of interest payment. Insofar as, administrative expenses are concerned, the AO has disallowed 0.5% but the assessee has disallowed a higher amount of 1% at Rs. 13,69,000/- which is more than the disallowance computed by the AO. We, therefore, do not find any reason to interfere with the findings of the ld. CIT(A). Accordingly, Ground dismissed.

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• 2024 (11) TMI 887
  Addition on account of difference between the value of closing stock shown in the return of income and in the statement made to the bank - HELD THAT:- We note that the assessee, undoubtedly shown a different value of closing stock to the bank stating to be for availing credit facilities. Admittedly the said value is different from the statement of value of closing stock as annexed to the balance sheet. Neither the bank authorities nor the AO made any effort to verify the actual stock to prove that there is existence of unaccounted stock. In common parlance, under open loan system, the parties tend to inflate figures of quantity of stock as well as rate merely to enjoy higher cash credit limits. Hon ble High Court in N. Swamy [ 1998 (9) TMI 27 - MADRAS HIGH COURT ] held that the AO shall consider the material, which is required to be considered for the purpose of assessment. The Assessing Officer shall not consider any statement that might have given to a 3rd party unless there is any material to corroborate the statement given to a 3rd party. Admittedly, nothing was brought on record by the AO that any existence of corroborating value of closing stock given to the bank. We find the burden is on the AO to show that the assessee has undisclosed income and the said burden cannot be said to be discharged by merely referring to the statement given by the assessee to the 3rd party, which is not directly related to the assessment, making the sole foundation for finding merely the assessee has deliberately suppressed income. Thus, we hold the addition made by the Assessing Officer is not justified and the order of the ld. CIT(A) is justified in directing the Assessing officer to consider the value of closing stock of current year as opening stock of subsequent assessment year. Therefore, the Assessing Officer shall consider the value of stock as annexed to balance sheet. Thus, the ground raised by the Revenue fails and are dismissed.

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• 2024 (11) TMI 886
  Chargeability of income earned under the Act / DTAA - Royalty or FTS receipts - Payment receipts for online education of MBA course - jurisdiction of AO by reclassifying the income as FTS instead of royalty - HELD THAT:- On careful reading of the Order of the Tribunal it is observed that it was also limited to examine the chargeability of income earned under the Act / DTAA as royalty . The remand to the AO was also limited to examine and follow the judgment of the Hon ble Apex Court in the case of Engineering Analysis Centre of Excellence (P.) Ltd [ 2021 (3) TMI 138 - SUPREME COURT] - Tribunal did not remand to the AO to examine the applicability of definition of FTS as per the Act / DTAA in respect of the income of the assessee. Only subsequent to the remand proceedings by the Tribunal, it dawns upon the AO after examining the services agreement to tax the same as FTS under section 9(1)(vii) of the Act instead of royalty under section 9(1)(vi) of the Act. The AO after examining the agreement ideally ought to have filed a MA before the Tribunal seeking for an open remand so that the receipt could have been either taxed under FTS or under royalty . On perusal of the above Order of the Tribunal, it is clearly discernible that it is not an open remand but only a limited remand to examine the receipt whether it can be taxed in light of the judgment of Engineering Analysis Centre of Excellence (P.) Ltd., (supra) and other judicial pronouncements relied on by the assessee. AO cannot go beyond the directions given in the remand order and look into the matters which was not subject matter of appeal before the Tribunal. This proposition was affirmed by the Hon ble Allahabad High Court in the case of S. P. Kochhar [ 1982 (5) TMI 3 - ALLAHABAD HIGH COURT] wherein the scope of remand by the Tribunal was explained as when the Tribunal allows the appeal and sets aside the assessment and remands the case for making a fresh assessment, the power of the ITO is confined to such subject-matter only. He cannot take up the questions which were not the subject-matter of appeal before the Tribunal. The Tribunal in the case of Bhagwandas associates [ 2007 (9) TMI 333 - ITAT PUNE-B] had held that Revenue has no scope for improving an already assessed income either by way of enhancement or in pretext of rectification while giving effect of an appellate Order. The Tribunal held that the statute does not provide such a wide unlimited and unending power to the AO. Thus, AO has clearly exceeded his jurisdiction by taxing the income of the assessee as FTS which was not the subject matter of appeal before the Tribunal nor has the Tribunal given an open remand to the AO (in light of the master services agreement being produced before it for the first time). On perusal of the entire Order of the Tribunal, it is clear that the examination is limited to taxability of the receipts only in light of the judgment of Engineering Analysis Centre of Excellence (P.) Ltd., Vs. CIT (supra) and other judicial pronouncements relied on by the assessee which deals with the taxability of the receipt as royalty under section 9(1)(vi) of the Act. Thus, the impugned addition is deleted on technical grounds.

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• 2024 (11) TMI 885
  Disallowance of business expenses - Assessee by filing first appeal before the Ld. Commissioner challenged the disallowance of expenses, however, as it appears from the impugned order the Assessee not responded to the various notices sent by the Ld. Commissioner and therefore in the constrained circumstances having left no option dismissed the appeal of the Assessee - HELD THAT:- We observe that though the Ld. Commissioner has written in the impugned order that multiple opportunities of being heard by way of issuing of hearing notices were given to the Assessee, however, from the order it nowhere appears by which mode and on which dates the notices were sent to the Assessee. Even otherwise we observe that the Ld. Commissioner did not pass the order on merits, hence for the just decision of the case and for the ends of substantial justice, we are inclined to remand the instant case to the file of the Ld. Commissioner for decision afresh on merits, suffice to say by affording reasonable opportunity to the assessee to substantiate its claim before the Ld. Commissioner. We also direct the assessee to cooperate with the appellate proceedings and to file the relevant submissions/documents which would be essential and required by the Ld. Commissioner for proper adjudication of the case. We clarify that in case of further default the assessee shall not be entitled for any leniency. Hence, the case is remanded accordingly. Appeal filed by the assessee stands allowed for statistical purposes.

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• Customs

• 2024 (11) TMI 884
  Classification of imported goods - Low Aromatic White Spirit classifying the same under the Customs Tariff Item No. 2710 1990. v/s Kerosene classifiable under CTH 2710 1910 - Allegation of mis-declaration - goods were confiscated u/s 111 (m) and Section 111(d) of the Customs Act, 1962 for mis-declaration and violation of the siprovions of Para 2.20 of the Foreign Trade Policy read with the rules made under the Petroleum Act, 1934 read with the Petroleum Rules, 2002 and the Customs Tariff Act, 1975 HELD THAT:- We observe that no test has been conducted to find out whether the goods imported by the appellant meets the requirement of Low Aromatic White Spirit as claimed by the appellant. The claim of the appellant cannot be rejected without testing whether the goods imported by the appellant satisfy the requirements for Low Aromatic White Spirit , which is similar to light oils and preparations . From the literature submitted by the appellant, we observe that Low Aromatic white Spirits (LAWS) is a specific high value segment of non-fuel petroleum products. These are manufactured by refractionation of wide boiling refinery products like, gasoline fraction. This is further subjected to Dearomatization process to make aromatic free to specified aromatic content, products. Products of different aromatic content as required by application could be made by blending aromatic free products to base fraction or partially dearomatized stocks. With regard to Nomenclature and classification, we find that these products widely vary in boiling range, hydrocarbon group composition, depending upon the end use, storage, safety, environmental and health considerations. Petroleum products are complex mixtures of hydrocarbons and the products are designed based on application requirements. Therefore overlapping of boiling range, compositions and physical characteristics amongst various products is common. For the purpose of international trade and movement, the World Customs Organization (WTO) has classified goods under the Harmonized System Nomenclature (HSC). Each material is assigned a unique eight digit code number, reflecting some basic characteristics. For instance number 27 refers to Chapter , 10 to Petroleum Oils . The next two digits 12 refers to hazardous nature. Flash point lower than ambient temperature API Class A material. 19 refers to fire safe API Class B and C materials. The next two digits refer to specific products like 10 for kerosene 20 for ATF and 90 for minor products like LAWS. HSN Code for the Low Aromatic White Solvent (LAWS) is 27101990. We observe that high flash solvents, both low aromatic or high aromatic, come under HSN classification 2710 1990, technically as well as in industry practice. In view of the above discussions and based on the technical literature produced by the appellant, we hold that the Low Aromatic White Spirit imported by the appellant having the same characteristics as required under the standard IS 1459:2018, are rightly classifiable under the CTH No. 2710 1990. The goods imported by the appellant are Low Aromatic White Spirit , as claimed by the appellant and the same are appropriately classifiable under the Customs Tariff Item No. 2710 1990. Adjudicating authority has reclassified the goods imported by the appellant as Kerosene under the Tariff Item No. 2710 1910. Kerosene, classifiable under CTH 2710 1910, could be imported only by State Trading Enterprises (STEs) or the agencies approved by DGFT, in terms of the Foreign Trade Policy, 2015-20. As the goods imported by the appellant are Low Aromatic White Spirit and classified under the CTH 2710 1990, there is no violation of the Foreign Policy 2015-20. Accordingly, we hold that the goods are not liable for confiscation under Section 111 (m) and Section 111(d) of the Customs Act, 1962 for mis-declaration and violation of the provisions of Para 2.20 of the Foreign Trade Policy read with the rules made under the Petroleum Act, 1934 read with the Petroleum Rules, 2002 and the Customs Tariff Act, 1975. Thus, the question of allowing re-export of the goods on payment of redemption fine under Section 125 of the Act does not arise. As the allegation of mis declaration is not sustained, the penalty imposed under Section 112(a)(i) of the Customs Act, 1962 is also not sustainable and accordingly, we set aside the same.

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• 2024 (11) TMI 883
  Demand of duty foregone on account of the scrips of Vishesh Krishi and Gram Udyog Yojna[VKGUY] issued to u/s 28 of the Customs Act, 1962 Act read with their Letter of Undertaking - penalties imposed on individuals - allegation of appellant exporting meat using pre-signed and pre-stamped veterinary certificates - HAIL was engaged in slaughtering animals and exporting their meat during the relevant period. It availed the benefit of VKGUY scheme of the DGFT under which exporters of agricultural and village industry products are given an incentive in the form of scrips issued by DGFT which can be either used by the person to whom they are issued to pay duty on imports or transferred or sold to others who can use them to pay duty on imports. What is the meaning of the term relevant? - HELD THAT:- The undisputed fact is that the recovered pre-signed and pre-stamped certificates were not used to export meat. The case of the department is built on the premise that previous meat consignments were also exported based on such certificates without actual inspection of the animals pre-mortem and post-mortem. After detailed investigation beginning on 3.10.2010 and culminating in the SCN issued on 4.8.2011, these allegations were made and actions against the appellant proposed. SCN relied upon the following 22 documents numbered relied upon documents RUD-1 to RUD-22. As many as 14 of the 22 relied upon documents are statements of various persons recorded during investigation by the Customs officers under Section 108 of the Act. Of these, the statements of Dr Shiv Kumar, the veterinarian and a few others are said to establish the fact that the appellant had exported meat in the past without actual examination of the animals by the veterinarian. Any statement made before any gazetted officer of customs is relevant to prove the truth of the fact which it contains as per section 138B under two situations- either the person is dead, cannot be found, is incapable of giving evidence or has been kept out of the way by the adverse party OR the person is examined as a witness and the court is of the opinion that it should be admitted as evidence. There is no other section in the Act which makes the statements relevant to prove the truth of the facts contained in them. In this case, the fact that blank signed and stamped certificates of veterinarian were recovered from the appellant has to be linked to the fact that meat was similarly exported using pre-signed certificates in the past. The evidence which provides this link are, according to the learned authorised representative for the Revenue, the statements recorded by the Officers under section 108 of the Act and relied upon in the SCN. However, as per section 138B of the Act, they can be relevant only in one of the two situations indicated in 138B (1) (a) and (b). There is no evidence or assertion that the situation under section 138B(1) (a) of the Act was present and the adjudicating authority did not follow the procedure prescribed under section 138B(1) (b). He neither examined the persons who made the statements nor allowed the appellant to cross-examine them. In this case, after extensive investigation spanning several years, the SCN was issued relying on as many as 22 documents including 14 statements of different persons recorded by the officers under section 108 of the Act. By not following the mandatory procedure under section 138B, the adjudicating authority brought to naught 14 of the 22 relied upon documents effectively destroying the case of the department. We do not find that the remaining 8 relied upon documents establish the fact that the appellant had exported meat using pre-signed and pre-stamped veterinary certificates. Once the case against HAIL is not established, the penalties on HAIL and other appellants also cannot be sustained. Therefore, the impugned order upholding the OIO cannot be sustained and needs to be set aside.

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• 2024 (11) TMI 882
  Short-payment of Custom duty on import of cars - differential duty demand u/s 28 of Customs Act, 1962, along with applicable interest u/s 28AA of Customs Act, 1962 -stipulative description of transaction value in section 14 of Customs Act, 1962 - HELD THAT:- The adjudicating authority has referred to adjustment of the amounts in credit balance held by M/s Bentley Motors Ltd but neither is any authentication of such account available nor its source established. It is also improbable that such purported outstandings are adjusted against an account which is not of M/s Exclusive Motors Pvt Ltd and, more so, in a contractual engagement bedrocked on prior payment. There is no record of any payment made through banking channels to the supplier either towards dues arising from the supplementary invoices or as transfers to the alleged adjustment account. There is also no evidence of such dues having been made through unofficial route, commonly known as hawala, to M/s Bentley Motors Ltd. The illegality of these would surely have precluded M/s Bentley Motors Ltd from indulging in such transfers; the lack of any proceedings against them is sure evidence of the contrary. It appears improbable that invoices are raised and recorded without any payment insisted upon. The certification in terms of section 138C of Customs Act, 1962 would also make it appear that the documents were sourced from the electronic records of M/s Bentley Motors Ltd and, though said to have been raised on M/s Exclusive Motors Pvt Ltd, was absent in the electronic records of the buyer. The contention of appellants that intensive scrutiny of physical and electronic records of M/s Exclusive Motors Pvt Ltd had not yielded such invoices has not been disputed. It is also surprising that such supplementary invoices, on which, along with the finding that the original invoices are on FOB terms, has the enhancement of value of 51 cars despatched as air freight been justified, are not available for cars despatched by sea transport which were also held to be liable for enhancement owing to the original invoices being on FOB terms. This is quite a leap of logic that may reasonably cast doubts on adjudicatory acknowledgement of the supplementary invoices. It is no less surprising that the correlation of 51 of the 63 supplementary invoices was rendered possible but not so for the remaining 12 and that there were another 12 cars despatched by air for which supplementary invoices were not available with the same source. That does not speak much about the record keeping by M/s Bentley Motors Ltd which the adjudicating authority has set such store by as to accept these documents without question merely owing to certification prescribed in section 138C of Customs Act, 1962. In the light of these discrepancies, we cannot permit ourselves the luxury that the adjudicating authority has of venturing to speculate on the cause and consequence of these supplementary invoices. Much of the outcomes in the impugned order rest on interpretation of the contractual arrangement between buyer and seller as being on FOB terms and this mutation from CIP/ DAP terms stems from the purported export declaration filed with HMRC. These, undisputably, have been executed by the freight forwarders but there is scarcely a whisper about the representation rights of these entities to declare price of goods exported by M/s Bentley Motors Ltd. A perusal of these declarations make it abundantly clear that these are not export declarations but a document intended for data amassing. Though AR did fall back on the information pertaining to such documentation from the website of HMRC, it appears that undeserving sanctity has been accorded to them. Apply known law to established facts for evaluating the correctness of the outcomes in the impugned order stemming from alleged non-inclusion of freight and insurance in the declared value which was allegedly only on FOB terms - It is clear that the contract for payment on CIP/DAP terms between M/s Bentley Motors Ltd and M/s Exclusive Motors Pvt Ltd squarely placed the risk liability till import into India on the former. No evidence is available that these terms of contract underwent change. There is no provision in the contract for price revision or issue of supplementary invoices; indeed, it could not be as the contract mandates payment in advance. The payment terms would alter to FOB only upon shifting of risk liability to M/s Exclusive Motors Pvt Ltd which would be attended upon by the importer engaging transport and procuring insurance which, uncontestedly, has not happened. The only feasible alternative is for the buyer to place reliance on seller s arrangement which not only varies the contract terms but brings in collusion between the two which is not the substance of the allegation in the notice or the findings in the impugned order. Mere declaration, and inconsequential too, in document meant for statistical reporting without risk of penal consequence does not suffice to hold that contract terms were altered to transfer the liability. The fiscal consequences of such far-reaching alteration in contract for supply of high-end motor vehicles would be enough of disincentive to suggest that risk liability stood altered and unless risk liability was altered, the reading down of invoice as excluding freight and insurance on the basis of unreliable statements does not stand the test for recourse to rule 10(2) of Customs Valuation (Determination of Value of Imported Goods) Rules, 2007. Nor do they discharge the onus of customs authorities, not having recourse to rule 12 of Customs Valuation (Determination of Value of Imported Goods) Rules, 2007, to establish that freight and insurance were not only excluded but also, as in large portion of this dispute, not ascertainable. To affirm that, on tenuous suggestion of wrong-doing, the onus stands shifted to the importer would be tantamount to transplanting the valuation scheme in the Customs Valuation Rules, 1963 to the present day. Thus, the finding for concluding that the declared price should be loaded by 21.125% to render it to be transaction value in 119 imports by sea or air is without any basis in law. As far as supplementary invoices are concerned, there is nothing on record to suggest that these were issued to the buyers before or after the despatch of 51 cars by air. The scrutiny of records of importer-appellant had not yielded those. To conjecture so, and lend credence to documents reflecting transactions not envisaged in the contract, payment would have to be evidenced. Other than an inference of adjustment in some account purportedly held by M/s Bentley Motors Ltd, which, as set out supra, has only unreliable statements in support, no evidence has been led in the show cause notice. There is no evidence of remittance either through banking channels or, as Learned Counsel put it, through hawala route. Indeed, it would surprise that two corporate entities operating in jurisdictions that criminalize such payments that could also carry loss of liability cover would opt for such compensatory payments. Furthermore, that it could be brought to fruition by one of the parties to the contract does not sit well logically or commercially. That such supplementary payments, insinuated in the finding on shipment by sea, were held as having occurred even without the supplementary invoices brings the available documentation, too, within the penumbra of non-acceptability. The declared price is, by default, not only the transaction value but also, unless established to the contrary, the price for delivery at the time and place of importation. With the law thus enacted, the onus for establishing the contrary rests with the adjudicating authority. On the evidence available and reliably acceptable, that onus has not been discharged. The declared price remains unimpeached to negate the enhancement and recovery of differential duty. In the absence of recourse to section 28 of Customs Act, 1962, ingredients for invoking section 114A against the importer do not exist. There being no misdeclaration of value, confiscation under section 111 of Customs Act, 1962 does not survive and with it the penalties under section 112 of Customs Act, 1962 lack sustenance. In the factual circumstances of this dispute, the impugned order is set aside to allow the appeals.

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• Corporate Laws

• 2024 (11) TMI 881
  Appointment of Adjudicating Officer in exercise of the powers conferred by section 454 of the Companies Act, 2013 - adjudication of penalties - HELD THAT:- In terms of the provisions of sub-rule (9) of Rule 3 of Companies (Adjudication of Penalties) Rules, 2014 as amended by Companies (Adjudication of Penalties) Amendment Rules, 2019, copy of this order is being sent to Khattu Housing Solutions Private Limited and its director in default mentioned herein and also to Office of the Regional Director (Eastern Region) and Ministry of Corporate Affairs at New Delhi.

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• 2024 (11) TMI 880
  Appointment of Registrar of Companies, Chennai as Adjudicating Officer in exercise of the powers conferred by section 454(1) of the Companies Act, 2013 - Non-compliance of the Companies Act, 2013 - HELD THAT:- It is concluded that the company and directors have violated Rule 14(6) of (Companies Prospectus and Allotment of Securities), Rules, 2014. It is required to impose a penalty as prescribed under Section 450 of the Companies Act, 2013. Therefore, in view of the above said violation, in exercise of the powers vested to the undersigned under Section 454(1) (3) of the Companies Act, 2013 a penalty of Rs. 10,000/- is imposed on the Company and Rs. 10,000/- is imposed on the Officers in default as mentioned above. Totally Rs.20,000/- as penalty amount for violation of Rule 14(6) of the Companies (Prospectus and Allotment of Securities), Rules, 2014 - The said amount of penalty shall be paid through online by using the website www.mca.gov.in(Misc. head) within 90 days of receipt of this order, and intimate this office with proof of penalty paid.

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• Insolvency & Bankruptcy

• 2024 (11) TMI 879
  Seeking to withdraw Appeal - seeking permission to withdraw the amount of Rs. 20,00,000/- that had been deposited in this Court pursuant to an interim order, along with accrued earnings thereon - HELD THAT:- The pleadings considered by the Supreme Court in Axis Bank vs. SBS Organics Private Limited and Another [ 2016 (4) TMI 917 - SUPREME COURT] on the very same question, and the resultant outcome of releasing the ICICI Guarantee, make it clear that security interests over the assets of the corporate debtor in order to secure amounts due from the corporate debtor under a judgement or decree would give way to the provisions of the IBC. The proceedings under the IBC may lead to an approved resolution plan or liquidation of the corporate debtor. Therefore, it is not appropriate to continue to hold the position that the interplay between the rights of a judgement creditor and the implications of insolvency law as existing in 1924 (in terms of Chowthmull) would still apply in 2024, when the IBC governs the field of insolvency and bankruptcy of corporate debtors. The real import of the ruling by the co-ordinate Division Bench in the NAHAR BUILDERS LTD VERSUS HOUSING DEVELOPMENT AND INFRASTRUCTURE LTD [ 2020 (1) TMI 1704 - BOMBAY HIGH COURT] , which was essentially to make the release of the amount deposited under Section 9 of the Arbitration Act, to the judgement creditor in the arbitration proceedings, subject to the provisions of IBC. Since another co-ordinate bench in Rajendra Bansal [ 2023 (1) TMI 306 - BOMBAY HIGH COURT] proceeded to release funds deposited by a corporate debtor to the judgement creditor on its reading of CHOWTHMULL MAGANMULL VERSUS THE CALCUTTA WHEAT AND SEEDS ASSOCIATION [ 1924 (5) TMI 5 - CALCUTTA HIGH COURT] and Nahar Case, it is clarified that the ruling in RAJENDRA PRASAD BANSAL VERSUS RELIANCE COMMUNICATION LIMITED [ 2023 (1) TMI 306 - BOMBAY HIGH COURT] applies only to the parties in that case, although the statement of law as contained therein, has been overtaken, as explained above. Since the Supreme Court has conclusively released the ICICI Guarantee in this very case, no question of law remains for reference to any larger bench. Taking into account the decision of the Supreme Court in respect of the ICICI Guarantee, and that too based on similar pleadings made by the parties before the Supreme Court; and also taking into account the provisions of the IBC and its implications for decree holders, the monies deposited in this Court are indeed assets under the ownership of the Applicant-Appellant, with possession being in the hands of the Court. No meaningful purpose would be served in continuing with the deposit, since even if the Appeal were to fail, the Respondent would need to be subjected to the CIRP run by the Committee of Creditors through the Resolution Professional. If the resolution attempts fail, the Respondent s rights under the Impugned Judgement would be subject to the waterfall mechanism for distribution of liquidation proceedings, stipulated under the IBC. The monies or any other asset deposited by a corporate debtor in court prior to commencement of CIRP by way of security (to protect against execution of any judgement or decree), would not cease to be the asset of the corporate debtor - the monies deposited by the Applicant-Appellant in this Court constitute assets owned by the Applicant-Appellant although they are not in possession of the Applicant-Appellant - the Applicant-Appellant is permitted to withdraw Appeal No. 597 of 2016, and indeed withdraw the amounts deposited in this Court in these proceedings, along with all earnings thereon. Refund of Court fees shall be processed as per Rules. Appeal disposed off.

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• Service Tax

• 2024 (11) TMI 910
  Challenge to SCN and adjudication order - inordinate, unexplained delay - violaion of principles of natural justice - HELD THAT:- In similar circumstances, this Court has, through its several decisions, quashed the show cause notice and restrained the Respondents from proceeding further with the adjudication, which is inordinately delayed. In this regard, we refer to our decision in the cases of COVENTRY ESTATES PVT. LTD. VERSUS THE JOINT COMMISSIONER CGST AND CENTRAL EXCISE ANR. [ 2023 (8) TMI 352 - BOMBAY HIGH COURT] , PARESH H. MEHTA VERSUS THE UNION OF INDIA, THE COMMISSIONER OF CUSTOMS NHAVA SHEVA, (GENERAL) RAIGAD, THE ADDITIONAL DIRECTOR DIRECTORATE OF REVENUE INTELLIGENCE MUMBAI. [ 2024 (10) TMI 1412 - BOMBAY HIGH COURT] , and M/S. ESJAYPEE IMPEX PVT. LTD., SHRI MAHENDRAKUMAR P. PARMAR MANAGING DIRECTOR OF M/S. ESJAYPEE IMPEX PVT. LTD., VERSUS THE UNION OF INDIA, ADDITIONAL DIRECTOR GENERAL, DIRECTORATE OF REVENUE INTELLIGENCE, MUMBAI, COMMISSIONER OF CUSTOMS (IMPORT-I) , MUMBAI [ 2024 (11) TMI 622 - BOMBAY HIGH COURT] . The impugned order is set aside - the Respondents are restrained from taking further steps or proceedings in furtherance of it - petition allowed.

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• Central Excise

• 2024 (11) TMI 878
  Process amounting to manufacture or not - re-packing of various excisable goods (herbal and cosmetic products), affixing the brand names owned by them in their premises - Illegality of duty liability under Section 4 of the Excise Act - it was held by CESTAT that demand confirmed even under Section 4 of Central excise Act, 1944 set aside - HELD THAT:- After having heard the learned counsel appearing for the appellant and after perusing the findings recorded by the Customs, Excise and Service Tax Appellate Tribunal, New Delhi, no error is found therein. The appeal is accordingly dismissed.

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• 2024 (11) TMI 877
  Disallowance of CENVAT Credit - service tax paid on the goods transport agency (GTA) services received by the appellant to transport the cement from its factory to the buyer s premises sold on FOR (free on road) destination basis - place of removal - recovery alongwith interest and penalties - HELD THAT:- Since there were conflicting views, the issue was referred to the Larger Bench in Ramco Cement versus CCE [ 2023 (12) TMI 1332 - CESTAT CHENNAI-LB] . The Larger Bench decided that where the goods are sold on FOR destination basis and the ownership of the goods gets transferred at the customer s premises, the place of removal shifts to the buyer s premises. In this case, there is no dispute that the goods were sold on FOR destination basis and so the place of removal gets shifted at the buyer s premises. Therefore, following the decision of the Larger Bench, it is held that the place of removal shifts to the buyer s premises and the appellant is entitled to CENVAT credit of the service tax paid on GTA services availed to transport the goods to the buyer s premises. The impugned order is set aside - appeal allowed.

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• 2024 (11) TMI 876
  Non-appearance of the Appellant or his authorised representative on the dates of public hearing - absence of authorized representative - HELD THAT:- Rule 20 of CESTAT (Procedure) Rules, 1982 provides that if the appellant appears afterwards and satisfies the Tribunal that there was sufficient cause for his non-appearance when the appeal was called on for hearing can set aside the dismissal and restore the appeal. The adjournments can t be given for the mere asking without any serious reason, backed with proof, for the non-appearance of the Appellant or his authorised representative on the dates of public hearing. Thus, no purpose would be served in continuing with this appeal and hence reject the same for default as per Rule 20 of CESTAT (Procedure) Rules, 1982. The appeal is disposed of accordingly.

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• 2024 (11) TMI 875
  Reversal of CENVAT Credit - packing material which is used for dutiable as well as non-dutiable products - invoice does not bear invoice number - HELD THAT:- In this case main denial of the Cenvat credit of Rs.10,03,635/- on the basis of ISD invoices issued to the appellant for promotional and marketing expenses alleging that the said promotional and marketing expenses are not wholly for the product manufactured by the appellant. The said issue has been examined by the Larger Bench of this Tribunal and the penalty in the case of M/s. Krishna Food Products [ 2021 (5) TMI 906 - CESTAT NEW DELHI] wherein this Tribunal observed A narrow and a literal interpretation of the phase its manufacturing units should, therefore, be avoided, more particularly when the Registration Exemption Notification provides for authorisation for manufacture of goods on behalf of the principal manufacturer. There appears to be no good reason as to why CENVAT credits should not be allowed to be distributed to a job worker in the facts and circumstances of the present case. The appellant is entitled to take Cenvat credit of Rs.10,03,635/-. Therefore, the said Cenvat credit is allowed. Availment of Cenvat credit - HELD THAT:- The appellant has produced the invoice bearing invoice number and the learned Authorized Representative also admitted that invoice number mentioned in the invoice, therefore, the said Cenvat credit is correctly taken by the appellant. Accordingly, Cenvat credit of Rs.32,149/- is allowed to the appellant. Cenvat credit on packing material - HELD THAT:- The reversal of proportionate Cenvat credit is sufficient for the appellant to avail Cenvat credit of Rs.39,159/-. If there is any discrepancy in the availment of Cenvat credit, the adjudicating authority shall verify from the records and if some calculation error is there, the appellant shall reverse the said proportionate Cenvat credit. In view of this, it is held that the appellant is entitled to take Cenvat of Rs.39,159/- also if there is no calculation error found by the adjudicating authority. No penalty is imposable on the appellant. The appeal is disposed of.

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• Indian Laws

• 2024 (11) TMI 874
  Challenge to Award of the Labour Court - whether the appellant, as a family member of a land-loser, whose land was acquired for the Kaiga Atomic Power Project, had legally secured the job as the sonin- law, of the land-loser? - HELD THAT:- The relevant materials reflecting the marriage of the appellant with Smt. Ganga was however ignored by the Writ Court. The Court also failed to appreciate that the learned Labour Court reached the factual conclusion, after due consideration of the material evidence. Such factual finding of the Labour Court should not normally be disturbed by a Writ Court without compelling reason. Such reasons are absent. Therefore it is felt that the Award in favour of the appellant, granted by the Labour Court, was erroneously disturbed by the learned Single Judge. The appellant is entitled to relief, in terms of the Labour Court s Award dated 09.08.2012 with consequential service benefits. But allowing backwages may not be justified. It is therefore made clear that the reinstated employee, shall not be entitled to any back wages from 16.12.2020, when the learned Single Judge set aside the Award, till he is reinstated. However, the gap period i.e. 16.12.2020 till reinstatement, should be taken into account for all other service benefits. The appellant is ordered to be reinstated in service, within four weeks from today. Appeal allowed.

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