TMI Tax Updates - e-Newsletter
November 26, 2020

Case Laws in this Newsletter:

GST Income Tax Benami Property Customs Corporate Laws PMLA Service Tax CST, VAT & Sales Tax

Articles

1. Income Tax Search and Seizure Assessments- No universal application of the “extrapolation technique” in Search Assessments

   By: MOHIT GUPTA

News

1. Two more States - Kerala and West Bengal choose Option-1 to meet the GST implementation shortfall

2. Cabinet approves the Memorandum of Understanding between the Institute of Chartered Accountants of India(ICAI) and the Vereniging van Registercontrollers (VRC), the Netherlands

3. Cabinet approves FDI of ₹ 2480.92 crore in M/s. ATC Telecom Infrastructure Private Limited by M/s. ATC Asia Pacific Pte. Ltd.

4. Cabinet approves Scheme of Amalgamation of Lakshmi Vilas Bank with DBS Bank India Limited

5. Cabinet approves Capital infusion into NIIF Infrastructure Debt Financing Platform comprising Aseem Infrastructure Finance Limited and NIIF Infrastructure Finance Limited

6. 7th Meeting of the Joint Trade Committee between India and Myanmar

Notifications

GST - States

1. 52/2020- State Tax - dated 19-11-2020 - Delhi SGST

Seeks to amend Notification No. 76/2018– State Tax, dated the 3rd September, 2019

2. (46/2020)-FD 03 CSL 2020 - dated 19-11-2020 - Karnataka SGST

Amendment in Notification (07/2020) No. FD 03 CSL 2020(e), dated the 27th March, 2020

3. ERTS (T) 65/2017/Pt.II/101 - dated 16-10-2020 - Meghalaya SGST

Seeks to amend Notification No. ERTS(T)65/2017/12, dated the 29th June, 2017

4. ERTS (T) 65/2017/Pt. II/97 - dated 30-9-2020 - Meghalaya SGST

Meghalaya Goods and Services Tax (Eleventh Amendment) Rules, 2020.

5. ERTS (T) 65/2017/Pt. II/96 - dated 30-9-2020 - Meghalaya SGST

Amendment in Notification No. 14/2020 -State Tax, dated the 21st March, 2020

6. ERTS (T) 65/2017/Pt. II/95 - dated 30-9-2020 - Meghalaya SGST

Amendment in Notification No. 13/2020 -State Tax, dated the 21st March, 2020

7. ERTS (T) 65/2017/Pt. II/94 - dated 30-9-2020 - Meghalaya SGST

Amendment in Notification No. 41/2020 -State Tax, dated the 5th May, 2020

Highlights / Catch Notes

GST

• High Court Invalidates Demand: Natural Justice Breach for Not Uploading SCN on GSTN Portal per Rule 142 CGST Act.

  Case-Laws - HC : Principle of natural justice - Failure to uploand the Show Cause Notice (SCN) and Order on the GSTN portal - Rule 142 of Central Goods and Services Tax Act, 2017 - The demand deserves to be and is struck down. - HC
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• High Court Rules GST Refund Rejection Violates Natural Justice; Petitioner Can Clarify GSTR-1 and GSTR-3B Forms.

  Case-Laws - HC : Refund of GST - Refund was rejected on the ground that there is no provision under GST Act and GST Rules for refund of excess payment of tax, if such payment is made through ITC - The Appellate Authority, in the instance case, was required to grant the petitioner an opportunity to explain its stand on GSTR-1 and GSTR-3B as also the Circulars - the impugned order militates against the principles of natural justice. - HC
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• ITC Refund on Exports: Circular No.14/2018-Customs Lacks Clarity, New Procedures Not Retrospective, Case Reconsidered.

  Case-Laws - HC : Refund of Input Tax Credit - exports of goods outside India - zero rated supplies - The admitted position is that the Circular No.14/2018-Customs is neither clarificatory nor it determines the eligibility of allowing refund of Input Tax Credit on exports. In any event, the new procedure cannot be made applicable from a retrospective date. - Matter restored back - HC
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• Developer Violated Section 171 CGST Act by Not Reducing Flat Prices, Failing to Pass ITC Benefits to Buyers.

  Case-Laws - NAPA : Profiteering - purchase of flat - the Respondent has not reduced the basic price of his flats by 0.14% in case of the above Project due to additional benefit of ITC resulting in contravention of the provisions of Section 171 of the CGST Act, 2017. It is also evident that the amount of benefit of ITC which has not been passed on by the Respondent - Directions issued - NAPA
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Income Tax

• Tribunal Rules ESOP Discounts Are Deductible Expenses u/s 37(1) of Income Tax Act, Not Capital Waste.

  Case-Laws - HC : Discount on issue of ESOP - The primary object of the aforesaid exercise is not to waste capital but to earn profits by securing consistent services of the employees and therefore, the same cannot be construed as short receipt of capital. Tribunal therefore has rightly held that incurring of the expenditure by the assessee entitles him for deduction under Section 37(1) of the Act subject to fulfillment of the condition. - HC
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• Penalty Proceedings Invalid if AO Fails to Specify "Concealment" or "Inaccurate Details" u/s 271(1)(c) at Start.

  Case-Laws - AT : Penalty levied u/s 271(1) (c) - Defective notice - When the AO has not applied his mind at the time of initiation of penalty proceedings by satisfying himself if it is a case of “concealment of income” or “furnishing of inaccurate particulars of income” then the entire penalty proceedings are vitiated and bad in law - AT
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• Appellate Authority Upholds CIT(A) Decision to Accept Entity's Financials Despite Power Consumption Discrepancies Exceeding 15% Limit.

  Case-Laws - AT : Unaccounted investment and unaccounted profit out of unaccounted production - The issue of rejection of books of account based on difference in power consumption of the relevant previous year turning act to be excessive than the so called tolerable limit of 15 % is no more res-intgra. - No infirmity in the order of the CIT(A) while directing the Assessing officer to accept the books results shown by the assessee for this year also and to delete the additions made by the AO - AT
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• Court Upholds Assessing Officer's Addition for Undisclosed Turnover Profits in Limited Scrutiny Case on Cash Deposits.

  Case-Laws - AT : Scope of limited scrutiny - cash deposits in the Bank accounts being more than the turnover - The impugned addition made by the AO on account of profit allegedly earned by the assessee on undisclosed turnover was directly related to the ground on which the case of the assessee was selected for limited scrutiny and the same being fall-out of the verification made by the AO on the issue on which the case of the assessee was selected for limited scrutiny, we do not find merit in the contention raised by assessee that the impugned addition made by the Assessing officer is beyond the scope of limited scrutiny. - AT
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• Interest Expenditure Allowed u/s 36(1)(iii) for Investments in Subsidiaries GIL and CNIL for Commercial Purposes.

  Case-Laws - AT : Disallowance u/s 36(1)(iii) - claim of interest expenditure - The companies GIL and CNIL are subsidiary companies, which clearly indicates that the investment made by the assessee company in other sister concerns rather we can say subsidiary companies are meant to be for commercial expediency and commercial necessity. - the investment made by the assessee are for its commercial purposes hence the interest expenditure borne by the assessee for the investment made by the assessee on its subsidiary company are allowable expenditure under section 37(1) of the Act. - AT
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• Expenditure must be attributed to earning exempt income u/s 14A and Rule 8D; disallowance enforced due to non-compliance.

  Case-Laws - AT : Disallowance u/s 14A read with Rule 8D - In any case, as per section 14A(3) whether or not the assessee has incurred any expenditure for earning exempt income, a part of the expenditure has to be attributed towards earning of exempt income - assessee has not been able to establish on record that no expenditure is attributable towards earning of exempt income. Therefore, in our considered opinion, disallowance of administrative expenditure has to be made under Rule 8D(2)(iii) of the Act. - AT
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Customs

• Court Rules Cross-Examination Request Premature; Petitioner Can Challenge Adverse Decision After Final Order Issued.

  Case-Laws - HC : Principles of natural justice - rejection of cross-examination - The petitioner has approached this Court prematurely as the respondents have only rejected the request made by the petitioner for cross examination of witnesses on the ground that the entire case is based on documentary evidence and there is no necessity for cross examination of witnesses. If there is any legal right available to the petitioner, as contended by them in this writ petition to cross examine the witnesses, they are always at liberty to raise the same as and when any adverse order is passed against them by the respondents through its final orders pursuant to the show cause notice - HC
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• No Penalty Under Customs Act Section 112(a) as Respondent Not Involved in Gold Seizure or Conspiracy.

  Case-Laws - CGOVT : Levy of penalty u/s Section 112(a) - The Respondent never came in touch with the gold at all, as it was seized before he came into the conspiracy, and therefore there was no cogent act of commission or omission by the Respondent, which rendered the goods liable for confiscation - The subsequent actions of unravelling the conspiracy and implicating the applicant did not take place and therefore there is no reason for invoking Section 112(a) of the Customs Act, 1962. - CGOVT
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Corporate Law

• Board Can Call Shareholders to Pay Off Partly Paid Shares, Converting Them to Fully Paid Status.

  Case-Laws - Tri : Conversion of partly up equity shares into fully paid-up equity shares - the board of directors are well within the powers to make a call on the shareholders in respect of unpaid shares to make them as fully paid. The company is entitled to issue partly paid shares. The petitioner became shareholder long after the company issued partly paid equity shares. Therefore, there is no irregularity in converting the partly paid shares into fully paid shares. - Tri
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Service Tax

• Tax Department's Claim for Unpaid Service Tax Dismissed Due to Lack of Objection in Previous Audits.

  Case-Laws - AT : Non-payment of service tax - Extended period of limitation - Demand for the period from 1.3.2006 to 15.5.2008 - the department was very much aware of the activities of the appellant as the department conducted audit of the accounts of the appellant from time to time and the last audit was conducted in December 2009 but has not raised any objections regarding the activities of the appellant, hence, allegation of suppression of material facts against the appellant is not sustainable. - AT
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Case Laws:

• GST

• 2020 (11) TMI 789
  Maintainability of Petition - availability of alternative remedy of appeal - challenge on order under Section 130 of U.P. Goods and Services Tax Act, 2017 passed by the Deputy Commissioner (SIB), Commercial Tax, Mirzapur Range, Mirzapur - respondents states that the writ petition is not maintainable as the impugned order is appealable under Section 107 of the Act, 2017. HELD THAT:- Without expressing any opinion on merits of the case of the petitioner the writ petition is dismissed on the ground of statutory remedy of appeal.

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• 2020 (11) TMI 788
  Refund of unutilized Input Tax Credit - Section 54 (3) (b) of the Central Goods and Service Tax Act, 2017 - HELD THAT:- The Court considers it appropriate to dispose of the present petition by directing the Respondents to process the Petitioner s application for refund and pass appropriate orders thereon not later than 31st January, 2021 and communicate the decision to the Petitioner not later than 8th February, 2021. If the Petitioner is aggrieved by the said order, it will be open to the Petitioner to seek appropriate remedies in accordance with law.

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• 2020 (11) TMI 787
  Principles of Natural Justice - foundational SCN was never communicated to the petitioner who is an individual registered under GST Act - Rule 142 of Central Goods and Services Tax Act, 2017 - HELD THAT:- As per Rule 142 of CGST Act, the only mode prescribed for communicating the show-cause notice/order is by way of uploading the same on website of the revenue. The State in its reply has provided no material to show that show-cause notice/order No.10 dated 10.06.2020 was uploaded on website of revenue. In fact, learned AAG, Shri Mody, fairly concedes that the show-cause notice/order was communicated to petitioner by Email and was not uploaded on website of the revenue - It is trite principle of law that when a particular procedure is prescribed to perform a particular act then all other procedures/modes except the one prescribed are excluded. This principle becomes all the more stringent when statutarily prescribed as is the case herein. This Court has no manner of doubt that statutory procedure prescribed for communicating show-cause notice/order under Rule 142(1) of CGST Act having not been followed by the revenue, the impugned demand dated 18.09.2020 vide Annexure P/2 pertaining to financial year 2019-2020 and tax period April, 2019 to July, 2019 deserves to be and is struck down - Petition allowed.

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• 2020 (11) TMI 786
  Principle of natural justice - Failure to uploand the Show Cause Notice (SCN) and Order on the GSTN portal - Rule 142 of Central Goods and Services Tax Act, 2017 - HELD THAT:- It is trite principle of law that when a particular procedure is prescribed to perform a particular act then all other procedures/modes except the one prescribed are excluded. This principle becomes all the more stringent when statutarily prescribed as is the case herein. This Court has no manner of doubt that statutory procedure prescribed for communicating show-cause notice/order under Rule 142(1) of CGST Act having not been followed by the revenue, the impugned demand dated 18.09.2020 vide Annexure P/1 and P/2 pertaining to financial year 2018-2019 and 2019-2020 and tax period September, 2018 to March, 2019 and April, 2019 to May, 2019 respectively, deserves to be and is struck down. Petition allowed.

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• 2020 (11) TMI 785
  Refund of GST - Refund was rejected on the ground that there is no provision under GST Act and GST Rules for refund of excess payment of tax, if such payment is made through ITC - HELD THAT:- The Appellate Authority cannot be faulted for undertaking an enquiry even after observing that the order of the Adjudicating Authority was erroneous because the Appellate Authority has to decide whether the petitioner has made out a case for grant of refund. The Adjudicating Authority had only scrutinized the cash ledger in GST portal for the relevant period of refund. In the reply to the SCN, the petitioner had stated that the GST liability for the month of August, 2017 had been discharged by debiting from ITC credit ledger to the extent of its availability and the balance liability was paid from cash ledger for the month and that since there is no requirement of debiting invoice-wise liability from the said ledger, the same may not be visible on the portal. The Appellate Authority concluded that the petitioner had rectified their error in tax payment in GSTR-3B for the month of August, 2017 in the GSTR-1 of the respective month, and the excess payment of tax had been carried forward to the next month s return to be offset against the output tax liability for that month. However, it does not appear from the order of the Appellate Authority that the Appellate Authority had perused and examined GSTR-1, GSTR-2 and GSTR-3B for the month of September, 2017 to actually find out whether excess payment of tax had been carried forward to be offset against the output tax liability of that month. It was presumed by the Appellate Authority that the petitioner had rectified the error in the GSTR-1 for the month of August, 2017 and that the excess payment of tax had been carried forward in the return of September, 2017. On that presumption, it was held that excess payment of tax in GSTR-3B is not actually an excess payment of tax as it will be auto adjusted by the system and therefore, there is no requirement of refund. No finding has been recorded that, subsequently, excess payment of tax had been auto adjusted. It is the positive case of the petitioner that excess payment of tax had not been carried forward to the subsequent months. The Appellate Authority, in the context of a claim for refund for excess payment of tax, may be justified to look into contemporaneous materials, but in such a circumstance, it will be imperative and mandatory for the Appellate Authority to afford an opportunity to the petitioner (appellant) to furnish its comments on the aspects on which the Appellate Authority would like to examine the matter by way of further enquiry. The Appellate Authority, in the instance case, was required to grant the petitioner an opportunity to explain its stand on GSTR-1 and GSTR-3B as also the Circulars - the impugned order militates against the principles of natural justice. Petition allowed - decided in favor of appellant.

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• 2020 (11) TMI 784
  Refund of IGST - Goods exported out of India during the period July 2017 to September, 2017 - It is the claim of the petitioner that in addition to the on-line process, the petitioner had also filed manual applications, however, the Department did not entertain the claims for refund and the amount sought for as refund was not given to the petitioner - HELD THAT:- It is seen that the petitioner did not prefer any application seeking payment of interest @6% on the principal amount. The learned counsel for the petitioner has very fairly submitted that the question of interest has been pursued upon only in the writ petition. Accordingly, upon hearing the learned counsel for the parties since the principal amount has been already been received by the petitioner on the date mentioned above, the writ petition is closed permitting the petitioner to pursue its claim for interest before the appropriate authorities if so advised - The petitioner is at liberty to furnish a copy of this order along with the claim for refunds to be filed before the authorities. Upon such filing of the application with respect to interest before the Department, the authorities will, upon hearing the petitioner, pass appropriate orders as per the provisions of law - Petition disposed off.

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• 2020 (11) TMI 783
  Refund of Input Tax Credit - exports of goods outside India - zero rated supplies - Section 16 of the Integrated Goods and Services Tax Act, 2017 - HELD THAT:- The admitted position is that the Circular No.14/2018-Customs dated 04th June, 2018 is neither clarificatory nor it determines the eligibility of allowing refund of Input Tax Credit on exports. In any event, the new procedure cannot be made applicable from a retrospective date. The impugned orders dated 01st June, 2020 passed by respondent no.3 as well as the orders dated 11th March, 2019 and 22nd July, 2019 issued by respondent no.2 are set aside - the matter is remanded back to the Original Adjudicating Authority i.e. Assistant Commissioner, who in turn is directed to decide the same in accordance with law - Petition allowed by way of remand.

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• 2020 (11) TMI 782
  Profiteering - purchase of flat - allegation that the Respondent had not passed on the benefit of the input tax credit by way of commensurate reduction in price to the Applicant - contravention of section 171 of CGST Act - period from 01.07.2017 to 30.09.2018 - Penalty - HELD THAT:- The Applicant No. 1 2 have stated that they had booked their flats with the builder on 31.10.2013 and as per the builder buyer agreement, the flats were to be delivered by 31.10.2015. The Respondent raised the final invoices on 19.01.2020 after receipt of the Completion Certificate from NOIDA in January 2017 but one year after receiving the Completion Certificate and by that time GST had been implemented thus resulting in extra financial burden to them which was Rs. 3, 00, 000/- approx. In this regard, it is pertinent to mention that as per the provisions of Section 171 of the CGST Act, 2017 read with Rule 127 and 133 of the CGST Rules, 2017, this Authority has only been mandated to ensure that both the benefits of tax rate reduction and ITC are passed on to the customers. Therefore, this Authority has no mandate to look into the matter whether the Respondent has wrongly charged GST from the Applicants. In respect of the Blossom County project the CENVAT credit/ITC as a percentage of the total turnover which was available to the Respondent during the pre-GST period was 0.71% and during the post-GST period this ratio was 0.85% as per the Table-C mentioned above. Therefore, the Respondent has benefited from the additional ITC to the tune of 10.25% (10.25% - 0%) of the total turnover in respect of the above Phase which he was required to pass on to the flat buyers of the above Phase. It has also found that the Respondent has not reduced the basic price of his flats by 0.14% in case of the above Project due to additional benefit of ITC resulting in contravention of the provisions of Section 171 of the CGST Act, 2017. It is also evident that the amount of benefit of ITC which has not been passed on by the Respondent or the profiteered amount came to Rs. 13, 32, 278/- which included 12% GST on the basic profiteered amount. This amount also included the profiteered amount of Rs. 3, 880/- and Rs. 3, 929/- including 12% GST in respect of the Applicant No. 1 and 2. It is also revealed from the submissions of the Respondent that he has not passed on interest @18% to his recipients/flat buyers on the profiteered amount, which shall be paid by the Respondent to his recipients/flat buyers from the date of receipt of the additional price till the amount is paid to each buyer, as he has used this amount in his business, as per the provisions of Section 171 (1) of the CGST Act, 2017 read with Rule 133 (3) (b) of the CGST Rules, 2017 - this Authority under Rule 133 (3) (a) of the CGST Rules, 2017 read with Sub-Section 171 (1) further orders that the Respondent shall reduce the prices to be realized from the buyers of the flats commensurate with the benefit of ITC received by him Penalty - HELD THAT:- The Respondent has denied the benefit of ITC to the buyers of the flats being constructed by him in his present project in contravention of the provisions of Section 171 (1) of the CGST Act, 2017 and has committed an offence under Section 171 (3A) of the above Act and therefore, he is liable for imposition of penalty under the provisions of the above Section. However, since the provisions of Section 171 (3A) have come in to force w.e.f. 01.01.2020 whereas the period during which violation has occurred is w.e.f. 01.07.2017 to 31.12.2018, hence the penalty prescribed under the above Section cannot be imposed on the Respondent retrospectively - A Show Cause Notice directing him to explain why the penalty prescribed under Section 171 (3A) of the above Act read with Rule 133 (3) (d) of the CGST Rules, 2017 should not be imposed on him is not required to be issued.

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• Income Tax

• 2020 (11) TMI 781
  Seeking directions to the respondents to release the refund - HELD THAT:- As revenue states that as rectification orders have already been passed, even the refund of Rs. 97 lakhs for the Assessment Year 2011-2012 along with interest shall be paid to the petitioner within four weeks. The statement made by Mr. Raghvendra Singh, learned senior standing counsel is accepted by this Court and present writ petition is disposed of as satisfied.

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• 2020 (11) TMI 780
  Refund claim delayed - respondents seeking extension of time for compliance of the order - concerned officer holding charge of ACIT HQ, CIT-3, posted on 4th Floor of E-2 Block of Civic Centre tested positive for COVID-19 on 28th October, 2020 and the office building was subsequently closed down for two days for deep sanitization - As stated that refunds have been due to petitioner since July, 2018. He emphasises that the refunds carry an element of interest and it is in the interest of the revenue to make early payment - HELD THAT:- Keeping in view of the aforesaid, the present application is allowed and the respondents are directed to ensure that refunds due to the petitioner are paid within eight weeks.

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• 2020 (11) TMI 779
  Discount on issue of ESOP - allowable deduction in computing the income under the head profits and gains of the business or not? - whether tribunal was right in holding that difference between market price of the shares at the time of grant of option and offer price amounts to discount and the same has to be treated as remuneration to the employees for their continuity of service? - as per revenue employees will not get any right in the shares till completion of the period prescribed and the expenditure claimed is contingent - HELD THAT:- The expression expenditure will also include a loss and therefore, issuance of shares at a discount where the assessee absorbs the difference between the price at which it is issued and the market value of the shares would also be expenditure incurred for the purposes of Section 37(1) - The primary object of the aforesaid exercise is not to waste capital but to earn profits by securing consistent services of the employees and therefore, the same cannot be construed as short receipt of capital. Tribunal therefore has rightly held that incurring of the expenditure by the assessee entitles him for deduction under Section 37(1) of the Act subject to fulfillment of the condition. Deduction of discount on ESOP over the vesting period is in accordance with the accounting in the books of accounts, which has been prepared in accordance with Securities And Exchange Board of India (Employee Stock Option Scheme and Employee Stock Purchase Scheme) Guidelines, 1999. The decisions relied upon by the revenue in Gajapathy Naidu [ 1964 (4) TMI 6 - SUPREME COURT] , Morvi Industries [ 1971 (10) TMI 5 - SUPREME COURT] and Keshav Mills Ltd. [ 1953 (1) TMI 5 - SUPREME COURT] support the case of assessee as the assessee has incurred a definite legal liability and on following the mercantile system of accounting, the discount on ESOPs has rightly been debited as expenditure in the books of accounts. We are in respectful agreement with the view taken in PVP Ventures Ltd. [ 2012 (7) TMI 696 - MADRAS HIGH COURT] And Lemon Tree Hotels Ltd. [ 2015 (11) TMI 404 - DELHI HIGH COURT] Also for Assessment Year 2009-10 onwards the Assessing Officer has permitted the deduction of ESOP expenses and in view of law laid down in Radhasoami Satsang [ 1991 (11) TMI 2 - SUPREME COURT] the revenue cannot be permitted to take a different stand with regard to the Assessment Year in question. - Decided against revenue.

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• 2020 (11) TMI 778
  Deduction u/s 80IA - assessee was required to develop 95% of the area for industrial use, but has failed to do so - HELD THAT:- Approval granted by Ministry of Commerce and Industry itself is a testimony that the assessee company has developed infrastructure facilities in the form of Multi storied structure to accommodate independent units to operate separate identities and individualities of the unit do not disappear only for the reason that the entire developed area has been leased out to a single company. The tribunal has therefore, applied the functional test and has held that each unit occupying a different floor is independent with independent facilities, instrumentation, power connection, door number and facility of functioning independently. It has been held that each unit is in a position to carrying on its activity without depending on other units. Therefore, a finding has been recorded in favour of the assessee that the assessee has successfully satisfied the functional test of an independent unit. Since, the assessee had applied for non automatic approval under paragraph 7 of the scheme, therefore, the requirement contained in paragraph 6(f), which requires a unit not to occupy more than 50% of the allocable area does not apply to the case of the assessee. Rule 18C of the Rules does not have a bearing on the claim of the assessee with regard to eligibility of deduction under Section80IA(4)(iii) of the Act in the fact situation of the case. Even otherwise, whether or not the assessee has complied with the conditions laid down in the Scheme in order to enable it to claim deduction under Section80IA(4)(iii) of the Act is a pure question of fact. The findings recorded by the tribunal have not been assailed by the revenue on the ground that the same are perverse. The aforesaid findings of fact could not be demonstrated to be perverse. - Decided against the revenue and in favour of the assessee

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• 2020 (11) TMI 777
  Deduction u/s 80IA(4)(iii) - conditions laid down by the Ministry of Commerce for the same have not been fulfilled by the assessee as noted by the assessing officer after physical verification of the premises and recorded perverse finding - tribunal allowed deduction holding that unit means separate floo r- HELD THAT:- Quash the order passed by the Tribunal. Therefore, it is not necessary to answer the substantial questions of law. The Tribunal shall decide the matter afresh and shall after affording an opportunity of hearing to the parties, shall record a finding whether the assessee has complied with the conditions laid down in the Industrial Park Scheme, 2002 and whether the assessee is eligible to claim deduction under Section 80IA(4)(iii) of the Act.

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• 2020 (11) TMI 776
  Penalty levied u/s 271(1) (c) - Defective notice - TP Adjustment - HELD THAT:- Bare perusal of the notices issued u/s 274 read with section 271(1)(c) of the Act, extracted above, in order to initiate the penalty proceedings against the assessee go to prove that at that point of time, AO himself was not aware/sure as to whether he is initiating penalty proceedings by way of impugned notice either for concealment of particulars of income or furnishing of inaccurate particulars of income by the assessee rather issued vague or ambiguous notice by incorporating both the limbs of section 271 (1) (c) of the Act. AO also neither invoked Explanation 7 of section 271(1)(c) of the Act nor any satisfaction note in the notices initiating the penalty proceedings has been recorded. When the charge is to be framed against any person so as to move the penal provision against assessee, he is required to be specifically made aware of the charges to be levied against the assessee under specific provisions of the Act. Not only this, even at the time of assessment proceedings, AO has not applied his mind as to whether he is satisfied if the assessee company has concealed the income or furnished inaccurate particulars of income mandatory to initiate the penalty proceedings u/s 271(1)(c) of the Act which is apparent from the satisfaction note of the AO - When the AO has not applied his mind at the time of initiation of penalty proceedings by satisfying himself if it is a case of concealment of income or furnishing of inaccurate particulars of income then the entire penalty proceedings are vitiated and bad in law. - Decided in favour of assessee.

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• 2020 (11) TMI 775
  Reopening of assessment u/s 147 - Notice solely on the basis of the information received from the Investigation Department - non independent application of mind - HELD THAT:- The original return of income filed by the assessee on 17.10.2007 was processed u/s 143(1) of the Act. On the basis of information received from the Director General of Income Tax (Investigation) that the assessee had obtained accommodation entries controlled and managed by Shri Pravin Kumar Jain, whose statement was recorded u/s 132(4) during the course of search on 01.10.2013, wherein he admitted that he indulged in providing accommodation entries, the AO recorded the reasons and then issued notice u/s 148 of the Act. A perusal of para 6 of the assessment order clearly indicates that the assessee invested Rs. 15,00,000/- in M/s Javda India Impex Ltd. is a minor error in view of the fact that the original return was processed u/s 143(1) of the Act. The Hon ble Supreme Court in the case of ACIT v. Rajesh Jhaveri Stock Brokers P. Ltd. [ 2007 (5) TMI 197 - SUPREME COURT ] analyzed the distinction between the acceptance of a return u/s 143(1) and an assessment which is framed u/s 143(3) of the Act. In the former case, the AO would have much wider latitude to reopen the assessment. Intimation u/s 143(1) is not an assessment. Thus in the instant case, the AO has rightly issued notice u/s 148 for reopening the return of income processed u/s 143(1). Addition made on account of share application money u/s 68 - HELD THAT:- In the instant case, the onus clearly shifted to the AO. There was enough material before the AO in the shape of loan confirmation, ledger account, bank account statement to make further inquiry/verification in the above matter. In the instant case, the AO has not done even elementary/ preliminary inquiry to verify the genuineness of the transaction. The addition made by him is based on surmises and conjectures. The ratio laid down by the Hon ble Bombay High Court in the case of Orchid Industries Pvt. Ltd. [ 2017 (7) TMI 613 - BOMBAY HIGH COURT ] is squarely applicable here. Respectfully following the same, we delete the addition. Disallowance against cost of purchases and expenses - Addition from the purchase and other expenses - books of accounts were not rejected by the AO before making such ad-hoc disallowance - HELD THAT:- In the instant case, as the disallowance made by the AO is on ad-hoc basis without rejecting the books of accounts maintained by the assessee, we delete the addition of Rs. 5,00,000/- by following the ratio laid down in R.G. Buildwell Engineers Ltd. [ 2018 (10) TMI 252 - SC ORDER ] - 3rd ground of appeal is allowed.

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• 2020 (11) TMI 774
  Penalty u/s 271AAA - search u/s 132 - assessee had offered additional income during the course of search being additional income declared in AY 2010-11 less the brought forward of unabsorbed short term capital losses - AO in disallowing the claim of set off of brought forward capital loss against the income declared - HELD THAT:- When the claim of the assessee of adjusting the brought forward capital loss against the income declared pursuant to the search has been upheld by the Co-ordinate Bench of Tribunal and since the order of the Tribunal in quantum proceedings has attained finality, then in such a situation, we are of the view that the assessee was fully justified in reducing the unabsorbed short term brought forward capital loss against the income and on the resultant income, he was justified in paying the tax. Thus we do not agree with the view of the Revenue that there was shortfall in the payment of taxes on the brought forward losses resulting into assessee being liable for penalty u/s 271AA of the Act. We, therefore, set aside the order of AO. Thus the ground of the assessee is allowed.

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• 2020 (11) TMI 773
  Revision u/s 263 - reexamine the claim of deduction u/s 54 by construing the investment made in a new residential flat as the case of acquisition and not construction - HELD THAT:- It is well-settled that immovable property is not conveyed by delivery of possession, but by a duly registered deed. Further, it is the date of execution of registered document, not the date of delivery of possession or the date of registration of document which is relevant. Once the executed documents are registered, the transfer will take place on the date of execution of documents and not on the date of registration of documents as held in Alapati Venkataramiah v. CIT [ 1965 (3) TMI 21 - SUPREME COURT ], CIT v. Podar Cements Pvt. Ltd. [ 1997 (5) TMI 2 - SUPREME COURT ] and CIT v. Vishnu Trading Investment Co. [ 2002 (2) TMI 31 - RAJASTHAN HIGH COURT ] In Malabar Industrial Co. Ltd v [ 2000 (2) TMI 10 - SUPREME COURT] it is held that the Commissioner has to be satisfied with the twin conditions, namely, (i) the order of the Assessing Officer sought to be revised is erroneous; and (ii) it is prejudicial to the interests of the revenue. If one of the conditions is absent- if the order of the Assessing Officer is erroneous but is not prejudicial to the revenue or if it is not erroneous but is prejudicial to the revenue- recourse cannot be had to section 263(1) of the Act. Thus the order of the Pr. CIT u/s 263 of the Act is hereby quashed. - Decided in favour of assessee.

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• 2020 (11) TMI 772
  Limited scrutiny V/S complete scrutiny - assessment order passed under section 143(3) - Scope of limited scrutiny - no prior approval and the permission of the PCIT before conversion of scrutiny - disallowance made under section 14A - HELD THAT:- The case of the assessee was selected for limitedprior approval and the permission of the PCIT scrutiny through CASS - no administrative approval from the competent authority was obtained by the AO for converting the case of the assessee from limited scrutiny into complete scrutiny case. We find that instruction no. 5 of 2016 dated 14.07.2016 issued by CBDT has inter alia laid down the procedure which is required to be followed by the AO to consider the case which are originally earmarked for limited scrutiny to complete scrutiny and also requires the administrative approval from PCIT / CIT. Before us Revenue has neither pointed out any distinguishing features in the facts of the present case and that of Urban Improvement Cooperative Bank Limited [ 2020 (4) TMI 531 - ITAT DELHI ] nor has placed any material on record to demonstrate that the order of the Tribunal in the case of Urban Improvement Cooperative Pvt. Ltd., (supra) has been set aside/ stayed/ overruled by higher judicial forum. We therefore, following the aforesaid decision of the Coordinate Bench in the case of Urban Improvement Co-operative Pvt. Ltd. (supra) and for similar reasons hold that the impugned assessment order passed by the AO under section 143(3) to be null and void - Decided in favour of assessee.

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• 2020 (11) TMI 771
  Disallowance u/s 40(a)(iib) - License fees paid to the Govt, of Odisha - HELD THAT:- In the present year under consideration, the assessee has shown license fee payment of Rs. 151,90,00,000/- in its profits and loss account paid to the State Government of Odisha and view of the amended provisions of section 40(a)(iib) of the Act, the license fees paid to State Government is taxable in the hands of the assessee. Admittedly, the assessee is the only wholesale liquor distributor in the State as authorized by Government of Odisha by charging impugned license fee. Therefore, there is no person in similar line of business with whom license fees charged by Govt. of Odisha and paid by the assessee cannot be compared for determination of reasonable license fee. On careful perusal of the order of the Tribunal and first appellate orders for assessment years 2014- 15 and 2015-16, we have no hesitation to hold that above contentions have not been raised by the assessee neither during assessment proceedings and first appellate proceedings for both the assessment years and nor before the Tribunal during arguments of assessment year 2014-15. In view of above, the assessee cannot be allowed to make a new case and to argue the contentions which were not pressed into service before the authorities below and before the Tribunal during the hearing of the case of A.Y. 2014- 15 at this belated stage. Therefore, these contentions of the assessee are dismissed.

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• 2020 (11) TMI 770
  Levy of penalty u/s 271(1)(c) - principles of natural justice violated - ex parte order - no hearing provided - HELD THAT:- CIT(A) has passed an ex parte order without hearing the assessee. It is an established principle of natural justice that assessee should be heard before a decision is taken against it. A fair opportunity of hearing is essence of the principles of natural justice. An opportunity of hearing to the assessee before the levy of penalty is a statutory requirement, which has to be strictly complied with by the Revenue. In the present case since the order of CIT(A) has been passed in violation of principles of natural justice, we are of the view that one more opportunity needs to be granted to assessee to present its case - Appeal of Assessee is allowed for statistical purposes.

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• 2020 (11) TMI 769
  Condonation of delay - delay of 132 days - As submitted assessee was seriously ill and was undergoing medical treatment from 5.6.2019 and was advised complete bed rest by the doctor and, therefore, he was unable to do his normal activities - HELD THAT:- There can be no presumption of deliberateness or negligence or mala fides in case of delay, because litigants run a serious risk without any benefit by the delay. The judiciary is respected not for legalizing injustice on technical grounds but for removing injustice. We find that the assessee had reasonable cause for not filing the appeal within the stipulated time. Respectfully following the decision of Hon ble Supreme Court in the case of Mst Katiji [ 1987 (2) TMI 61 - SUPREME COURT] we condone the delay of 132 days in filing the appeal before the Tribunal and admit the appeal for hearing. Reopening of assessment u/s.147 - Reassessment proceedings u/s.147 before expiry of limitation period for issuing notice u/s.143(2) - Undisclosed investment - value disclosed in the Registered Sale Deed when there was no such transaction - HELD THAT:- Unless the return filed by the assessee is scrutinized by the AO by way of issuing notice u/s.143(2) he cannot come to the conclusion of any escapement of income by the assessee for the relevant assessment year. If the AO issues notice u/s.143(2) obviously, he would scrutinize the return and frame the assessment u/s.143(3) and, thereafter, original assessment proceedings would be closed or terminated. Subsequently, if the AO notice escapement of income, on the basis of some new tangible material, which was not before him during original assessment proceedings, then he has reason to believe that there is escapement of assessment and he may assume valid jurisdiction for initiation of reassessment proceedings u/s.147 and issuance of notice u/s.148 of the Act. Assessment proceedings are deemed to be over or terminated when (a) the return is processed u/s.143(1) of the Act or (b) scrutiny assessment order is framed u/s.143(3) of the Act or (c) the time limit for issue of notice u/s.143(2) of the Act is expired and thereby the assessment is no longer possible 143(3) of the Act. Thus, the assessment proceedings u/s.147 of the Act can be initiated only after the earlier assessment proceedings are terminated by way of any of the one of the three modes as noted above. We are convinced that the contention advanced by ld D.R. that even if the prescribed time for issuance of notice u/s.143(2) was not expired, the AO was having valid jurisdiction to initiate reassessment proceedings u/s.147 of the Act and issuance of notice u/s.148 of the Act is not correct, therefore, we dismiss the same. Our above noted judicious conclusion also gets strong support from the order of ITAT Hyderabad in the case of Sri Venkata Shiva Reddy[ 2017 (11) TMI 1475 - ITAT HYDERABAD] Since, undoubtedly, the time limit for issuance of notice u/s.143(2) for assessment year 2014-15 was to be expired on 30.9.2016 and prior to that on 25.1.2016, the AO issued notice u/s.148 of the Act after initiating reassessment proceedings u/s.147 of the Act, i.e. before expiry of limitation period for issuing notice u/s.143(2) of the Act. Therefore, we are compelled to hold that the initiation of reassessment proceedings u/s.147 of the Act, notice u/s.148 of the Act, and all consequent proceedings and orders including the reassessment order u/s.144/147 of the Act passed on 19.12.2016 in pursuance to the notice u/s.148 of the Act and impugned first appellate order are also bad in law. - Decided in favour of assessee.

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• 2020 (11) TMI 768
  Revision u/s 263 - bogus LTCG - AO should have treated the LTCG earned by the assessees as bogus credit and should have added back the entire credit u/s 68 - HELD THAT:- Pr. CIT has simply cut and pasted para 5 to para 5.12.3 and also para 6 from the orders he had passed u/s 263 of the Act from the order of the Pr. CIT passed u/s 263 of the Act in the case of M/s. Girish Tikmani Others. Only in para 7, the quantum of addition, or the figures of addition have varied from case to case. This shows that the same general observations and reasons have been given by the ld. Pr. CIT in all cases where he took action u/s 263 in cases where there was a claim of deduction u/s 10(38) of the Act on LTCG and where the claim was accepted by the AO. Based on this cut and paste reasoning, the ld. Pr. CIT has directed the AO to make additions u/s 68 of the entire sale consideration received by each of the assessees on the sale of shares, as well as addition u/s 69C of the Act, of an assumed commission payment u/s 69C - No evidence is brought on record except for stating generalities. SIT recommendations were cited, but these do not have any reference to these assessees. This, in our view cannot be a ground for the Pr. CIT to give specific directions to the AO to make certain additions. The assessee is not confronted by any adverse material. No reference has been made to any specific adverse material. When the assessee is not confronted with any material no amount can be directed to be added by the ld. Pr. CIT, on the basis of suspicion, or material in the public domain on the general modus operandi adopted in such cases. It is necessary for the ld. Pr. CIT to have conducted his own enquiries, collected adverse material and confronted the assessee with such adverse material, consider the replied and only after following the principles of natural justice, he could have directed the additions in question against the assessee. Additions cannot be made based on general reasoning or some supposed material in the public domain which was never brought on record. Such direction is arbitrary and has to be struck down as bad in law. AO in this case has called for details and thereafter made enquiries with the parties by issuing notices u/s 133(6) of the Act. Only on receiving replies from third parties, the AO came to a conclusion that he could not find any discrepancy in the claim of the assessee for exemption u/s 10(38) of the Act. The Pr. CIT has not pointed out as to what was the deficiency in these enquiries of the AO and as to what are the further enquiries the AO should have done. AO had taken a possible view, after making his enquiries and admittedly this view is supported by some judicial decisions. Pr. CIT has not specified as to what was the nature of enquiry that the AO has failed to do, nor he has stated the extent of enquiry that was required to be done in such cases - Case followed - M/s. Gitsh Tikmani, HUF and Others [ 2019 (9) TMI 1177 - ITAT KOLKATA] - Decided in favour of assessee.

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• 2020 (11) TMI 767
  Unaccounted investment and unaccounted profit out of unaccounted production - variation of consumption of electricity was more than 15% - Rejection of books of accounts - income estimation - HELD THAT:- No merit in the Revenue s stand that the Assessing Officer s three folded action inter alia in rejecting the assessee s books of account followed by gross profit element on alleged unaccounted production of Rs. 13,04,677/- as well as unaccounted investment in stock of Rs. 1,62,54,188 78 - Case records indicate that this issue of rejection of books of account based on difference in power consumption of the relevant previous year turning act to be excessive than the so called tolerable limit of 15 % is no more res-intgra. This Tribunal s coordinate bench decision ITO Vs M/s Baba Balak Nath Steels [ 2019 (8) TMI 1587 - ITAT CHANDIGARH] has rejected Revenue s identical stand wherein held CIT(A) has accepted the variation of 15% in consumption of electricity per metric ton of finished goods as per the report of the Committee. He has also observed that pursuant to the report of committee, the AO have also followed this norm while making assessment in similar type of cases and have accepted the book results shown by the assesses. No infirmity in the order of the CIT(A) while directing the Assessing officer to accept the books results shown by the assessee for this year also and to delete the additions made by the Assessing officer on account of unaccounted profits / unaccounted investment made on estimation basis - Decided in favour of assessee.

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• 2020 (11) TMI 766
  Validity of reopening of assessment u/s 147 - borrowed satisfaction - no material for forming belief that income of the assessee had escaped assessment - as argued action was initiated on the basis of mere suspicion and vague information and there was no independent satisfaction of the A.O. - as per assessee no satisfaction of the A.O. of escapement of income, which is a necessary pre requisite for initiating the reassessment proceedings was not as per law - HELD THAT:- AO has merely relied on the information passed on to him by the Investigation department regarding accommodation entry taken by the assessee, without even applying his mind to it and verifying the same. The entire reasons, we find, talks about some information with the Department regarding the assessee having availed accommodation entries of Rs. 20 lacs from M/s Virgin Capital Services Pvt.Ltd. a paper company of M/s Surinder Kumar Jain Group, which is engaged in providing such entries, through cheque in lieu of cash. There is nothing in the reasons revealing application of mind by the AO to the information in his possession, as to whether he had verified that any such amount was actually received during the year and if so in what mode or manner i.e as share capital or unsecured loan etc. A.O. has formed his belief solely on this information without even verifying and cross checking the same with the facts on record available with him. The belief of escapement of income as recorded in the reasons, is clearly not that of the A.O. but, as rightly pointed out by the Ld. Counsel for the Assessee, it is a borrowed belief. Since the satisfaction regarding escapement of income as recorded in the reasons, was not that of the AO but was borrowed satisfaction, the jurisdiction therefore assumed to reopen the case u/s 147 of the Act was bad in law. - Decided in favour of assessee.

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• 2020 (11) TMI 765
  Scope of limited scrutiny - cash deposits in the Bank accounts being more than the turnover - Profit earned on undisclosed turnover - undisclosed bank accounts - HELD THAT:- Huge deposits were made in the said Bank accounts and since the said Bank accounts were found to be not reflected in the accounts of the assessee, the same were treated by him as the undisclosed turnover of the assessee s business and estimated profit thereon was added by him to the total income of the assessee. The impugned addition made by the AO on account of profit allegedly earned by the assessee on undisclosed turnover was directly related to the ground on which the case of the assessee was selected for limited scrutiny and the same being fall-out of the verification made by the AO on the issue on which the case of the assessee was selected for limited scrutiny, we do not find merit in the contention raised by assessee that the impugned addition made by the Assessing officer is beyond the scope of limited scrutiny. Deposits found to be made in the two Bank accounts maintained with Paschim Banga Gramin Bank and UCO Bank - Serious discrepancies were found in the books of account of the assessee, inasmuch as, the substantial balances in the two accounts maintained by the assessee with Paschim Banga Gramin Bank and UCO Bank were not reflected in the audited balance-sheet of the assessee. Similarly the interest earned by the assessee in one Bank account as well as interest charged in the other Bank account was also not reflected in the accounts of the assessee. Keeping in view these serious discrepancies seriously doubting the reliability of the audited accounts of the assessee, the onus, in our opinion, was greater on the assessee to establish by furnishing cash flow statement duly supported by the relevant books of account that the deposits found to be made in the Bank accounts maintained with Paschim Banga Gramin Bank and UCO Bank represented the sale proceeds of his business, which were duly reflected in the books of account and included in the total turnover finally declared in the return of income. Since this exercise was not specifically done by the assessee either during the course of assessment proceedings before the Assessing Officer or during the course of appellate proceedings before the ld. CIT(Appeals), we consider it fair and proper and in the interest of justice to set aside the impugned order of the ld. CIT(Appeals) on this issue and restore the matter back to the file of the Assessing Officer for deciding the same afresh - Appeal of the assessee is treated as allowed for statistical purposes.

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• 2020 (11) TMI 764
  Disallowance u/s 36(1)(iii) - claim interest expenditure disallowed as investment made in subsidiary companies - sister concerns have invested in capital assets and mutual funds and not utilized the same in commercial activities - HELD THAT:- The assessee company is holding substantial shareholding and also considering the set up of the group companies, we can see that Global Holding company controls the whole group concerns which includes assessee company. The assessee company also under control of Global Holding. Assessee companies invest in other group companies in which holding company controls the majors shares as well as controls composition of directors. The companies GIL and CNIL are subsidiary companies, which clearly indicates that the investment made by the assessee company in other sister concerns rather we can say subsidiary companies are meant to be for commercial expediency and commercial necessity. Therefore, in our considered view the investment made by the assessee in these companies are for commercial expediency and we also note that apart from it is holding substantial shares and we also notice that substantial portion of their commercial activities are sourced through the subsidiary companies. These investments made by the assessee will fall within the term business expediency /commercial expediency expressed by the Hon ble Apex Court in its landmark judgement of S. A. Builders [ 2006 (12) TMI 82 - SUPREME COURT] . Therefore, the investment made by the assessee are for its commercial purposes hence the interest expenditure borne by the assessee for the investment made by the assessee on its subsidiary company are allowable expenditure under section 37(1) of the Act. Therefore, we are inclined to allow the grounds raised by the Assessee. Accordingly, grounds raised by the assessee are allowed.

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• 2020 (11) TMI 763
  Exemption u/s 11 12 denied - addition u/s 68 towards the loan amount received from its members - assessee has not been granted registration u/s 12A/12AA though the assessee has claimed to have submitted an application on 01/10/2003 - HELD THAT:- This is a question of fact regarding submitting of the application on behalf of the assessee as claimed on 01/10/2003 seeking registration u/s 12A - assessee has not filed any record or copy of the alleged application either before the authorities below or before the Tribunal. The assessee is strongly relied upon a letter dated 31/03/2005 issued by the ITO, Dausa wherein it is stated that till application of the assessee is disposed off for grant of registration U/s 12A of the Act, the assessee will get the benefit of exemption u/s 11 and 12 It is no clear that in what capacity, the said letter dated 31/03/2005 was issued by the ITO, Dausa whether he was functioning on behalf of the ld. CIT(Exemptions), Jaipur or not. Further all these facts require a proper scrutiny of the record and particularly any documentary evidence to be filed by the assessee to show that any application on behalf of the assessee was submitted for seeking registration U/s 12A and which has not been decided till date. There is no dispute in this appeal regarding the registration U/s 12A of the Act but the assessee is seeking an exemption U/s 11 and 12 of the Act. Since the ld. CIT(A) has decided the appeal of the assessee ex parte and that too by a summary non-speaking order, therefore, we grant one more opportunity to the assessee to present its case before the ld. CIT(A) and also to produce the supporting evidence for the claim of pendency of the application for registration U/s 12A of the Act and consequential claim of exemption u/s 11 and 12 of the Act. - Decided in favour of assessee for statistical purposes.

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• 2020 (11) TMI 762
  Disallowance u/s 14A read with Rule 8D - AR submitted, no disallowance of interest expenditure under Rule 8D(2)(ii) can be made as no interest bearing fund was invested in exempt income yielding asset - HELD THAT:- Claim of the assessee requires factual verification, in case it is found that the assessee had sufficient interest free funds available with it which can take care of investment made in exempt income yielding assets, no disallowance of interest expenditure under Rule 8D(2)(ii) can be made. AO is directed to factually verify assessee s claim in this regard. In so far as, disallowance of administrative expenditure under Rule 8D(2)(iii) is concerned, it is the contention of the assessee that for availing loan from a co-operative bank, the assessee mandatorily has to invest in shares of the bank. As submitted, the dividend income earned on such shares are directly credited to the bank account of the assessee and hence, the assessee is not required to incur any expenditure for earning dividend income. Whether or not the assessee has incurred any expenditure has to be established through supporting evidence. In any case, as per section 14A(3) whether or not the assessee has incurred any expenditure for earning exempt income, a part of the expenditure has to be attributed towards earning of exempt income - assessee has not been able to establish on record that no expenditure is attributable towards earning of exempt income. Therefore, in our considered opinion, disallowance of administrative expenditure has to be made under Rule 8D(2)(iii) of the Act. However, such disallowance has to be computed by taking into consideration only those investments which have yielded exempt income during the year - Assessee appeal is allowed for statistical purposes.

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• Benami Property

• 2020 (11) TMI 761
  Benami transaction - jurisdiction of civil Courts under Section 45 - Whether a civil Court can consider an application when its jurisdiction is alleged to be barred by operation of law - question agitated for the second time before this Court. - HELD THAT:- Substance of the respondent s case is that he had paid the entire sale consideration for the purchase of plaint B schedule property in the name of his sister Mary and that the document happened to be nominally taken in the name of the Mary only due to the fact that the respondent was working in the Merchant Navy. The Benami Transactions (Prohibition) Act, 1988 came into force on 5.9.1988. The Act was enacted with the objective to prohibit benami transactions and the right to recover property held benami. The Act was extensively amended by Act 43 of 2016, which came into force with effect from 1.11.2016, except Sections 3, 5 and 8 which are deemed to have come into force w.e.f 19.05.1988 (read Section 1 (3) of the Act). Once it is established in Court that the claim put forth in the suit is a benami transaction not falling within the exceptions under Section 2 (9) of the Act, then no suit will lie in view of Section 4 of the Act; that there is a clear bar of jurisdiction of civil Courts under Section 45 of the Act and that pending cases have to be transferred to the Adjudicating Authority or Appellate Authority. Exhibit P-9 order is erroneous and unsustainable in law and is liable to be interfered with because when the petitioners have raised a specific plea that the suit is hit by the prohibitions under Sections 4 and 45 of the Act, the Trial Court ought to have considered the said question as a preliminary issue as laid down in T.M.Bagasarwalla v. H.R.Industries [ 1997 (2) TMI 563 - SUPREME COURT] before making an endeavor to decide on Exhibit P-5 application, otherwise as it is commonly said in the idiom it would be like putting the cart before the horse. Thus remit the matter back to the Trial Court for de novo consideration, to decide on the maintainability of the suit in view of Sections 4 and 45 of the Act, as contemplated under Order VII Rule 11 (d) of the Code or decide whether the suit has to be transferred in light of Section 65 of the Act, in which case the Trial Court shall try the question as a preliminary issue, as provided under Order XIV Rule 2 (2) of the Code. Only if the Trial Court finds it has jurisdiction, it shall decide Exhibit P-5 application.

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• 2020 (11) TMI 760
  Benami transaction - suit property belonged to father late Yashpal Sain of appellant wherein she is entitled to 1/4th share in the said property - suit was filed by Smt. Savita Anand, ( appellant ) for partition and permanent injunction against three defendants, i.e. her mother Smt.Krishna Sain (who has since expired during the pendency of the appeal and will be referred to for convenience as D1 ), her sister Smt.Sarita Mullick (hereinafter referred to as D2 ) and her brother Sh.Sanjeev Sain (hereinafter referred to as D3 ) - how the plaintiff/appellant could claim a share in the suit property merely on the basis of her late father being a member of the Society in question, given the dicta of the courts? - argument of appellant was that the case ought not to have been dismissed without trial as there were many factual issues that were to be proved by leading evidence HELD THAT:- The appellant appears to be very eager to establish a vested right in the suit property by claiming it to be an HUF property or in the alternative, joint family property. The purchase of 5 Bighas 10 biswas land at Mathura Road in 1960 cannot be connected with any compensation received as a refugee by late Yashpal Sain in the absence of any document to substantiate payment and receipt of such compensation. Nor can the purchase of the property at Mathura Road by him be accepted as a restoration of ancestral property, when the existence of any such ancestral property at Lahore, Pakistan, is itself completely doubtful in the absence of cogent and clear disclosures in the plaint in this regard. There is no reason to presume that it was this compensation that he may have received that was invested in the property that was purchased at Mathura Road. Secondly, the said plot of land at Mathura Road was acquired by the Government in 1960, thus extinguishing all rights of late Yashpal Sain in that land. Though compensation for the same amounting to Rs.14,101.88 paise was also awarded to him, such compensation did not take the colour of joint family funds. Even if this compensation was thereafter ploughed back into the purchase of a plot measuring 5494 sq yds in the Society, no conclusion can be drawn that this plot was also of the nature of an HUF property in which the appellant could stake a claim Yashpal Sain failed to complete the requisite formalities as a result of which no plot of land was in fact allotted to him. At the time of his death, no plot stood in his name to which the appellant could stake a claim as his legal heir. Thus on both the threads of arguments, the appellant was rightly held to be not entitled to any share in the suit property. Whatever may have been the source of the various payments made towards consideration, development charges, electricity charges, all documents that determine the ownership of the suit property stand in the name of D1.The Share Certificate (dated 3rd June, 1964) stands in the name of D1.The receipts for payment of various amounts also stand in the name of D1. When the partnership was dissolved, the land was not sought to be divided in the shares of the partners in the partnership business clearly establishing that it was the asset not of the partnership but of D1. All these documents were well within the knowledge of the appellant when they were executed between 1963 and 2011 and the admissions contained explicitly in them, as also disclosed in the conduct of all family members including the appellant and her husband, cannot be permitted to be withdrawn by her merely because it is now convenient to claim otherwise, after the filing of the present suit. Through the appellant s own conduct it is well proven that D1 was the absolute owner of the property and during her lifetime the appellant could not have claimed a share in the same. We are unable to find any error in the impugned judgement, which we uphold. The appeal is devoid of merit

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• Customs

• 2020 (11) TMI 759
  Principles of natural justice - rejection of cross-examination of petitioners - Section 138(B) of the Customs Act, 1962 - HELD THAT:- This Court is of the considered view that the petitioner has approached this Court prematurely without allowing the respondents to pass final orders. The petitioner has made it clear before the respondents that they intend to cross examine the witnesses, which were referred to by the respondents in the annexures attached to the show cause notice dated 17.10.2018. The respondents have rejected the request of the petitioner, but till date, final order has not been passed. If the respondents have not followed the statutory provisions as mandated under the Customs Act, 1962 by not allowing the petitioner to cross examine the witnesses, the petitioner is always at liberty to challenge the final order as and when passed by the respondents either before this Court or before the Appellate Authority, as the case may be. Admittedly, no final order has been passed by the respondents and the respondents have only issued the show cause notice and on receipt of the same, the petitioner has requested the respondents to permit him to cross examine the witnesses mentioned in the annexure to the show cause notice. The said request has been rejected by the respondents under the impugned order - in the case on hand, the petitioner has approached this Court prematurely, without allowing the respondents to pass final order after hearing the petitioner pursuant to the show cause notice issued by them on 17.10.2018 under Section 28 of the Customs Act, 1962. The petitioner has approached this Court prematurely as the respondents have only rejected the request made by the petitioner for cross examination of witnesses on the ground that the entire case is based on documentary evidence and there is no necessity for cross examination of witnesses. If there is any legal right available to the petitioner, as contended by them in this writ petition to cross examine the witnesses, they are always at liberty to raise the same as and when any adverse order is passed against them by the respondents through its final orders pursuant to the show cause notice dated 17.10.2018 issued under Section 28 of the Customs Act, 1962 - as on date, there is no merit in this writ petition as it has been filed prematurely. Therefore, the writ petition stands dismissed.

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• 2020 (11) TMI 758
  Smuggling - Gold - Baggage Rules - Conspiracy - absolute confiscation - levy of penalty u/s Section 112(a) - HELD THAT:- At the outset the Government observes that the officers of AIU have acted impulsively, and somewhat prematurely the passenger Shri Sahubar Sathik Hithayadullah was intercepted as soon as he stepped out of the Aircraft, at the aerobridge. It is therefore clear that the passenger was prevented from filing a declaration as required under Section 77 of the Customs Act, 1962. As a plan/conspiracy was in existence, the officers having specific intelligence could have made the interceptions after the transfer of the gold near the lifts. Further, the seizure of the gold took place at the aerobridge and according to the mahazar, the Respondent has not received the gold from the passenger nor has he come into contact with him or the gold. The entire case on the respondent has originated from the statement given by Shri Sahubar Sathik Hithayadullah in which he has stated that he was to proceed to lift to handover the gold to the Respondent. To put it shortly, there is no tangible involvement of the Respondent leading to seizure of gold. The passenger with gold was intercepted at the aerobridge itself, before the entire conspiracy took place. The officers along with the passenger contacted the respondent and intercepted him at the lift. However, by then the gold was already taken into possession by the officers, the intended plan of smuggling the gold out of Airport as a part of conspiracy did not take place, as the plan has not been executed. As the gold was seized before the respondent came in the picture, the offence associated with the mens rea was not allowed to happen. The Respondent never came in contact with the gold. It is thus evident that the Respondent has not done anything in relation to the gold that was seized. The Respondent never came in touch with the gold at all, as it was seized before he came into the conspiracy, and therefore there was no cogent act of commission or omission by the Respondent, which rendered the goods liable for confiscation - The subsequent actions of unravelling the conspiracy and implicating the applicant did not take place and therefore there is no reason for invoking Section 112(a) of the Customs Act, 1962. Penalty - HELD THAT:- The Government holds that Section 112(a) cannot be invoked in the case and penalty is not imposable. The penalty imposed is therefore rightly set aside. The impugned Appellate order is therefore to be upheld - Revision Application is liable to be dismissed.

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• Corporate Laws

• 2020 (11) TMI 757
  Oppression and Mismanagement - Extraordinary General Meeting held or not - It is the case of the petitioner that there was no extraordinary general meeting for passing resolution for sale of a major portion of the land held by respondent No. 1-company - HELD THAT:- The alleged agreement of sale was not produced before the Advocate Commissioner. Not only the said document was not produced before the Advocate Commissioner, but even before the Tribunal it was not furnished. It is not known why respondents Nos. 1 to 4 are withholding the said document from being produced. The petitioner being a shareholder is entitled to have the information related to sale of a big chunk of land of respondent No. 1-company. The majority shareholders are running the company. Thus, the petitioner, a minority shareholder is being oppressed. Thus, neither proof of extraordinary general meeting nor proof of notice of service to the petitioner, nor copy of the alleged agreement of sale is filed. The next contention of the petitioner is that respondents Nos. 1 to 4 have not filed any documents showing any settlement with the secured creditors of respondent No. 1-company. No proof about terms of settlement with the secured financial creditors. It is the case of respondents Nos. 1 to 4 that in order to meet the one-time settlement proposal entered with secured financial creditors, respondent No. 1-company was forced to sell the land. It is the case of respondents Nos. 1 to 4 that respondent No. 1-company owed Rs. 612 crores to the secured creditors. Besides there were other liabilities to other creditors. There was absolutely no difficulty for respondents Nos. 1 to 4 to produce all the documents connected with the one-time settlement proposal entered with the secured creditors. The purpose behind the sale of a big chunk of land of respondent No. 1-company was to meet the commitments of one-time settlement proposal entered with the financial creditors. If this is the reason, then why respondents Nos. 1 to 4 have not submitted the relevant documents - No resolution approved by the extraordinary general meeting that the land in question was allowed to be sold for meeting the commitments of one-time settlement proposal entered with the secured financial creditors. The contention of learned counsel for respondents Nos. 1 to 4 is that there was no procedure prescribed that notice should be published in newspapers for sale. In all prudence, when the company proposes to sell 400 acres of land, notice could have been published in newspapers in order to get an attractive price for the land. Thus, respondent No. 1-company has not properly conducted the sale transaction and the procedure adopted by respondent No. 1-company is not in tune with the established practice. This is also one of the grounds to set aside the sale entered with respondent No. 14. The serious contention of the petitioner is that the land was allegedly sold for Rs. 4 lakhs per acres bringing the total sale consideration at Rs. 16 crores. Learned counsel for the petitioner would contend that the sale price as per the Ready Reckoner was Rs. 15 lakhs per acre. This extent of land, if sold at Rs. 15 lakhs per acre, it would have fetched Rs. 60 crores - the sale is hit on the ground that it was entered with a related party. It is not in dispute that respondent No. 14 is owned and controlled by Ravi Sanghi, who was promoter and ex-director of respondent No. 1-company. Thus, it is nothing but a related party transaction. Therefore, the sale transaction with respondent No. 14 suffers from several irregularities and it is nothing but an act of oppression and mismanagement on the part of respondents Nos. 1 to 4. The sale transaction therefore, deserves to be set aside being an act of oppression and mismanagement. The next contention of learned counsel for the petitioner is that there was an irregular conversion of partly-paid shares into fully-paid shares. Two crore shares were given as partly-paid shares. Rs. 4 was collected for each share of the value of Rs. 10 at the first instance. Thus, the partly-paid shares were converted into fully-paid shares after receiving balance of Rs. 6 per share. This was done only to meet with the one-time settlement proposal requirements - The petitioner cannot question the conversion of partly-paid shares into fully-paid shares, because need arose for conversion in order to raise money for clearing debt liabilities of respondent No. 1-company. Therefore, this cannot be held as an act of oppression and mismanagement. In fact, the partly-paid shares were issued long prior to the petitioner acquiring the shares in respondent No. 1-company. Therefore, he cannot question issuance of partly-paid shares when he was not a member of respondent No. 1-company. As there was need to raise money, partly-paid shares were converted into fully-paid shares by collecting balance. How this conversion can be said to be oppressive against the petitioner. The case of the petitioner is that he wants to exit from respondent No. 1-company and for the said purpose valuation to be done. If respondent No. 1-company is not ready to purchase shares after taking valuation, then the petitioner may be permitted to sell the shares to a third party. In the alternative to this prayer, the petitioner further asked relief that respondent No. 1-company may be wound up - valuation cannot be done at this stage. Valuable assets of respondent No. 1-company consist of possessing of vast extent of land. Land Ceiling proceedings are pending against the lands possessed by respondent No. 1-company. Whether the lands belong to respondent No. 1-company or the lands to be surrendered to the Government under the Land Ceiling Act is the matter yet to be determined in the Land Ceiling Proceedings started against respondent No. 1-company. Therefore, valuation cannot be taken unless ownership of the lands of respondent No. 1-company is decided. Thus, sale of land by respondent No. 1-company to respondent No. 14 is an act of oppression and mismanagement and as such sale transaction with respondent No. 14 is liable to be set aside. Secondly, the petitioner is allowed to sell its shareholding to the existing shareholder at the price offered by him and in case the existing shareholders of respondent No. 1-company do not wish to purchase the shares at the price offered by the petitioner, then the petitioner is entitled to sell the same to third party. Respondent No. 1-company is further directed to return the sale price to respondent No. 14 along with interest at 12 per cent. per annum from the date of sale till the date of payment. The petition is allowed by cancelling the sale agreement entered with respondent No. 14 for the sale of lands of respondent No. 1-company - petitioner is permitted to sell its shareholding to the existing shareholder of respondent No. 1-company at the rate offered by him. Petition disposed off.

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• 2020 (11) TMI 756
  Transfer and registration of shares - deletion of entries made in furtherance to conversion of 2,00,00,000 partly up equity shares into fully paid-up equity shares - It is submitted that the petitioner is coercing the respondents to buy at exorbitant price, its 2,40,70,000 shares which were purchased by the petitioner from various banks during 2011-12 at an average price of Rs. 1.11 per share - HELD THAT:- Partly paid-up shares were issued in 2003-04, which was long prior to the applicant purchasing the shares of respondent No. 1-company from the banks. The petitioner is aware of the authorised capital of respondent No. 1-company. There is no irregularity in calling for conversion of partly paid shares into fully paid shares, because respondent No. 1-company needed money for payment to the banks to avoid proceedings under the SARFAESI Act, 2002. Partly paid shares were issued prior to the petitioner becoming shareholder of respondent No. 1-company. Even assuming that the petitioner purchased shares in 2011-12 though transfer was effect on May 20, 2015 yet 2 crores partly paid shares of Rs. 10 were issued prior to 2011-12. Absolutely the petitioner cannot have any grievance for conversion of partly paid-up shares in to fully paid-up shares on March 16, 2015. The partly paid-up shares were issued prior to passing of restraining order, then how order dated March 20, 2008 of the Company Law Board is violated. Only conversion of partly paid shares into fully paid shares has taken place after interim order - this is not in violation of any interim order. The applicant is therefore, not entitled to challenge such conversion and the applicant is not entitled to any relief for forfeiture or for cancellation of the shares. The grievance of the applicant is that calling for conversion of partly paid shares into fully paid shares is in contravention of the order passed by the then Company Law Board, whereunder the Company Law Board directed that shareholding to be in status quo. This order dated October 23, 2008. No fresh shares were issued by the company after passing of the interim order. Partly paid shares were issued prior to the interim order. They were only converted into fully paid shares after the interim order. It cannot be said that there is violation of the interim order passed by the Company Law Board under section 179(3)(a) of the Companies Act, 2013. The board of directors are entitled to make calls on shareholders in respect of money unpaid on their shares. So, the board of directors are well within the powers to make a call on the shareholders in respect of unpaid shares to make them as fully paid. The company is entitled to issue partly paid shares. The petitioner became shareholder long after the company issued partly paid equity shares. Therefore, there is no irregularity in converting the partly paid shares into fully paid shares. The applicant has not filed any material warranting for appointment of auditor for auditing the accounts. In fact, the petitioner was supplied financials for the financial years 2014-15, 2015-16, 2016-17. When such is the case there is no need for ordering auditing of the accounts of respondent No. 1-company. The petitioner has also filed one more application against the respondents under section 241 of the Companies Act, 2013 - there are no grounds to grant any relief in favour of the petitioner. Petition dismissed.

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• PMLA

• 2020 (11) TMI 755
  Money Laundering - Modification of the ex parte ad interim order - maintenance of status quo in respect of attached properties - acquittal of the accused - it was alleged that the present applicants with other accused were intentionally aiding and facilitating the payment of alleged quid pro-quo of Rs. 200 crores as a reward for alleged undue favours shown to company - HELD THAT:- The plea of petitioner/ED raised in these applications for early hearing was that since this Court is to demit the office on 30th November, 2020 and arguments on behalf of petitioner in Crl.L.P. 185/2020 stand concluded and part arguments on behalf of respondents have already been advanced, the leave petitions should, therefore, be heard expeditiously and in case, the arguments remain inconclusive, the petitioners will have to address all the arguments afresh. The said applications for early hearing were strongly opposed by learned counsel for the applicants and other respondents on various grounds i.e. the Courts are hearing only urgent matters through video conferencing as per the Roster and non-urgent matters shall be taken up by the Roster Benches on resumption of regular hearings. It was also argued as to why these petitions be given preference in hearing over the appeals in which accused persons are in jails. The leave petition was set down for day to day hearing from 5th October, 2020, while the orders in these applications stood reserved. It goes without saying that Coordinate Bench of this Court after preliminary hearing and being satisfied, had passed ex parte ad interim order dated 21st March, 2018 directing the parties to maintain status quo in respect of the attached properties. Perusal of instant applications and replies reveals that disputed and complicated issues have been raised which require analysis of evidence and judgment of learned trial court which is voluminous in nature and is, no doubt, subject matter of leave to appeal also which this Court intended to decide at the earliest and had even directed listing of the same for hearing on day to day basis from 5th October, 2020 onwards. Since the subject matter of present applications required thorough examination of the impugned judgment, this Court had, therefore, made an earnest effort to hear and decide the leave to appeal as expeditiously as possible. However, this Court has to say with a heavy heart that limited time available at its disposal was consumed in hearing and disposal of miscellaneous applications and writ petitions filed one after another on behalf of the respondents, which have been dismissed vide detailed orders/judgments on merits. Had the leave to appeal been heard on merits, a clear picture would have emerged and this Court could have arrived at a conclusion whether the properties at all are required by the prosecution or these should be released to the applicants - In the absence of any arguments on merits, this Court is of the opinion that the order dated 21st March, 2018 vide which status quo in respect of attached properties was directed to be maintained, need not be interfered with at this stage. This Court is of the opinion that it will be in the interest of justice if these applications are decided only after hearing arguments in criminal leave to appeal. However, if there is inordinate delay in disposal of leave to appeal, the applicants/respondents are at liberty to approach this Court by filing fresh application for release of attached properties, which will then be considered in accordance with law. Application disposed off.

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• Service Tax

• 2020 (11) TMI 754
  Maintainability of petition - only point of dispute is that Assessee could not file the Appeal within the prescribed time limit of 4 weeks as granted by the learned Single Judge due to overriding reasons and indulgence is now sought to file the said Appeal before the Commissioner within 4 weeks from now - HELD THAT:- The time limit given by the learned Single Judge does not deserve to be extended except subject to the condition of deposit of 50% of the demand under the impugned order dated 27.9.2010. It is directed that subject to deposit of Rs. 1,50,000/- by the Petitioner/Assessee within 4 weeks from today and filing of the Appeal within 4 weeks from today, the Appeal may be heard and decided on merits in accordance with law by the Commissioner of Service Tax (Appeals) - appeal disposed off.

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• 2020 (11) TMI 753
  Non-payment of service tax - Management or Business Consultant Service or Information Technology Software Service? - modification and customization of software, install the software for use on the equipment for trading, providing support through remote access using the internet as a medium, sending engineers to the site of customers, provide additional training required by the customer from time to time - HELD THAT:- The learned Commissioner after examining the services rendered by he appellant has come to the conclusion that the activities carried out by the appellant is covered under the category of Enterprise Resource Planning (ERP) Software Application and the same is rightly classifiable under the category of Management or Business Consultant service and are liable for service tax - After carefully considering the definition of Management or Business Consultant Service and Information Technology Software Service, it can be concluded that Enterprise Resource Planning implementation would not be covered under Management or Business Consultant service. Further, as per the terms of the Agreement entered into between the appellant and their clients, the activities undertaken by the appellant are covered under the definition of Information Technology Software Service as specifically covered under the Information Technology Services as taxable under Section 65(105)(zzzze) with effect from 16.5.2008. Further, the activities alleged in the show-cause notice clearly fall within the ambit of Information Technology Software Service as defined in the Finance Act, 1994. The issue involved in the present case is no more res integra and has been settled by various decisions of the Tribunal and the apex court. In this regard, it is pertinent to mention that this Tribunal in the case of IBM India Pvt. Ltd. [ 2009 (4) TMI 314 - CESTAT, BANGALORE ] has specifically held that implementation of Enterprise Resource Planning does not attract service tax under the category of Management or Business Consultant Service. Time Limitation - HELD THAT:- The period involved in the present case is from 1.3.2006 to 15.5.2008 whereas the show-cause notice was issued on 8.4.2011 by invoking the extended period of limitation alleging suppression of facts with intent to evade payment of tax by the appellant - the appellant has been regularly filing the returns and was under bona fide belief that their activities are not liable to service tax under Management or Business Consultant Service. It is not disputed that the appellant is paying service tax with effect from 16.5.2008 under the category of Information Technology Software Service. Moreover, the department was very much aware of the activities of the appellant as the department conducted audit of the accounts of the appellant from time to time and the last audit was conducted in December 2009 but has not raised any objections regarding the activities of the appellant, hence, allegation of suppression of material facts against the appellant is not sustainable. Appeal allowed on merits as well as on limitation.

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• CST, VAT & Sales Tax

• 2020 (11) TMI 752
  Stay on recovery steps - Section 55 of the Kerala Value Added Tax Act, 2003 - HELD THAT:- This Court find that Exts.P1, P1(a) and P1(b) orders of assessment made by the 1st respondent are under challenge in Exts.P3, P3(a) and P3(b) appeals filed before the 2nd respondent appellate authority, which are accompanied by Exts.P4, P4(a) and P4(b) stay applications. This writ petition is disposed of directing the 2nd respondent appellate authority to consider and pass appropriate orders on Exts.P4, P4(a) and P4(b) stay applications within a period of two months from the date of receipt of a certified copy of this judgment, with notice to the petitioner - Till such time, any recovery steps pursuant to Exts.P1, P1(a) and P1(b) assessment orders shall be kept in abeyance by respondents 1and 3.

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