TMI Tax Updates - e-Newsletter
November 3, 2022

Case Laws in this Newsletter:

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

Articles

1. Can a Show Cause Notice be considered to be Vague if it doesn't specify allegations to the Assessee?

   By: Abhishek Raja

2. Play safe and file ITR by 31st October 2022 for AY 2022-23 in cases in which any audit report under provisions of Income-tax Act, 1961 is not required to be electronically furnished. Although audit report under other enactment is required. Extended date of Seventh November, 2022 may not apply in such cases.

   By: DEVKUMAR KOTHARI

3. Input Tax Credit of F.Y. 2021-22 invoices or debit note to be claimed in GSTR-3B of October 2022

   By: Ganeshan Kalyani

4. RECENT DEVELOPMENTS IN GST

   By: Dr. Sanjiv Agarwal

News

1. India : A Story of Resilience (Inaugural Address by Shri Shaktikanta Das, Governor, Reserve Bank of India - November 02, 2022 - at the Annual FIBAC 2022 Conference Organised Jointly by FICCI and IBA, Mumbai)

2. India’s agricultural and processed food products export up by 25% to USD 13771 million in Q2 of the current fiscal (2022-23) compared to the same period last year

3. Shri Piyush Goyal and H.E. Don Farrell, Minister of Trade and Tourism of Australia discuss IndAus ECTA (India-Australia Economic Cooperation and Trade Agreement)

4. Commerce Minister applauds the Gujarat Government for spearheading several wide-ranging initiatives to promote the Lab Grown Diamonds Sector

5. CBDT condones delay in filing Form No.10A for which the extended due date was 31.03.2022

Notifications

Central Excise

1. 37/2022 - dated 1-11-2022 - CE

Exemption to the excisable goods - Increase the Special Additional Excise Duty on Diesel - Seeks to further amend No. 04/2022-Central Excise, dated the 30th June, 2022.

2. 36/2022 - dated 1-11-2022 - CE

Reduce the Special Additional Excise Duty on production of Petroleum Crude and increase Special Additional Excise Duty export of Aviation Turbine Fuel - Seeks to amend No. 18/2022-Central Excise, dated the 19th July, 2022.

SEBI

3. SEBI/LAD-NRO/GN/2022/97 - dated 1-11-2022 - SEBI

Recognition to the clearing corporation - Renewal of recognition to the AMC Repo Clearing Limited - Seeks to amend Notification No. SEBI/LAD-NRO/GN/2022/67, dated the 24th January, 2022

Circulars / Instructions / Orders

SEZ

1. Instruction No. 112 - dated 1-11-2022

Digital Receipt and Payment implementation in the Ministry's subordinate offices

SEBI

2. SEBI/HO/DDHS/RACPOD1/CIR/P/2022/136 - dated 3-10-2022

Extension of timeline for entering the details of the existing outstanding non-convertible securities in the ‘Security and Covenant Monitoring’ system hosted by Depositories

Highlights / Catch Notes

GST

• High Court Orders Review of Petitioner's Eligibility for Benefits Under Amended Section 50 of Income Tax Act.

  Case-Laws - HC : Interest on delayed payment of taxes - appeal rejected on the count that the petitioner has not paid the amount of tax, interest, fine, fee and penalty arising from the impugned order - in view of the amendment made by the Central Government, the writ petition is disposed of with a direction to the appellate authority to examine whether in the given facts and circumstances of the case, the petitioner can be extended benefits of amendment made in Section 50 of the Income Tax Act or not. - HC
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• Seeds Not Exempt from GST: AAAR Denies Exemption Due to Lack of Proof of Agricultural Processing Criteria.

  Case-Laws - AAAR : Taxability - agricultural produce or not - seeds produced/ procured and processed, packed and sold - If the activities of the applicant are only cleaning, drying, grading without involving any chemical processing on the subject produce, then the services would be on agriculture produce and exemption would be available. However, since in this case it is not proved beyond doubt by the applicant that their activities get exempted under the said two notifications, we are not inclined to accept the plea of the applicant. - AAAR
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• Appeal Dismissed for Missing Deadline: Filed on 07.07.2022 Instead of 29.06.2022, Rendering It Invalid.

  Case-Laws - AAAR : Admissibility of appeal - time limitation - appeal not filed on time - in any foreseeable case, the last date for filing of appeal under law in the instant case was 29.06.2022. No appeal was filed by the Appellant till that date and it was finally filed only on 07.07.2022. - The appeal filed by the Appellant is not admissible in eye of law - AAAR
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• Railway Construction Project Classified as Immovable; Benefits Under SI. No. 3(v)(a) of Notification No. 11/2017 Apply.

  Case-Laws - AAAR : Classification of supply -Works Contract - composite supply of works contract service or not - movable or immovable project - the said project of construction for Railways, on the basis of the scope of work as can be seen from the documents submitted by the Appellant, it is concluded that the said project are immovable in nature. - benefit of SI. No. 3(v)(a) of the Notification No. 11/2017-Central Tax (Rate), as amended vide Notification No. 20/2017-Central Tax (Rate) for the subject work is available. - AAAR
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Income Tax

• CIT(A) Rules Out Notional Interest on Deposits in Annual Letting Value for House Property Income Calculation.

  Case-Laws - AT : Chargeability of notional interest on deposits under Income from House Property - ALV determination - CIT(A) has rightly concluded that estimation of ALV on the basis of notional interest could not be upheld in the eyes of law. However, the same time, the findings that the property would not be subjected to Rent Control Legislation is bereft of any evidence on record. The income so earned notwithstanding the nomenclature of rental / lease rental or license fees, all are assessable under the head Income from House Property and subjected to similar computations. - AT
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• AO Cannot Categorize Demonetisation Period Cash Deposits as Unexplained Without Evidence Contradicting Cash Sales u/s 68.

  Case-Laws - AT : Addition u/s 68 - unexplained cash towards cash deposits made during the demonetisation period - AO did not reject the books of accounts of the assessee and has not brought anything contrary on record to show that cash sales is not the source for the cash deposited during demonetisation period. We are therefore of the opinion that there is no case here for making the addition as unexplained u/s.68. - AT
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• Hindu Undivided Family's assessment deemed invalid due to disruption on assessment date; order from March 25, 2013, void.

  Case-Laws - AT : Assessment in the hands of HUF - the HUF was disrupted / partitioned as on the date of assessment (Assessment order in case of HUF was . completed on 25.03.2013) and the HUF having not been assessed in the past, the assessment order in the status of HUF is invalid - AT
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• Court Upholds Legitimacy of Father's Gift to Son, Overturns Addition Due to Procedural Delay Challenge.

  Case-Laws - AT : Addition of sum received as "Gift" by the assessee from his "father" - The donor is about 85 years old and the amount has been gifted to his own son through a gift deed proves the genuineness of the transactions. The addition has been made solely on the basis of failure of the assessee to produce his father (donor) who is 85 years old, staying at Hong Kong before the authorities within a span of 13 hours. - Additions deleted - AT
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• Section 263 Revision Unjustified if AO Accepts Explanation Without Detailed Inquiry or Specific Reasons.

  Case-Laws - AT : Revision u/s 263 - the AO merely accepting the explanation of the assessee cannot be faulted merely because it could have been lawful to make more detailed inquiries or because he did not write specific reasons of accepting the explanation cannot be a reason to invoke the powers u/s. 263 of the Act. - AT
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• Customer Advances Recorded as Liabilities; Assessed by CIT(A) for Income Recognition Between 2010-11 and 2011-12.

  Case-Laws - AT : Income recognition - advances received from customers - the customers advances carried over year after year and it is the consolidated list of advances as on balance sheet date is done in the liabilities side of the balance sheet. The advances may comprise of earlier advances also. Considering the same, the Ld. CIT(A) has rightly calculated the advances for the current year being the difference between the customer advances of AYs 2010-11 and 2011-12. - AT
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Customs

• Department's Sale of Gold During Pending Appeals Violates Natural Justice Principles, Deemed Legally Unsustainable.

  Case-Laws - AT : Refund of sale proceeds of Gold - It is very clear that the department has disposed of /sold the goods on the understanding that the first order of the adjudicating authority is the final order. At the same time the department was well aware about the pendency of the appeals before this Tribunal. Therefore the action of the department is clearly in gross violation of principles of natural justice, hence the same cannot be allowed to sustain. - AT
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• Penalty of Rs. 40 lakhs for smuggling gold under Customs Act, but gold confiscation deemed improper due to lack of conditions.

  Case-Laws - AT : Penalty of Rs. 40 lakhs under Section 112(b)(i) of the Customs Act - Smuggling - foreign origin gold - The confiscation of gold under the facts and circumstances is bad in absence of condition precedent, as provided under Section 111(d), (o) and (p) of the Customs Act - the appellant has not violated any of the provisions of Section 111 as alleged - AT
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• Project Imports Regulations, 1986: Customs duty exemption denied due to non-mandatory procedure; cases remanded for reassessment per contract.

  Case-Laws - AT : Denial of benefit of Project Imports Regulations, 1986 - substantial benefit of exemption from Customs duty has wrongly been denied by invoking procedural provision which is not at all mandatory. - The cases are remitted to the original authority for finalizing the assessment in terms of project contract in the light of reconciliation statement filed - AT
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• Show cause notice u/s 143 of Customs Act issued for potential Foreign Trade Policy breach, not Section 28 demand.

  Case-Laws - AT : Breach of condition of Foreign Trade Policy (FTP) - A decision on the contractual breach of obligation entered into in relation to schemes under the Foreign Trade Policy vests with the licencing authority and it is only upon such occurrence that it may be conclusively held that breach of condition is demonstrated. It is relevant here that the show cause notice has invoked section 143 of Customs Act, 1962 which provides for the execution of bonds for ensuring fulfillment of conditions. It is, therefore, not a demand under section 28 of Customs Act, 1962 - AT
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Corporate Law

• Company Penalized for 122-Day Delay in Appointing Whole Time Company Secretary u/s 203 of Companies Act 2013.

  Case-Laws - Other : Failure to appoint Whole time Company Secretary within a period of six months - The penalty is imposed on the Company and its Officers in default as per table below for violation of provisions of Section 203 of the Companies Act, 2013 for delay of 122 days. It is opined that, the penalty is commensurate with the aforesaid failure committed by the Notice. - CGOVT
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Indian Laws

• Accused Must Rebut Presumptions of Legally Enforceable Debt u/ss 118 and 139 of Negotiable Instruments Act.

  Case-Laws - HC : Dishonor of Cheque - legally enforceable debt or not - The law is clear on the point that when the complainant discharged the initial burden to prove the transaction led to execution of the cheque, the presumption under Sections 118 and 139 of the N.I Act would come into play. No doubt, these presumptions are rebuttable and it is the duty of the accused to rebut the presumptions and the standard of proof of rebuttal is nothing but preponderance of probabilities - HC
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PMLA

• Giving Bribe Money is Money Laundering Under PMLA Section 3, Says Supreme Court.

  Case-Laws - SC : By handing over money with the intent of giving bribe, such person will be assisting or will knowingly be a party to an activity connected with the proceeds of crime. Without such active participation on part of the person concerned, the money would not assume the character of being proceeds of crime. The relevant expressions from Section 3 of the PML Act are thus wide enough to cover the role played by such person. - SC
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• High Court Rules: No Need to Wait 45 Days Before Property Attachment u/s 8(4) of PMLA.

  Case-Laws - HC : Attachment of property - expiry of period of limitation for filing appeal - There is no scope to interpret the provisions contained in Section 8(4) and Section 26 of the PMLA and Rule 5(2) of the Rules of 2013 to hold that for taking action under Section 8(4) of the PMLA, the authorized officer has to await the expiry of period of limitation i.e., 45 day - HC
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• Responding to Initial Summons Doesn't Exempt Petitioner from Future Compliance or Appearance as Required by Authorities.

  Case-Laws - HC : Validity of summons - Mere fact that the reply has been filed and the requisite documents as required in first summons have been furnished, does not absolve the petitioner of his statutory obligation to honour the summons. Nor does it take away right of the authorised officer to call upon the petitioner to appear before him - HC
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Service Tax

• Service Tax on Healthcare Services Dismissed Due to Lack of Notice; Exemption Applies Only if Liability Established.

  Case-Laws - AT : Levy of service tax - healthcare services - The exemption notification will be relevant if tax liability can be fastened on the respondent in the first place. In the absence of any notice under the category of healthcare services no tax liability can be fastened on the respondent. Therefore, the demand under the head event management services made in the show cause notice has been correctly dropped in the impugned order. - AT
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Central Excise

• Court Finds Insufficient Evidence of Marketability for Specialized Iron and Steel Items in Hydroelectric Project Case.

  Case-Laws - HC : Marketability - different iron and steel items such as plates, angles, channels, beams etc. - turnkey project - these are articles that have been fabricated or manufactured for the particular requirements of the particular Hydroelectric Project. That the Gates, RCC construction etc. have been made by the petitioner - it cannot be said, nor to be found from any material on record to indicate that all the goods that are being manufactured by the petitioners are goods which are said to be marketable. - HC
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• Tribunal Rules on Recovering Dues Under NCLT-Approved Resolution Plan; Customs Act Lacks Clear Provisions for Recovery.

  Case-Laws - AT : Recovery of dues - existence of dues as per the resolution plan approved by NCLT or not - This tribunal being creature under the Customs Act, even though the Insolvency and Bankruptcy Code have over riding effect over all the other acts, in absence of any explicit provision under the Customs/Central Excise Act, this tribunal cannot decide finally whether the adjudged amount can be recovered by the department or otherwise. This issue has to be resolved by the respondent. - AT
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Case Laws:

• GST

• 2022 (11) TMI 86
  Validity of assessment order - Maintainability of petition - availability of alternative remedy of appeal - appeal under Section 107 of the Central Goods Services Tax Act, 2017 - HELD THAT:- In view of the alternative statutory remedy available by way of appeal, the High Court has rightly refused to entertain the writ petition. The view taken by the High Court is agreed upon - SLP dismissed.

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• 2022 (11) TMI 85
  Interest on delayed payment of taxes - appeal rejected on the count that the petitioner has not paid the amount of tax, interest, fine, fee and penalty arising from the impugned order dated 03.08.2018 - violation of Section 107 (6) of the Act, 2017 - HELD THAT:- The amendment which has been made effective from 01.07.2017 clearly provides that the interest on tax payable in respect of supplies made during the tax paid and declared in the return for the said period furnished after the due date in accordance with the provisions of Section 39 of the Act, 2017 except where such return is furnished after commencement of any proceedings under Section 73 or 74 of the Act, 2017 shall be levied on that portion of tax i.e. paid by debiting the electronic cash ledger, as such, the amendments are having retrospectively applicability effect, as such, in view of the amendment made by the Central Government, the writ petition is disposed of with a direction to the appellate authority to examine whether in the given facts and circumstances of the case, the petitioner can be extended benefits of amendment made in Section 50 of the Act or not. It is made clear that this Court has only examined the retrospectively applicability of amendment in Section 50 of the Act, 2017 and whether the petitioner can take its advantage or not to over come the rider of Section 107(6) which is a condition precedent for maintaining the Appeal under GST Act 2017, it will be decided by the appellate authority in accordance with law after giving opportunity of hearing to the petitioner. The matter is remitted back to the appellate authority to decide the appeal of the petitioner afresh after examining the effect of the amendment in Section 50 of the Act, 2017 within four months from the date of receipt of copy of order passed by this Court - the instant writ petition is partly allowed.

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• 2022 (11) TMI 84
  Cancellation of GST registration certificate of petitioner - failure to file GST returns for a continuous period of six months - HELD THAT:- Issue raised in this writ petition is no more res integra . In several writ petitions raising similar grievance, this Court had interfered with such cancellation of GST registration as well as the appellate order and had remanded the matter back to the primary authority for taking a fresh decision in accordance with law. The order dated 10.01.2022 as well as the order-in-appeal dated 18.10.2022 are set aside and matter remanded back to respondent No.4 for taking a fresh decision in accordance with law after giving an opportunity of hearing to the petitioner - petition disposed off.

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• 2022 (11) TMI 83
  Seizure of goods alongwith vehicle - notices under Section 129 of Central GST Act, 2017 were issued - HELD THAT:- No useful purpose will be served for delineating the substantial issue of law as the issue is academic at this point of time, as the goods have already been released. However, it is made clear that since the appeal is filed before the Appellate Commissioner together with mandatory pre-deposit as contemplated under section 107 of the Central GST Act, 2022, we leave all the issues open to be canvassed before the Appellate Tribunal. Appeal dismissed.

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• 2022 (11) TMI 82
  Taxability - agricultural produce or not - seeds produced/ procured and processed, packed and sold by the Applicant as seeds for sowing - storage of the seeds in the leased storage facility/godowns, loading, unloading and packing of the seeds (heading No.9986) by the job worker on job work basis - processes, namely, cleaning, drying, grading and treatment with chemicals (heading No.9986) carried out by the job worker on job work basis - transport of seeds from the farm lands to storage facility/godown of the applicant - transport of seeds from one storage facility/godown of the applicant to the other storage facility/godown of the applicant - transport of packed seeds from storage facility/godown of the applicant to the distributor and transport of sales-returns - processes undertaken by the applicant, namely, cleaning, drying, grading, treatment with chemicals and packing (heading No.9986), for himself - supply or not - applicability of exemption under N/N. 12/2017- Central Tax (Rate) dated 28-06-2017 and 11/2017- Central Tax (Rate) dated 28-06-2017. HELD THAT:- The appellants are in the business of production and sale of agricultural seeds. In the process of production, the applicant outsources certain services such as cleaning, drying, grading and packing to the job workers and stores the seeds in various facilities after processing them. In the process they also transport the seeds by engaging a GTA. The applicant filed an application before the lower authority for a ruling on their activities with reference to exemption / taxability under Goods and Services Tax Act. Since, the ruling of the lower authority was pronounced against the interests of the applicant, they filed the present appeal before this authority. It becomes imperative to analyse the definition of agriculture produce . The primary factory which needs to be understood is that to get into the bracket of agriculture produce for claiming exemption, the main condition is that either no processing is done on the produce or such processing is done as is usually done by a cultivator or producer which does not alter its essential characteristics but makes it marketable for primary market. In the present case, as per the written submissions, the applicant takes land on lease and produces agriculture seeds, food grains / vegetables / green vegetables and fruits out of cultivation and out of the produce through harvesting, it segregates part of the agriculture produce based on its quality and germination strength and undertakes preservation process such as clearing, drying, grading and chemical processing to make the seed fit for sowing purpose and to have better shelf life - If the activities of the applicant are only cleaning, drying, grading without involving any chemical processing on the subject produce, then the services would be on agriculture produce and exemption would be available. However, since in this case it is not proved beyond doubt by the applicant that their activities get exempted under the said two notifications, we are not inclined to accept the plea of the applicant. The order passed by the lower authority is upheld - Appeal disposed off.

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• 2022 (11) TMI 81
  Admissibility of appeal - time limitation - appeal not filed on time - Input Tax Credit - expenditure incurred for Civil and Interior Works - property is further used for letting out to different tenants on rental basis viz, for furtherance of business - construction of commercial complex - HELD THAT:- Rule 107-A of CGST Rules, stipulates the provision for manual filing of appeal against an order issued by the Authority for Advance Ruling and this option to file appeal manually was always available with the appellant and they have ultimately filed it manually without any glitch, whatsoever. The Appellant had sufficient time to file an appeal against the said advance ruling, however, they failed to comply with the time limit prescribed under law for filing an appal against the concerned advance ruling order. Hon ble Supreme Court in Writ Petition (C) No. 3 of 2020 dated 10.01.2020 [ 2022 (1) TMI 385 - SC ORDER] , wherein, the Hon ble Apex Court has ordered for extension of period of limitation due to COVID-19 led adverse circumstances - in view the decision of Hon ble Court, since the impugned order was served on 12.02.2022 to the Appellant, as admitted by the Appellant in their appeal, (though in the appeal form GST ARA-2, it is written as 12.01.2022), the last date for filing an appeal would have been 30.05 2022. Further, even if the added benefit of proviso to sub-section (2) of Section 100 of CGST Act is extended to the Appellant, by considering that the Appellant was prevented by a sufficient cause from presenting the appeal within the normal period and a further period of 30 days were allowed, even then the last dale of filing appeal would be 29.06.2022. Therefore, in any foreseeable case, the last date for filing of appeal under law in the instant case was 29.06.2022. No appeal was filed by the Appellant till that date and it was finally filed only on 07.07.2022. The appeal filed by the Appellant is not admissible in eye of law - Appeal dismissed on the ground of limitation itself without going into the merits of the case.

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• 2022 (11) TMI 80
  Classification of supply -Works Contract - composite supply of works contract service or not - movable or immovable project - work of supply, installation and commissioning of the plant and machinery, mechanical engineering works, electrical works etc. as per the J.V. Agreement between the J.V. Partners - applicability for benefit of SI No. 3(v)(a) of the Notification No. 11/2017-Central Tax (Rate), as amended vide Notification No. 20/2017-Central Tax (Rate). HELD THAT:- The instant contract consists of transfer of property in goods, coupled with supply of services which leads to the inevitable conclusion that this is a case of Works contract, covered under the definition of Works contract defined under Section 2(119) of the CGST Act, 2017. The details of works as enumerated and as forthcoming from the contract, goes to show that the said project awarded to the Appellant by the JV is not as simple or movable. The work consists of an entire system comprising of a variety of different structures which are installed after a lot of prior work which involves Civil work, Civil engineering, Ground work, supply, Foundation work, Fabrication, various mechanical and electrical works etc. The magnitude of project covers a large area of about 40 thousand sq meter tailored specifically to fit the dimensions and orientation of the needs of the project. It is no one s case that these items will ever be removed from their position. Therefore, they qualify under clause (c) of Section 3 of the Transfer of Property Act, 1882. Thus, the project of setting up of Electric Loco Shed at Saiyedpur Bhitri, Uttar Pradesh, fulfills the conditions of it being an immovable property. Accordingly, we in affirmation with the Appellant that the said project of construction for Railways, on the basis of the scope of work as can be seen from the documents submitted by the Appellant, it is concluded that the said project are immovable in nature. This is a composite supply of works contract service - benefit of SI. No. 3(v)(a) of the Notification No. 11/2017-Central Tax (Rate), as amended vide Notification No. 20/2017-Central Tax (Rate) for the subject work is available.

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• Income Tax

• 2022 (11) TMI 79
  Reopening of assessment us 147 - As argued reopening was on the basis of mere change of opinion - disallowance of liability on account of the warrantee - HELD THAT:- When we refer to Explanation (1) to Section 147 of the Act, as it existed at the relevant point of time as per which production before the Assessing Officer the account books or other evidence from which material evidence with due diligence could have been discovered by the Assessing Officer would not necessarily amount to disclosure within meaning of Section 147 of the Act. That being the position we answer the first question against the appellant and in favour of the revenue. Provision for warranty which incidentally was the reason for re-opening of assessment - As has been held by the Supreme Court in Bharat Earth Movers [ 2000 (8) TMI 4 - SUPREME COURT ] the law is settled that if a business liability has arisen in the accounting year, the deduction should be allowed although the liability may have to be quantified and discharged at a future date. What should be certain is the incurring of the liability. It should also be capable of being estimated with reasonable certainty though the actual quantification may not be possible. If these requirements are satisfied, the liability is not a contingent one. The liability would be in - praesenti though it may have to be discharged at a future date. In the present case, no liability had arisen in the assessment year under consideration. All that the assessee had done was to make a provision for warranty that might accrue in future. There was no certainty of incurring the expenditure. No reason to answer the second question in favour of the appellant. Consequently this question is also answered against the appellant and in favour of the revenue.

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• 2022 (11) TMI 78
  Unexpalined cash - Search and seizure operation - difference in cash found in the books of account and actual cash found during the search - HELD THAT:- As initially the assessee in the instant case has not given access to the books of accounts, cash book etc., which are maintained in the computer. However, from the perusal of the record, it is clear that the said electronic computer, etc., were sealed by the Department and thereafter, it was accessed only on 09.12.2013. Revenue had failed to point out the efforts undertaken by it either to retrieve or find out user id / password of computer immediately after the search. In this age of technology, the user ID and password can always be retrieved with the help of various software and technical help. Department in the present case has not resorted to taking any such help as is clearly discernible from the record of the assessee. Further, the Department has also not taken any other effort to call or summon the Accountant of the assessee with whom allegedly the user ID and password of the computer were available. The appellant / revenue is not helpless and it can use all its powers under the Act to compel / force the assessee to share the user id, and password of the computer and the revenue can use its power under the Act to take coercive measures against the assessee and also impose a penalty for non-cooperation but nothing has been done in the present case except to sit idle and wait for the assessee to provide the information to the Department. As mentioned herein above, the Department retrieved the data on 9/12/2013 after having access to the system, the same is clear from the Mahazarnama at page 2, of the paper book. No question was asked by the search team as to whether the assessee had any other premises or factory other than the premises, which was the subject matter of the search. Incidentally, in the present case, cash was found from the business premises and residence of the assessee however, no question was asked about whether the assessee had any other factory or not. Admittedly, the assessee had the availability of cash as per books of accounts and it is not mandatory for the assessee to keep the cash only in the business premises of the assessee. Nonetheless, once the cash has been deposited, as per the cash balance available on the date of search in the books of accounts, it cannot be said that the said cash which was subsequently deposited was unexplained. In light of the above, the order of the ld.CIT(A) calls for no interference. Appeal filed by the Revenue is dismissed.

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• 2022 (11) TMI 77
  Chargeability of notional interest on deposits under Income from House Property - ALV determination - assessee as owner is given a substantial amount as deposit and Rent received by assessee is meagre - HELD THAT:- We have also carefully perused the order of the co-ordinate Bench in assessee s own case [ 2020 (12) TMI 869 - ITAT MUMBAI] as held CIT(A) has rightly concluded that estimation of ALV on the basis of notional interest could not be upheld in the eyes of law. However, the same time, the findings that the property would not be subjected to Rent Control Legislation is bereft of any evidence on record. The income so earned notwithstanding the nomenclature of rental / lease rental or license fees, all are assessable under the head Income from House Property and subjected to similar computations. No difference has been carved out in law in all these different streams of income. The assessee nowhere denied the applicability of Rent Control Act to the stated stream of income. Therefore, the facts of the case are squarely covered by the earlier decision of the Tribunal in assessee s own case for AYs 1996-97 1997-98. There is no change in material facts. No contrary decision is on record. Nothing has been shown that the aforesaid decision of the Tribunal has ever been reversed or not applicable, in any manner. Therefore, respectfully following the consistent stand of the Tribunal, we are inclined to quash the directions given by Ld. CIT (A). The additions, thus made by Ld.AO, stand deleted. Thus we allow ground no.1 to 6 of the appeal in this case and direct the learned Assessing Officer to delete the addition made under income from house property.

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• 2022 (11) TMI 76
  Revision u/s 263 by CIT - wrong Computation of LTCG - under-assessment of the income - Assessee submitted letter assessee correcting income under the head long term capital gain from sale of investment - CIT observed that Ld. AO has considered the request of the assessee based on the letter submitted by it which ought to have been done only through filing of a revised return and not by way of a letter - assessee submitted that no claim of any new deduction except for this correction in the indexed cost for acquisition of shares by exercising the option u/s. 55(2)(b) of the Act which was initially based on the historical cost of acquisition of FY 1975-76 - HELD THAT:- When the correction in the computation of LTCG on sale of shares was brought to the knowledge of the Ld. AO by exercising the option available u/s. 55(2)(b) of the Act, he took cognizance of this corrective facts, for which all the relevant corroborative documentary evidences were placed on record. Thus, by considering the details and documents, Ld. AO accepted the correction made by the assessee in the LTCG, reported by the assessee which was lesser by an amount when compared with the original return and completed the assessment. We observe that in the course of proceedings u/s 263 of the Act before the Ld. PCIT, assessee had furnished the relevant details and explained the issue raised through the show cause notice by the Ld. PCIT, supporting its contentions by various decisions. It is well settled law that for invoking the provisions of section 263 of the Act, both the conditions that the order must be erroneous and prejudicial to the interest of revenue needs to be satisfied. This ratio stands laid down by various Hon ble Courts. Looking at the second limb as to whether the actions of the AO can be termed as prejudicial to the interest of Revenue, one has to understand what is prejudicial to the interest of the revenue. The Hon ble Supreme Court in the case of Malabar Industries [ 2000 (2) TMI 10 - SUPREME COURT] held that this phrase i.e. prejudicial to the interest of the revenue has to be read in conjunction with an erroneous order passed by the AO. Their Lordships held that every loss of revenue as a consequence of an order of Assessing Officer cannot be treated as prejudicial to the interest of the revenue. When the Assessing Officer adopted one of the courses permissible in law and it has resulted in loss to the revenue, or where two views are possible and the Assessing Officer has taken one view with which the CIT does not agree, it cannot be treated as an erroneous order prejudicial to the interest of the revenue unless the view taken by the Assessing Officer is unsustainable in law. The issue in the present case is purely on facts which is verifiable from the records of the assessee. Audited financial statements i.e. Balance Sheet of KLMCL, valuation report for FMV of the shares of KLMCL sold and the revised computation of LTCG by exercising the option available u/s. 55(2)(b) of the Act, reveals the correct state of affairs in respect of the issue raised in the impugned revisionary proceedings for which both, ld. PCIT and the ld. CIT, DR could not bring any material on record to controvert the verifiable factual position. Accordingly, on the issue raised by the Ld. PCIT in the revisionary proceedings, no action u/s 263 of the Act is justifiable which in our considered view cannot be sustained under the facts and circumstances of the present case and judicial precedents dealt herein above. We, therefore, quash the impugned order u/s 263 of the Act and allow the grounds raised by the assessee.

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• 2022 (11) TMI 75
  Disallowance of hedging losses - hedging transaction is not in connected commodities and, therefore, it is a speculative transaction; whereas the reason for the CIT(A) to confirm the disallowance of hedging loss is that such transaction in palmolein oil was not in respect of the coal which was taken actual delivery of - HELD THAT:- AO and CIT(A) are eluding to points No. (ii) and (i) of circular (supra) respectively, inasmuch as point (ii) refers to the transactions in connected commodities and point No. (iii) refers to the hedging transactions in respect of the raw materials or the merchandise in stock. A reading of the first appellate orders shows that even according to the information furnished by the assessee, the transaction for purchase of coal was also not intended for actual delivery in order to form it part of stock, so as to guard against the fall in its value the hedging transaction was entered. Though the case of assessee has been that they are dealing in imported and domestic commodities in vegetable oils, coal and sugar etc. neither the assessment order nor the first appellate order clarify in unequivocal terms whether or not the assessee has been dealing in edible oils also apart from the coal. In this situation, the findings of the authorities below cannot be held to be baseless without facts being first fixed. Factual determination is required to give a finding whether the edible oils are connected commodity in the context of point (ii) of the circular (supra). Further factual verification that is required is in respect of point (i) to know whether the hedging transaction in edible oils was against another hedging transaction in coal or it was to guard against the risk of merchandise in stock falling in value. In respect of the bad bebts, according to the AO, the assessee failed to furnish any evidence in support of the claim that the same was offered as income in the respective years; where as according to the CIT(A), the amount was written off as sundry balances but not accounted as bad debts. This also requires verification at the end of the AO as to whether the assessee offered such an amount in the earlier years as income or that this amount is properly written off in the books of accounts. We are, therefore, of the considered opinion that it is a fit case to set aside the impugned order on these aspects and restore the issues to the file of the AO for verification of the facts stated above in the light of proviso (a) to section 43(5) - We accordingly set aside the impugned order and restore the issues to the file of the AO for verification of the facts stated above. While doing so, AO will consider the necessity and possibility of set off of the profits arising from sale of coal against the loss incurred in the transactions of palmolein oil. Grounds are accordingly treated as allowed for statistical purposes.

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• 2022 (11) TMI 74
  Addition u/s 68 - unexplained cash towards cash deposits made during the demonetisation period - CIT-A deleted the addition - HELD THAT:- AO is not questioning the source of the cash deposit since he has recorded a finding that cash sales during the demonetisation period is brought to tax u/s. 68 which makes it clear that it is admitted fact that sales is the source for cash deposits. The revenue is contending that there is a requirement as per the Circular that the Doctors prescriptions and identity of the persons purchasing medicines needs to be kept in record to substantiate the cash sales during demonetisation period. However, from the plain reading of the said Circular, there is no specific mention as contended by the department. AO did not reject the books of accounts of the assessee and has not brought anything contrary on record to show that cash sales is not the source for the cash deposited during demonetisation period. We are therefore of the opinion that there is no case here for making the addition as unexplained u/s.68. In view of this discussion, we see no reason to interfere with the order of the CIT(A). Appeal of the revenue is dismissed.

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• 2022 (11) TMI 73
  Penalty u/s 271(1)(c) - Disallowance of exemption u/s 54F and 54EC - HELD THAT:- As in the computation of total income furnished with the return of income for A.Y. 2013-14 filed on 14.03.2014, the assessee has done nothing but made an attempt to show less Long Term Capital Gain by making false claim under Section 54EC of the Act, without making any investment and therefore, the same was not legally admissible for the year under consideration. On this premise, the Revenue, in our considered opinion, rightly imposed penalty for intentionally furnishing inaccurate particulars of income within the meaning of Section 271(1)(c) of the Act. Thus, we do not find any iota of doubt in holding that the appellant is consciously and continuously mis-represented the facts and furnished inaccurate particulars of her income by making computation for this claim under Section 54EC of the Act and 54F of the Act. We therefore confirm the order passed by authorities below in imposing impugned penalty under Section 271(1)(c) of the Act. Assessee s appeal is dismissed.

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• 2022 (11) TMI 72
  Validity of Reopening of assessment u/s 147 v/s assessment u/s 153C - Assessment in the hands of HUF - AR submitted that the AO is required to pass order u/s 153C of the I.T.Act and not u/s 144 r.w.s. 147 - HELD THAT:- In the instant case, admittedly, when the directions were issued by the CIT(A) in the case of the individual to assess the income in the hands of the HUF, the assessments in the hands of the HUF had not become time barred. The directions of the CIT(A) is very clear and specific. The CIT(A) directed the A.O. to assess the income in the hands of the HUF, instead of the individual (while allowing the appeal in the case of the individual). Therefore, taking into account the provisions of section 150(1) of the I.T.Act, we hold that the reassessment completed is justified and valid in law. As in the case of CIT v. M/s.Lakkanna Sons [ 2005 (5) TMI 684 - KARNTATAKA HIGH COURT] held that when HUF was not assessed in that status prior to the relevant assessment year, the Assessing Officer has erred in assessing the assessee as an HUF after the disruption of the HUF. It was held by the Hon ble Court that fiction that a joint family shall be deemed to continue, enunciated in section 171(1) of the I.T.Act is only for limited purpose of roping in cases of joint families which had hitherto been assessed. It was further observed by the Hon ble Court that it is not possible to extend that fiction beyond the field legitimately intended by the statute. It was held by the Hon ble Court that the expression hitherto assessed occurring in section 171 of the I.T.Act is significant and only HUF which had suffered in the past would deem to continue to be HUF till an order of partition u/s 171(1) is recorded HUF was partitioned on 30.06.2002. Admittedly, the said partition deed was forming part of the seized document during the course of search. The Assessing Officer, who passed the original order u/s 153C of the I.T.Act in the individual case had accepted the partition, which was part of seized material. The assessment order u/s 144 r.w.s. 147 of the I.T.Act in the case of HUF was completed on 25.03.2013. In the instant case, the HUF was disrupted / partitioned as on the date of assessment (Assessment order in case of HUF was . completed on 25.03.2013) and the HUF having not been assessed in the past, the assessment order in the status of HUF is invalid, going by the dictum laid down by the judicial pronouncements cited supra. Therefore, the assessment order dated 25.03.2013 in status of HUF is hereby quashed. It is ordered accordingly.

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• 2022 (11) TMI 71
  Addition made on account of interest income on accrual basis instead of due basis - Tribunal was right in excluding from the total income of the Assessee Company the amount of interest which had accrued, but not fallen due or received - HELD THAT:- Similar views were expressed in assessee s own case for the A.Ys. 2002-03 and 2004-05 respectively. Disallowance made on account of ESOP expenditure - HELD THAT:- This issue is no longer res integra in view of the decision of this Tribunal in assessee s own case for the A.Ys. 2011-12 2012-13 [ 2019 (2) TMI 1713 - ITAT MUMBAI] Disallowance u/s 14A - HELD THAT:- We hold that the ld. CIT(A) grossly erred in misinterpreting the said decision of Hon ble Supreme Court. Accordingly, we direct the ld. AO to completely delete the disallowance made u/s 14A of the Act in respect of both second and third limbs of Rule 8D(2) of the Rules. Accordingly, the Ground raised by the revenue is dismissed. Disallowance on account of broken period interest - HELD THAT:- This issue is no longer res integra in view of the decision of Hon ble Jurisdictional High Court in assessee s own case [ 2019 (4) TMI 1488 - BOMBAY HIGH COURT] assessee, however, argued that there was separate interest component payment of which was an allowable deduction. Tribunal having accepted the assessee s contention, the Revenue is in the appeal before us. This issue is no longer res integra. Division Bench of this Court in case of CIT Vs. HDFC Bank Ltd [ 2014 (8) TMI 119 - BOMBAY HIGH COURT] had ruled in favour of the assessee. We are informed that the appeal against such judgement of the High Court was also dismissed by the Supreme Court. In the result, the Income Tax Appeal is dismissed. Allowance of deduction u/s 36(1)(viia) restricted by reducing the amount of advances to the rural branches, population of which was more than 10000 as per census report 2011 - HELD THAT:- We find from perusal of the aforesaid decision of Hon ble Apex Court, it only talks about provision made for Non-Performing Assets (NPAs) by a Non-Banking Finance Company (NBFC) in accordance with prudential norms for income recognition and asset classification prescribed by the RBI. It also addressed the fact that NPA provisions were allowable at a certain percentage of advances as deduction in the Act in respect of banks and that the said provision cannot be extended to NBFCs. As held that RBI guidelines are not binding on the revenue. In our considered opinion, the said decision is factually distinguishable with that of the facts before us. In the instant case before us, it is an admitted fact that even as per the definition of rural branch as given in Explanation to Section 36(1)(viia) the relevant figures of village wise population details were not published on or before 01/04/2013. Hence even as per the Act, the assessee could not have computed the provision as per the Census data of 2011. Hence assessee was justified in making provision based on Census data of 2001 where village wise population details were indeed available in public domain. Accordingly, we do not find any infirmity in the order of the CIT(A) granting relief to the assessee in this regard. Accordingly, Ground No. 5 raised by the revenue is dismissed. Disallowance made u/s.14A - HELD THAT:- Disallowance u/s.14A of the Act could not be made in respect of investments held as stock in trade by the assessee bank in view of the CBDT Circular No.18/2015 dated 02/11/2015 and in view of the decision of the Hon ble Supreme Court in the case of Maxopp Investments [ 2018 (3) TMI 805 - SUPREME COURT] the ground raised by the assessee is hereby allowed. Recognition of interest income on non-performing assets which in the opinion of the assessee is not in accordance with RBI guidelines - HELD THAT:- It is a fact that this interest income on non-performing assets had been brought to tax by the ld. AO on accrual basis ignoring the RBI prudential norms for income recognition wherein, it has been stipulated that income from non-performing assets could be recognized only on receipt basis and not on mercantile basis. The ld. AO had applied the provisions of Section 43D of the Act and sought to bring to tax the interest income of non-performing assets on accrual basis. This issue is no longer res-integra in view of the decision in the case of Vasisth Chay Vyapar Ltd. [ 2010 (11) TMI 88 - DELHI HIGH COURT] wherein the decision of the Hon ble Delhi High Court in the same case was duly confirmed by the Hon ble Supreme Court - that the interest income onNon-Performing Assets (NPAs) could be brought to tax only on receipt basis in line with the RBI prudential norms. Disallowance on bad debts made by the AO pertaining to credit card business claimed by the assessee on the ground that credit card business was not banking business of the assessee - HELD THAT:- Credit card business according to the RBI master circular is a permissible banking business activity provided under Banking Regulation Act and hence, it could be safely construed that credit card business is part and parcel of the banking business carried on by the assessee bank. We find that VISA and Master Card only act as service provider. The monies are lent by the assessee bank. The entire risk of bad debts thereon is borne by the assessee bank and not the service providers. Claim of bad debts to be routed through provision for bad and doubtful debts account would be relevant if the provision is created u/s.36(1)(viia) - assessee duly drew our attention from the computation of income that total amount of bad debts is reduced by the amount of brought forward provision for bad and doubtful debts claimed u/s.36(1)(viia) of the Act in the preceding previous year and only the balance amount was claimed as deduction as bad debts u/s.36(1)(vii) - In this regard, we have verified the computation of income of the paper book. We have also gone through the workings for bad debts written off enclosed in page 43 of the paper book. Hence, it is observed that the bad debts arising from credit card business is part and parcel of total bad debts reflected by the assessee. Hence, we have no hesitation to hold that bad debts arising from credit card business would be part and parcel of loss arising in the course of banking business and hence liable as deduction u/s.36(1)(vii) - Accordingly, the ground No.4 raised by the assessee is allowed. Alternative claim made by the assessee on without prejudice basis, that in case if the said bad debt arising from credit card business is not allowable u/s.36(1)(vii) the said loss would become allowable u/s.28 or u/s 37 of the Act. In our considered opinion, the adjudication of this alternative ground would be infructuous as we have already granted relief to the assessee for ground hereinabove.

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• 2022 (11) TMI 70
  Addition on account of income from project under PCM method - whether income of the assessee is taxable in the impugned year or in the subsequent year? - HELD THAT: - DR was unable to point any infirmity in the findings of the CIT(A) that as per the guidance note issued by the ICAI for accounting of construction contracts the cost of land was to be excluded for calculating the Construction and Development cost of the project, nor was he able to controvert the factual findings of the CIT(A) that after excluding this cost of land the CDC completed by the assessee during the year was below the prescribed 25% of the Estimated cost of the project. Since the basis of the AO for recognizing Revenue from construction contracts of the assessee during the impugned year was the CDC as per his calculation exceeding the prescribed limit of 25% of the estimated cost of project, which the CIT(A) has found to be factually incorrect and the Revenue has been unable to controvert the factual finding of the CIT(A) before us, we see no reason to interfere in the order of the CIT(A) upholding the claim of the assessee that no revenue was to be recognized in the impugned year from the construction projects undertaken by it. Ground no.1 raised by the Revenue is accordingly dismissed. Disallowance u/s.36(1)(iii) - HELD THAT:- Since we have held in ground no.1 above that no income is assessable in the impugned year, there arises no question of claim of any expense whatsoever by the assessee and therefore the addition made on account of disallowance of interest is not tenable. Ground no.2 is therefore become infructous, and is thus dismissed.

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• 2022 (11) TMI 69
  Delayed payment of PF and ESI in respect of employees contribution - payments have been made within the grace period of 5 days in some cases and in some cases, there has been delay in payment in respect of salary itself, which consequently affect the payment of PF and ESI - HELD THAT:- Admittedly, the Hon ble Supreme Court in the case of Checkmate Services Pvt. Ltd [ 2022 (10) TMI 617 - SUPREME COURT] has categorically held that the employees contribution to PF and ESI to the extent it is not paid within due date prescribed under the PF Act, is not allowable u/s. 36(1)(va) of the Act. The Hon ble Supreme Court has also admittedly held that the provisions of section 43B would not apply to the provisions of section 36(1)(va) of the Act in respect of employees contribution. However, as ld. AR submitted that the employees contribution to PF and ESI has been paid in some cases within grace period provided under the respective Act and also in some cases the salary has been paid belatedly, consequently, there was delay in payment of employees contribution to PF and ESI. This issue is restored to the file of the Assessing Officer for reexamination and re-adjudication after granting the assessee adequate opportunity of being heard. Liberty is granted to the ld. AR to make all submissions in respect of allowability of disallowed contribution of the employees to PF and ESI under other relevant provisions in the interest of justice. This direction is being given because ld. AR has submitted that as the amount is not allowable under section 36(1)(va) of the Act and same is also not covered under section 43B of the Act, the amount of delayed contribution to PF and ESI in respect of employees contribution would be treated as income in the hands of the assessee u/s. 2(24)(x) and on subsequent payment of the same, it would be a business expenditure, which can be claimed u/s. 37(1) - We are not expressing any opinion in regard to his arguments as it has not been examined by the lower authorities. Liberty is also granted to the assessee to raise all arguments as are found necessary by him before the lower authorities. Appeal of the assessee stands partly allowed for statistical purposes.

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• 2022 (11) TMI 68
  Addition of sum received as Gift by the assessee from his father - assessee failed to produce the donor on the designated date, AO held that genuineness of the gift is doubtful and brought the gift amount to tax - HELD THAT:- As find the identity of the donor who is the father of the assessee has been established through the ITR, Passport and permanent residency card of Hong Kong. The creditworthiness is proved by the fact that the donor is having enough sources to the tune of Rs. 119 Cr. as per the ITR, and also received an amount on sale of shares as reflected in the ITR and an established hotelier. The donor is about 85 years old and the amount has been gifted to his own son through a gift deed proves the genuineness of the transactions. The addition has been made solely on the basis of failure of the assessee to produce his father (donor) who is 85 years old, staying at Hong Kong before the authorities within a span of 13 hours. Since, all ingredients of identity, genuineness and creditworthiness have been proved beyond doubt, we hereby hold that no addition on account of the gift received by the assessee is called for. Appeal of the assessee is allowed.

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• 2022 (11) TMI 67
  Revision u/s 263 - sources of cash deposits and low profit on turnover over the preceding year - HELD THAT:- Admitted facts are that the assessee is engaged in the business of purchase and sale of Cull Birds which is predominantly in cash. From the comparative statement filed by the Ld. AR, we find that the assessee has earned its profit percentage of 0.76% on the turnover. It is also found from the order of the Ld. AO that the Ld. AO has verified the ledger account copies of purchases and sales, month-wise bills / vouchers for the expenditure incurred, stock ledger and closing stock valuation. AO has not relied on the books due to the fact that most of the bills do not have details of transactions and the expenditure is supported by self-made vouchers AO estimated the profit @ 0.85% of the turnover. Since the books of accounts could not be relied upon the only option available to the Assessing officer is to estimate the income and accordingly he has estimated the income without mentioning the facts in the assessment order that he has rejected the books of accounts. In this trade of purchase and sale of Broilers and Cull Bird, segregation of sale bills and the veracity of the assessee s transactions are practically difficult and hence the books of accounts cannot be relied upon. In these circumstances AO has estimated the net profit which is considered reasonable. Further, the net profit ratio of 0.76% declared by the assessee in the earlier years was not disputed by the Ld. AO. We therefore, find the estimation is reasonable and the order of the AO is not erroneous or prejudicial on this ground. Agricultural income - AR submitted that it has been received from the Andhra Pradesh Civil Supplies Corporation into Canara Bank account of the assessee. It was also submitted that the assessee s daughter who was owning agricultural lands and a copy of the Pattadar Pass Book was submitted as a proof of such ownership. The daughter of the assessee Ms. Gude Kalyani also submitted that she derived the agricultural income and has gifted the same to her father due to his illness. The assessee has mistakenly disclosed this as an agricultural income while filing his return of income. The observation of the Pr. CIT that the assessee did not claim any expenditure for earning such income could not be accepted because of the fact of confirmation of gift received from the assessee s daughter where she has earned agricultural income. Cash payments to M/s. CPF (India) Private Limited the Ld. Pr. CIT has invoked the provisions of section 40(A)(3) and observed that exemption under Rule 6DD of the IT Rules is not available for these transactions - As noted from the submissions of the assessee that the assessee has submitted SFT 13 for the cash payments to the suppliers of Broiler birds and poultry feedings. Since the Ld. AO has recorded in his order that he has verified the copies of purchases, sales, bills, vouchers, stock register etc., and has formed an opinion that the estimating the income at 0.85% of the turnover which amounts to verification by the Ld. AO and does not require invoking the provision of section 263 of the Act by the Ld. Pr. CIT by considering the order of the Ld. AO as erroneous and prejudicial to the interests of the Revenue. We therefore are of the considered view that the AO merely accepting the explanation of the assessee cannot be faulted merely because it could have been lawful to make more detailed inquiries or because he did not write specific reasons of accepting the explanation cannot be a reason to invoke the powers u/s. 263 of the Act. In view of the above discussions, we hereby vacate the impugned revision order and restore the order of the Ld. AO. Appeal of the assessee is allowed.

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• 2022 (11) TMI 66
  Revision u/s 263 by CIT - AR submitted that the assessee has furnished the details required by the Ld. AO with respect to cash deposits in response to the notice u/s.142(1) - HELD THAT:- Confirmation letters from the assessee s Mother-in law and from her mother s sister who has gifted aggregating Rs.15.25 lakhs to the assessee out of their income earned from the agricultural activities and savings. As seen from the paper book the assessee s husband Mr. Akula Satyanarayana has also gifted Rs. 16 lakhs which is also substantiated from the sources available from his personal return of income and savings. AO after considering all these evidences has passed the assessment order accepting the income returned by the assessee. We find that there was a specific question raised in Notice u/s 142(1) and detailed reply submitted by the assessee during the assessment proceedings. CIT has subjected the assessment order to revision proceedings on the ground that the AO has passed the assessment order without making any further enquiry and concluded that in the absence of any specific enquiry made by the AO / recording reasons for accepting the assessee s submissions without any appropriate evidence shall be considered as erroneous or prejudicial to the interests of the Revenue - It is a settled principle that when the assessee has produced appropriate evidence before the AO and where the AO has not recorded the reasons for accepting the explanation of the assessee cannot render the order of the Ld. AO prejudicial to the interests of the Revenue. AO accepting the explanation of the assessee cannot be faulted merely because it could have been lawful to make more detailed inquiries or because he did not write specific reasons of accepting the explanation cannot be a reason to invoke the powers u/s. 263 - we hereby vacate the impugned revision order and restore the order of the Ld. AO. Appeal of the assessee is allowed.

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• 2022 (11) TMI 65
  Income recognition - advances received from customers - AR submitted that the advance from customers are due to accounting errors by the accountants who have been engaged temporarily by the assessee - HELD THAT:- We find from the arguments of the AR that there is an error in the accounting of the customers advances in different years which was converted into sales during the subsequent years. Accordingly, it is admitted by the AR that the tax on income has been deferred to the subsequent assessment years. It is also evident from the orders of the Ld. Revenue Authorities that the assessee has produced details regarding the customer advances before the Ld. AO who has not disputed the same. Further, as explained by the Ld. AR due to change in the incumbent of the accountant, the details furnished during the reassessment proceedings were not matching with the original list filed by the assessee. However, the Ld. AR pleaded that the original list filed by the assessee filed at the time of original assessment for the amount of actual advances received from customers is as per the audited balance sheet of the assessee. We also find merit in the argument of the Ld. AR that the customers advances carried over year after year and it is the consolidated list of advances as on balance sheet date is done in the liabilities side of the balance sheet. The advances may comprise of earlier advances also. Considering the same, the Ld. CIT(A) has rightly calculated the advances for the current year being the difference between the customer advances of AYs 2010-11 and 2011-12. We therefore find that the Ld. CIT(A) has rightly considered the current year advances and estimated the profit @ 6% based on the declared profits by the assessee, which were not disputed by the Ld. AO in the earlier years. We therefore find no interference is required in the order of the Ld. CIT(A) on this ground and accordingly, this ground raised by the Revenue is dismissed. Taxing of unrecorded incentives - HELD THAT:- We find from the submissions made by the Ld. AR that a reconciliation statement has been provided before the Ld. Revenue Authorities. However, the Ld. AO was not being convinced with the reconciliation and rejected the claim of the assessee and proceeded to tax the difference amount as unexplained income. We also find from the submissions made by the Ld. AR that an amount represents income/incentives of the assessee. Therefore, the net income of the assessee should be shown at Rs. 10,65,576/- against which the assessee has admitted Rs. 9,30,860/-. Therefore, there is an unreconciled difference of Rs. 1,34,716/- which the assessee failed to reconcile but agreed for the addition to the total income of the assessee. CIT(A) in his findings of the order has observed the above facts and rightly directed the Ld. AO to delete Rs. 22,31,200/- and add Rs. 1,34,716/- to the total income of the assessee. We therefore find no interference is required in the order of the Ld. CIT(A) on this ground and dismiss the appeal of the Revenue.

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• 2022 (11) TMI 64
  Reopening of assessment u/s 147 - Notice after expiry of four years from the end of the assessment year - HELD THAT:- In the reassessment proceedings, the AO referred the matter relating to international transactions to the Transfer Pricing Officer. After passing of draft assessment order, the assessee filed its objections to Ld Dispute Resolution Panel. After receiving directions from Ld DRP, the AO determined the total income under the normal provisions of the Act at Rs.4.72 crores and book profit at Rs.3.16 crores. Since the total income computed under normal provisions of the Act was more than the book profit, the AO raised tax demand on the total income computed under normal provisions of the Act. The assessee, inter alia, has challenged the validity of reopening of assessment before the Tribunal. We heard the parties first on this legal issue. As noticed earlier, the original assessment in the hands of the assessee was completed u/s 143(3) of the Act on 06-12-2015. AO has reopened the assessment by issuing notice u/s 148 of the Act on 31.3.2019, i.e., the reopening has been done after expiry of four years from the end of the assessment year. At this juncture, we may refer to the provisions of sec.147 of the Act, particularly the proviso thereto, which gives a protection to the assessee in the cases of reopening of assessment after expiry of four years from the end of the assessment year As reasons recorded by the assessee would show that the assessing officer has noticed alleged escapement of income only on verification of records . Hence there is merit in the contentions of Ld A.R that the AO did not bring any new material on record for forming belief that there is escapement of income. We noticed earlier that the reopening has been done after expiry of four years from the end of the assessment year and hence it is imperative for the AO to show that there was failure on the part of the assessee to disclose fully and truly all material facts, as stated in the proviso to sec.147 of the Act. The case of the assessee is that there was no failure on its part as alleged by the AO. We are of the view that the reopening of assessment is bad in law and hence the order passed by the assessing officer is liable to be quashed. Accordingly, we quash the order passed by the AO. Appeal filed by the assessee is allowed.

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• 2022 (11) TMI 63
  Unexplained investment u/s 69 - CIT-A deleted the addition - HELD THAT:- CIT A did not examine the assessee whereas the learned AO issued the summons and it was not complied with Without examining the assessee, CIT A reached at the conclusion that assessee is a homemaker and she has fluctuating income. He did not care to look into the fact that assessee has only filed return of income for this year and there is no source of income available with the assessee. He also did not consider the fact that a person who does not have any source of income, how an NBFC could have lent Rs.251 lakhs to such a party and where the price of the property is the same. He also did not examine that what is the actual cost of the property and how the registration, stamp duty expenses have been incurred, if at all such expenses are incurred. He also did not care to examine that how the interest of the above loan could have been serviced. He also did not look into the facts of this NBFC whether it is engaged in the business of housing loan or not. He also did not consider the relationship between NBFC and the assessee family. In view of this, we find that the order of the learned CIT A is not sustainable. We restore the appeal of the learned AO back to the file of the learned assessing officer with a direction to the assessee to furnish all the requisite details, appear before the assessing officer in compliance with the summons u/s 131 of the act, show the credentials of the nonbanking financial company and rational of loan given to the assessee within 180 days from the date of this order. The learned assessing officer may examine the same, give an opportunity of hearing to the assessee, and then decide the issue on the merits of the case. Appeal of AO is allowed for statistical purposes.

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• 2022 (11) TMI 34
  Validity of Order framed u/s 147/144C(13)/143(3) - Non quoting the mandatory document identification number ( DIN ) in conformity with Para-2 and Para-3 of Circular No. 19/2019 dated 14 August 2019 and thus, the said final assessment order deserves to be held as invalid, bad in law and void-ab-initio - HELD THAT:- A perusal of the CBDT Circular No. 19/2019 clearly shows that the CBDT has considered the exceptional circumstances as mentioned in Para 3 of the Circular and therefore, in our considered opinion, only those circumstances which have been mentioned therein would be considered for non-mentioning of DIN. The Board has made it very clear that in cases where communication is issued manually, it may be done only after obtaining necessary approval of the relevant authorities and communication so issued must indicate the exceptional circumstances provided in the Circular itself. It has been made very clear by the Board that any communication which is not in conformity with Para 2. and 3 of the Circular shall be treated as invalid and shall be deemed to have never been issued. The impugned order is hit by this mandate of the Board and, therefore, we are inclined to adjudicate Ground No. 8 [supra] in favour of the assessee by holding that the order dated 15.10.2019 framed u/s 147/144C(13)/143(3) of the Act is invalid and deemed to have never been issued as it fails to mention DIN in its body by adhering to Circular No. 19/2009 dated 14.08.2019.

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• Customs

• 2022 (11) TMI 62
  Refund of sale proceeds of Gold - Gold disposed off without following the procedure under Section 110(1A) of the Customs Act - whether appellants are entitled to receive the differential value of the seized gold between the value prevailing on the date of melting i.e. 01.08.2018 and value as on the date of which the cheque was given to the Appellant? HELD THAT:- Admittedly, against the order-in-original dated 09-03-2018 the appellants had filed the appeals before the Tribunal challenging / questioning the correctness of the entire impugned order passed by Ld. Adjudicating authority ordering for absolute confiscation of gold and imposing penalties on Appellants. During the pendency of the appeal, it appears that the department took steps to dispose of the said disputed Gold, through the SBI Bullion Branch - the Department has to necessarily await the decision of the Tribunal and abide by the direction that has been issued by the Tribunal. In the instant case, during the disputed period the matter was sub judice before the Tribunal, but the Department in a haste manner has disposed of the goods without seeking permission from the appellate court where the matter was sub judice. Thus, the Department has committed a serious mistake by disposing the disputed goods which was a subject matter of an appeal. In the present matter department also not intimated the Appellants regarding the disposal of confiscated gold. The act of the department ex-part cannot be held as proper and legal. In the KAILASH RIBBON FACTORY LTD. VERSUS COMMR. OF CUS. C. EX., NEW DELHI [ 2002 (3) TMI 57 - HIGH COURT OF DELHI] , the Hon ble Delhi High Court held that it is a serious lapse on the part of the department when it auctioned confiscated goods without permission of the Tribunal during pendency of the appeal without even giving notice to the appellants. It was held that the department has to refund the declared value of the goods with interest per annum from the date of auction of the goods. It is very clear that the department has disposed of /sold the goods on the understanding that the first order of the adjudicating authority is the final order. At the same time the department was well aware about the pendency of the appeals before this Tribunal. Therefore the action of the department is clearly in gross violation of principles of natural justice, hence the same cannot be allowed to sustain. The appellants are entitled for the refund of differential value of the gold as claimed by them alongwith interest - Appeal allowed.

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• 2022 (11) TMI 61
  Penalty of Rs. 40 lakhs under Section 112(b)(i) of the Customs Act - Smuggling - foreign origin gold - retraction of statements - cross-examination of witnesses - HELD THAT:- Appellant is engaged in selling of gold as a consignment agent/ broker, wherein the owner of the gold either himself brings or through his trusted persons/ employee. This appellant after retaining his brokerage returns the sale proceeds and unsold gold, if any, to the consignor, normally on the same day. This fact is evident on the face of the record, as on the day of search and seizure, this appellant has stated that he has received gold for sale from Sh. Amit Goel through his employee Sh. Pankaj Kumar Singh who has come to his shop alongwith Sh. Santosh Kumar. Further, this appellant stated in presence of Sh. Pankaj Kumar Singh that he has received the gold from Sh. Amit Goel through Sh. Pankaj Kumar Singh, and this statement was not disputed rather affirmed by Sh. Pankaj Kumar Singh in his statement recorded on the same day or simultaneously. It is further evident from the facts on record that the seized gold 20.643 kgs. has been found in the cloth bag brought by Sh. Pankaj Kumar Singh. Thus, it is held that the gold was actually in possession of Sh. Pankaj Kumar Singh who was present in the shop. Thus, although this appellant was facilitating the sale of gold, the gold was in defacto and de-jure possession of Sh. Pankaj Kumar Singh on behalf of his master Sh. Amit Goel. The subsequent change of statement of Sh. Pankaj Kumar Singh does not inspire confidence, has evidently been made in order to save his employer - Sh. Amit Goel from penal consequences. Further, the panch witness Sh. Yogesh - President of Bullion Association has also supported the contention of this appellant, that he is a broker dealing in bullion on consignment basis for brokerage. These facts are also corroborated with the Income Tax record of this appellant wherein he has declared annual income during the financial year 2014-15 to 2017-18 in the range of Rs. 3.9 to Rs. 9 lakhs. Admittedly, Sh. Amit Goel is a wealthy person of substantial means, which also support the contention of this appellant. The submission of ld. Counsel for the appellant that investigation does not adduce any evidence to arrive at a definite conclusion, if the gold was smuggled or not. Penalty under Section 112(b) requires mens rea to be established i.e. conscious knowledge of the appellant that he was dealing in smuggled gold. This fact is not coming out from the evidence on record. Admittedly, it is a case of town seizure and not a seizure (or near) in customs area or in the vicinity of international border. Thus, the suspicion of Revenue that the gold is smuggled does not lead to inevitable evidence that the gold is smuggled. Admittedly, the seized gold was of 99.5% purity, whereas normally the smuggled gold is of 99.9% purity. The confiscation of gold under the facts and circumstances is bad in absence of condition precedent, as provided under Section 111(d), (o) and (p) of the Customs Act - the appellant has not violated any of the provisions of Section 111 as alleged - appellant is not involved in acquiring possession of or is any way concerned in carrying, removing, depositing, harbouring, keeping, concealing, selling or purchasing, or in any other manner dealing with any goods which he knew or has reason to believe are liable to confiscation under Section 111. Thus, no penalty is imposable on the appellant in the facts and circumstances under Section 112(b)(i). Accordingly, penalty imposed on this appellant is set aside. Appeal allowed.

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• 2022 (11) TMI 60
  Denial of benefit of Project Imports Regulations, 1986 - import of goods for the project meant for Prayagraj Thermal Power Project Generation of Co. Ltd. - importing goods at nil rate of duty - Whether violation of Regulation 7 of Project Import Regulations, 1986 is sufficient to deny the duty benefit to the appellants? HELD THAT:- The perusal of the provision reveals that the language used therein does not make the provision mandatory. There are conditions in the statute that some of those may be substantive, others may be mandatory and based on consideration of policy and some others may merely belong to the area of procedure - the conditions of provision / Regulation 7 are not mandatory, they are merely directory. In the present cases the purpose of statute was to grant a beneficial rate of duty to the goods imported for setting up a new project, the appellants was such a project and had satisfied the conditions for eligibility Regulation 7 comes into force much after the imports are over and is actually meant only to facilitate finalization of provisional assessment. It did not have any effect on the eligibility to the lower rate of duty - substantial benefit of exemption from Customs duty has wrongly been denied by invoking procedural provision which is not at all mandatory. The cases are remitted to the original authority for finalizing the assessment in terms of project contract in the light of reconciliation statement filed - Appeal disposed off.

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• 2022 (11) TMI 59
  Scope for invoking the detriment of confiscation under section 111(o) of Customs Act, 1962 with attendant penalty under section 112 of Customs Act, 1962 - HELD THAT:- The appellant had conceded inability to execute export orders within the prescribed period and had, thus, not been in compliance with the conditions in the advance authorization scheme elaborated in the Foreign Trade Policy issued under the authority of Foreign Trade (Development and Regulation) Act, 1992 mirrored in notification no. 96/2009-Cus dated 11th September 2009. It is also on record that the first appellate authority had held the said breach as not attributable to malafide and, therefore, reduced the redemption fine and penalty thereon. The various schemes incorporated in the Foreign Trade Policy are administered, insofar as imports and exports are concerned, though notifications issued under section 25 of Customs Act, 1962 emplacing the same conditions including execution of bond for compliance and, failing which, duty foregone along with interest, is obliged to be deposited besides being liable to appropriate action under Customs Act, 1962. Such stipulation is necessitated as, generally, the period granted for fulfillment of export obligation lies well beyond the normal period of limitation prescribed in section 28 of Customs Act, 1962. Whether the regularization had occurred, as argued by Learned Authorised Representative, to extricate the appellant from the consequence of the show cause notice? - HELD THAT:- A decision on the contractual breach of obligation entered into in relation to schemes under the Foreign Trade Policy vests with the licencing authority and it is only upon such occurrence that it may be conclusively held that breach of condition is demonstrated. It is relevant here that the show cause notice has invoked section 143 of Customs Act, 1962 which provides for the execution of bonds for ensuring fulfillment of conditions. It is, therefore, not a demand under section 28 of Customs Act, 1962 following allegation of short payment, non-payment or evasion of duties but for enforcing the obligation under advance authorization scheme of the Foreign Trade Policy - the regularization is complete in all respects and it is only in the absence of such regularization that proceedings under section 111(o) of Customs Act, 1962 could have been brought to conclusion. The decisions of the Tribunal in M/S. GLOBAL BOARDS LTD VERSUS COMMISSIONER OF CUSTOMS (EXPORT) , MUMBAI [ 2019 (8) TMI 336 - CESTAT MUMBAI] and MARUTI UDYOG LIMITED VERSUS COMMISSIONER OF CUSTOMS, KANDLA [ 2001 (2) TMI 210 - CEGAT, MUMBAI] , pertaining to law on invoking of section 111(o) of Customs Act, 1962 in circumstances of the imports having been regularised, must be followed, where the decisions disfavor resort to section 111 of Customs Act, 1962 when breach of conditions of licence had been regularized, and certified to be so, by the competent authority. Appeal allowed.

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• Corporate Laws

• 2022 (11) TMI 58
  Failure to appoint Whole time Company Secretary within a period of six months from the date of vacancy of previous Whole-time Company Secretary, who had resigned - Section 203 of the Companies Act 2013 read with Rule 8A of Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 - HELD THAT:- The Company failed to appoint a Whole time Company Secretary from 20.09.2021 till 20.01.2021 with a delay of 122 days thereby contravening the provisions of Section 203 of the Companies Act, 2013. As per Section 203(5) of the Companies Act, 2013. Further, Section 203(5) of the Companies Act, 2013 prescribes a penalty of Rs. 50,000/- and Rs. 1,000/- per day for continuing offence for every director and KMP - appointment Key Managerial Person is the collective responsibility of the entire Board. Further, a Whole-time Director is included in the definition of Officer in Default and Key Managerial Personnel as per Sec. 2(60) r/w Sec. 2(51) and thus the MD and Wholetime Directors are liable for penalty. The penalty is imposed on the Company and its Officers in default as per table below for violation of provisions of Section 203 of the Companies Act, 2013 for delay of 122 days. It is opined that, the penalty is commensurate with the aforesaid failure committed by the Notice. Application disposed off.

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• Insolvency & Bankruptcy

• 2022 (11) TMI 57
  Maintainability of petition - initiation of CIRP - Corporate Debtor failed to make repayment of its dues - Financial Creditors - existence of debt and dispute or not - HELD THAT:- Upon perusal of the record it is apparent that transaction between the parties was purely financial in nature and there is an existence of Financial Debt - In light of the facts and circumstances, the present petition filed by the Financial Creditor is complete in all respects as required by law. The Petition establishes that the Corporate Debtor is in default of a debt due and payable and that the default is more than the minimum amount stipulated under section 4 (1) of the Code, stipulated at the relevant point of time. The application under section 7 of the Code read with rule 4(1) of the Insolvency Bankruptcy (Application to Adjudicating Authority) Rules, 2016 for initiating CIRP against Impex Ferro Tech Limited, the Corporate Debtor, is admitted - Moratorium declared.

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• 2022 (11) TMI 56
  Maintainability of petition - initiation of CIRP - Corporate Debtor failed to make repayment of its dues - Operational Creditors - existence of debt and dispute or not - date of default for each invoice is 10 days after the date of respective invoice - time limitation - HELD THAT:- It is noted that the applicant supplied CNG to the respondent against which the invoices were issued and the last invoice issued was in the year 2012-13. The applicant charged interest on delay payments @ SBI PLR +2% i.e., 16.50% 16.45%. In the year 2017 the respondent through letter requested the applicant to waive off the interest amount - The issue of the limitation, being very relevant for maintainability of application under Section 9 assumes its importance; and even if there exists a debt which is defaulted and not paid, the application filed under Section 9 of the IBC, 2016 for initiating CIRP proceedings against the defaulting corporate debtor would not be maintainable if the debt itself is barred by the limitation under Article 137 of the Limitation Act, at the time of filing of the petition. Admittedly in the present case, the invoices under reference were raised in the year 2012-13 and the last invoice by the corporate debtor was made on 16.02.2013. The date of default is ten days after the date on which invoices were raised on from 10.12.2012 to 26.02.2013 (upto 10.02.2013). Therefore, considering the date of last invoice, the period of limitation has expired [after three years] in the year 2016. The letter by the respondent for excluding the interest amount from the total outstanding amount along with the cheque of Rs. 5,00,000/- was sent in the year 2017, i.e. much beyond the period of limitation, therefore, the said letter cannot be said to have extended the period of limitation - the application filed on 11.09.2019 under Section 9 of the IBC, 2016 is beyond the period of limitation and accordingly, the said application is not maintainable under the IBC. Application disposed off.

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• 2022 (11) TMI 55
  Maintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its dues - Financial Creditors - existence of debt and dispute or not - time limitation - HELD THAT:- The corporate debtor committed default of the financial debt of Rs. 37,17,582/- which is within the threshold as per Section 4 of the IBC, since the application was filed on 03.10.2018 and the amendment to section 4 was w.e.f. 24.03.2020. The Financial Creditor has established the existence of financial debt payable by the corporate debtor and its default by the corporate debtor. This application is filed within limitation and is defect free. Application admitted - moratorium delcared.

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• 2022 (11) TMI 54
  Maintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its dues - Operational Creditors - existence of debt and dispute or not - HELD THAT:- It may be seen that the Corporate Debtor has sought for time and more time on the pretext that negotiation between the parties for settlement are going on, which dissuade the Corporate Debtor from filing any reply and during the hearing the Learned Counsel, Mr. V.V. Sivakumar appeared for the Corporate Debtor had admitted their liability of payment due to the Operational Creditor. Thus, the Operational Creditor has proved that there is an existence of Operational Debt and the default of such operational debt which is payable by the Corporate Debtor to the Operational Creditor. From the list of invoices filed which has been annexed in the application, it is evident that the claim as raised by the Operational Creditor is within the prescribed period of limitation of 3 years and in relation to the Corporate Debtor the registered office of which is situated within the State of Tamilnadu, amenable to its territorial jurisdiction, this Authority has no hesitation in admitting this Petition and initiating the Corporate Insolvency Resolution Process (CIRP) as against the Corporate Debtor - it is also pertinent to note that the default arising in the present Application is much prior to the advent of the Covid-19 pandemic and hence the Corporate Debtor also cannot seek shelter under Section 10A of IBC, 2016. Petition admitted - moratorium declared.

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• PMLA

• 2022 (11) TMI 53
  Smuggling - proceeds of crime - Scheduled offences - conspiracy to commit offences punishable under Sections 7, 12, 13(1)(d) read with Section 13(2) of the PC Act - HELD THAT:- The definition of proceeds of crime in PML Act, inter alia, means any property derived or obtained by any person as a result of criminal activity relating to a scheduled offence. The offences punishable under Sections 7, 12 and 13 are scheduled offences, as is evident from paragraph 8 of Part-A of the Schedule to the PML Act. Any property thus derived as a result of criminal activity relating to offence mentioned in said paragraph 8 of Part-A of the Schedule would certainly be proceeds of crime . Whether the role played by respondent could come within the purview of Section 3 of the PML Act? - HELD THAT:- It is true that so long as the amount is in the hands of a bribe giver, and till it does not get impressed with the requisite intent and is actually handed over as a bribe, it would definitely be untainted money. If the money is handed over without such intent, it would be a mere entrustment. If it is thereafter appropriated by the public servant, the offence would be of misappropriation or species thereof but certainly not of bribe. The crucial part therefore is the requisite intent to hand over the amount as bribe and normally such intent must necessarily be antecedent or prior to the moment the amount is handed over. Thus, the requisite intent would always be at the core before the amount is handed over - By handing over money with the intent of giving bribe, such person will be assisting or will knowingly be a party to an activity connected with the proceeds of crime. Without such active participation on part of the person concerned, the money would not assume the character of being proceeds of crime. The relevant expressions from Section 3 of the PML Act are thus wide enough to cover the role played by such person. Appeal allowed.

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• 2022 (11) TMI 52
  Attachment of property - expiry of period of limitation for filing appeal - whether for the purpose of taking possession of the property attached under Section 5 or frozen under sub-section 1-A of Section 17 of the Prevention of Money Laundering Act, 2002 (PMLA), the Director or any other officer authorized by him has to wait for the expiry of the period of limitation for filing appeal against the attachment order that has been confirmed in terms of sub-section (3) of Section 8 of the PMLA for taking its possession in terms of Section 8(4) of the PMLA? HELD THAT:- There is no dispute to the legal position that the Supreme Court in Vijay Mandal Choudhary s case [ 2022 (7) TMI 1316 - SUPREME COURT ] has upheld the vires of the provisions contain in Section 8(4) of the PMLA. The said provision authorizes the Director or any other officer to take possession of the property regarding which provisional order of attachment has been confirmed. As per the Rule 5(2) of the Prevention of Money Laundering (Taking Possession of Attached or Frozen Properties Confirmed by the Adjudicating Authority),Rules, 2013 (hereinafter referred to as the Rules of 2013), once the attachment of immovable property has been confirmed by the Adjudicating Authority and it is found to be in possession of the owner, the authorized officer has to issue a notice of eviction of ten days so as to prevent the person from enjoying such property and if such person does not vacate the property within the stipulated time, he has to be evicted by taking possession thereof. The jurisdiction to proceed under Section 8(4) of the PMLA would come into play immediately upon passing of the order of attachment by the Adjudicating Authority. There is no scope to interpret the provisions contained in Section 8(4) and Section 26 of the PMLA and Rule 5(2) of the Rules of 2013 to hold that for taking action under Section 8(4) of the PMLA, the authorized officer has to await the expiry of period of limitation i.e., 45 days - the respondents were well within their powers to issue the impugned notice, which is in tune with the legal position as discernible from the provisions contained in Sections 8 and 26 of the PMLA read with Rule 5(2) of the Rules of 2013. There are no ground to interfere in the impugned judgments passed by the learned Writ Court. The same are well-reasoned and lucid and deserve to be upheld - appeal dismissed.

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• 2022 (11) TMI 51
  Validity of summons issued by the Assistant Director, PMLA, Directorate of Enforcement, Ministry of Finance, Government of India, Jaipur - HELD THAT:- On perusal of the impugned summons dated 31.08.2022, it reveals that the petitioner has been asked to appear before the Investigating Officer on 15.09.2022 - A conjoint reading of sub Section (1) (b) (2) of Section 50 of the Act of 2002 makes it abundantly clear that it is wide enough to authorise and empower the Director or the Additional Director (as the case may be) to issue a summons to a person. Mere fact that the reply has been filed and the requisite documents as required in first summons have been furnished, does not absolve the petitioner of his statutory obligation to honour the summons. Nor does it take away right of the authorised officer to call upon the petitioner to appear before him - Petitioner s argument that the summons issued to the petitioner which does not append the schedule and list of documents is illegal, is preposterous. When the authorised officer needs only petitioner s presence, it is not necessary to append the list of documents and the schedule - Petitioner simply wants to avoid summons by way of taking hyper technical pleas, which too have no substance. This Court does not find any illegality or infirmity in the impugned summons dated 31.08.2022 - Petition dismissed.

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• 2022 (11) TMI 50
  Money Laundering - Seeking grant of bail - scheduled offences - proceeds of crime - untainted money - framing of charges - Sections 417 of the IPC and under Sections 17, 40 (1)((b) and 40(1)(c) of the Unlawful Activities (Prevention) Act, 1967 - HELD THAT:- The applicant is in custody for more than 2 years, particularly considering that schedule offence has been registered in the year 2013 and the investigation in respect of other offences commenced after the knowledge of registration of schedule offence and the investigation started belatedly and complaint was filed after more than 5 years, and that the schedule offence has been finished and till so far the Special Court has not framed the charges under the PMLA Act; for the schedule offence the applicant has been in jail for more than 8 years and was granted bail under Section 389 of the CrPC - further considering the nature of accusation and the evidence and that the applicant has taken a specific defence that one unknown person has called him that he has won the lottery and the applicant has been trapped in such a organized crime and further considering the statement given by the applicant under Section 50 of the PMLA Act; without further commenting anything on the merits of the case and that trial is likely to take considerable time, this Court is inclined to release the applicant on bail. The applicant is directed to be released on bail subject to the conditions imposed - application allowed.

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• 2022 (11) TMI 49
  Money Laundering - Seeking grant of Regular Bail - loan amount declared as NPA - chance of his absconding or tampering with the evidence or influencing the witnesses or not - HELD THAT:- From the order sheets of the trial Court as well as the documents in the case diary, it is clear that the applicant is not produced before the competent Court within 24 hours of his detention. Charge sheet/complaint has been filed before the learned trial Court. As per order sheet dated 2.5.2022, the case is at preliminary state for argument before registration. Looking to the number of documents and list of witnesses, there is every likelihood that conclusion of trial would take considerable time. Therefore, in the totality of facts and circumstances of the case, this Court is of the opinion that present is a fit case to release the applicant on bail. It is directed that the applicant shall be released on bail on his executing a personal bond for a sum of Rs.10 lacs with two sureties of the like amount to the satisfaction of the trial Court for his appearance before the said Court as and when directed, till final disposal of the trial, on the further conditions imposed - application allowed.

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• Service Tax

• 2022 (11) TMI 48
  Levy of service tax - service received by the respondent/Assessee received in India, provided by nonresident/ person located outside India - reverse charge mechanism - HELD THAT:- In the present case, the taxable service received by the respondent/Assessee received in India, when provided by nonresident/ person located outside India was for the period between November, 1999 and March, 2002, i.e., prior to 18.04.2006, the Tribunal has rightly set aside the the levy of service tax on the aforesaid. Once there is no service tax liability by the respondent/Assessee for the services received during the period between November, 1999 and March, 2022, there is no question of levy of any penalty. Therefore, the Tribunal has rightly held that the Assessee is not liable to pay any penalty, as sought to be levied by the Department. Appeal dismissed.

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• 2022 (11) TMI 47
  Works Contract Service - It is contended that service receiver is a trust, a charitable trust registered under Section 12 A/12 AA of the Income Tax Act, providing service of education and are not involved in any commercial activities - whether the service tax has been rightly demanded as short paid or not paid? - HELD THAT:- Religious use includes providing of education, and medical aid, which reduces human suffering. Accordingly, it is held that the appellant is entitled to exemption with respect to aforementioned works contract service provided to the Trusts registered under Section 12A/12AA of the Income Tax Act. Thus, the demand of Rs.(2,52,912/- + Rs.1,75,512/-) or Rs. 4,28,424/- is set aside. Confirmation of duty of Rs. 55620/- demanded on sale of two numbers of completed houses - HELD THAT:- The Adjudicating Authority have recorded in para 10 of the Order-in-Original that the appellant had produced sale deed of completed house (s) situated at Saakar Hills. On perusal of the two sale deeds, are of completed/ fully furnished house to independent buyers for consideration. However, as per profit loss account, the appellant have received sale proceeds of Rs.69,50,000/- whereas the cost of construction is Rs. 65 lakhs. Hence, Court below have held liable to pay service tax on differential value of Rs. 4,50,000/-. Demand of Rs. 64,259/- with respect various civil constructions/maintenance works done for Narmada Gelatine Ltd. - HELD THAT:- The Adjudicating Authority observed that the appellant have taken irregular abatement and hence, have short paid the service tax. Accordingly, re-worked out, the taxable value on which service tax is payable, have mentioned in para 11 12 in the order-in-original and worked out differential value of Rs. 4,44,249/- on which tax payable was worked out at Rs. 54,909/- being service tax as short paid. Further, the Adjudicating Authority observed that as per profit loss account, appellant have shown Rs. 42,08,078/- as income from Narmada Gelatine Ltd., Whereas, they have provided invoices of Rs. 41,32,431/- and accordingly on the differential amount Rs. 75,647/- demanded further tax of Rs. 9,350/- for want of invoice, work order, etc. - the appellant have rightly claimed abatement, accordingly they have paid their service tax liability being 50% of the tax payable. Admittedly, balance 50% of service tax is payable by Narmada Gelatine Ltd. being a corporate entity. Further, I hold that no service tax can be demanded on the differential value as per profit loss account, of Rs. 75,647/-, as service tax is chargeable on accrual basis i.e. the liability occurs immediately on raising of the bill for the service provided or to be provided, whereas the appellant have maintained their account on cash basis/receipt basis. Accordingly, the demand of Rs. 64,259/- is set aside. Demand on other receipts as per profit loss account Rs. 47 lakhs - HELD THAT:- The demand of tax has been made arbitrarily without relating the said receipt to any service provided, only on the allegation that the appellant did not provide any supporting documents with respect to the same and have demanded service tax of Rs. 5,85,920/-. The learned Counsel explains that the said receipt is in respect of construction of individual houses and the same is an exempted activity under the service tax provisions. Accordingly, the demand is hereby set aside. So far the demand of Rs. 18,540/- on house rent is concerned, it is found that no service tax is chargeable on house rent of residential premises. Thus, this demand of Rs. 18,540/- is set aside. Demand of Rs. 7,416/- with regard to tower rent - HELD THAT:- The said amount have been shown under the head tower rent but in actuality this has been received by way of compensation, and not towards any other service rendered. Thus, the demand of Rs. 7,416/- is set aside. The impugned order is set aside and the penalties imposed are also set aside - Appeal allowed.

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• 2022 (11) TMI 46
  Levy of service tax - healthcare services - Event Management Service - applicability of Sl. No. 2 of Notification No. 25/2012-ST dated 20.06.2012 - HELD THAT:- It is undisputed that the show cause notice demanded service tax from the respondent under the head event management services . There is no demand under the head healthcare services . The Principal Commissioner has, in the impugned order, examined the nature of the services provided by the respondent has come to the conclusion that provision of MMUs by the respondent would qualify as healthcare services and NOT as event management services . This finding of the Commissioner has not been disputed in the appeal by the Revenue. After concluding that the respondent has not provided event management services , the Principal Commissioner has examined the taxability under the head healthcare services and came to the conclusion that they were exempted by virtue of Notification No. 25/2012-ST dated 20.06.2012. Revenue s contention is that the respondent does not qualify for the exemption under this notification because it is neither a clinical establishment nor an authorized medical practitioner nor a para-medic and the exemption has not covered all services rendered in relation to healthcare services but specifically the healthcare services provided by the aforesaid three noticees/persons. Since an exemption notification must be strictly construed against the person who claims it, the respondent is not entitled to the benefit of exemption notification. The exemption notification will be relevant if tax liability can be fastened on the respondent in the first place. In the absence of any notice under the category of healthcare services no tax liability can be fastened on the respondent. Therefore, the demand under the head event management services made in the show cause notice has been correctly dropped in the impugned order. The Principal Commissioner should not have even considered fastening the liability under the head healthcare services because no notice was served upon the respondent. The appeal is rejected and the impugned order is modified to the extent that the demand stands dropped for the reason that no notice was served upon the respondent under the category of healthcare services.

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• 2022 (11) TMI 45
  Condonation of Delay and Restoration of Appeal - appeal dismissed for non-prosecution - HELD THAT:- It is found that definitely appellant has been lethergic and negligent in pursuing their appeal. In the justice, the miscellaneous application is allowed and the appeal restored subject to payment of Rs. 25,000/- in Prime Minister Care Fund. The cost will be deposited within 4 weeks from today and compliance file before the Deputy Registrar of this Tribunal. Subject to compliance, the appeal shall be restored to its original number.

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• Central Excise

• 2022 (11) TMI 44
  Remission of duty - Tobacco - Pan Masala - goods lying without any use since 2004 - goods are unfit for consumption or not - Rule 21 of the Central Excise Rules, 2002 - HELD THAT:- As admittedly the goods being tobacco and pan masala are not fit for consumption since 2004 as they are lying without any use, the following interim order is passed in the interest of justice: (i) The petitioner shall furnish the bank guarantee of Rs. 3 Crore of any nationalized bank in favour of respondent-the Principal Commissioner, Central GST and Central Excise, Vadodara-I within a period of four weeks from today. (ii) On furnishing such bank guarantee by the petitioner, without prejudice to the rights and contentions of both the sides, the respondent shall permit the petitioner to destruct the goods in question. Stand over to 24.11.2022.

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• 2022 (11) TMI 43
  Marketability - different iron and steel items such as plates, angles, channels, beams etc. - turnkey project - HELD THAT:- In the instant case, what was being marketed therein are cement concrete poles, which have been manufactured, therefore, it was held thereon that the marketability of the article does not depend on the number of purchasers nor is a market confined to the territorial limits of the country. What the department would have to show is that the goods that are being manufactured by the petitioner are goods that are capable of being sold in the open market or to any purchaser. Only going by the theoretical reference that goods are marketable is not sufficient. The nature and extent of the goods requires to be defined in order to show that any one in the open market can purchase the same. In the instant case, there is no dispute that what the petitioner is fabricating or manufacturing are articles such as Spillway Raidal Gates, Spillway Stoplog Units, Intake Gates of Trash Racks, Sedimentation Chamber Gates, Flushing Conduit Gates. The same has also been extracted in the impugned order. They would clearly indicate that these are articles that have been fabricated or manufactured for the particular requirements of the particular Hydroelectric Project. That the Gates, RCC construction etc. have been made by the petitioner - it cannot be said, nor to be found from any material on record to indicate that all the goods that are being manufactured by the petitioners are goods which are said to be marketable. The order dated 15.12.2005 passed by respondent no.1 is quashed. The amount in deposit made by the petitioner with the respondents is directed to be adjusted towards any dues of the petitioner and if there are no dues, then to be refunded to him within a period of six months from today - petition allowed.

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• 2022 (11) TMI 42
  CENVAT Credit - lease rental charges paid to the Ashok Leyland Wind Energy Ltd. for the power that has been drawn by the respondent at Chennai - lease rental is computed on the actual power consumed by respondent on agreed rates - case of Revenue is that the service tax paid on services of generation of electricity (which is not excisable) and situated far away from the factory premises cannot be said to be related to the manufacturing activity carried out at Chennai - HELD THAT:- On perusal of the Show Cause Notice, it is seen that the electricity generated by the windmills is transmitted to the Udumalpet TNEB Grid and the respondent draws the same quantity of electricity at Chennai. There is no allegation in the Show Cause Notice that any excess electricity has been sold to any other party. The respondent has availed credit on the lease rental which is calculated on the basis of the electricity consumed by them. Electricity being in a nature which cannot be transported in an ordinary manner, the respondent has made the facility of transmitting it through TNEB grid and drawing it at Chennai. It is not in dispute that the said electricity is supplied to the factory of the respondent and the same is used for manufacturing activity. Merely because the wind generation plant is situated far away from the manufacturing activity, credit cannot be denied. The impugned order does not call for any interference - Appeal dismissed.

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• 2022 (11) TMI 41
  Recovery of short paid duty - supplies to Government Hospitals and Institutional Buyers - method of valuation - to be valued under Section 4 of the Central Excise Rules, 2002 or under Section 4A of CEA? - HELD THAT:- There is no dispute that the appellant have supplied Medicament to Government Hospitals and Some Institutional Buyers. In case of such nature of transaction the medicaments are not sold in retail, therefore, retail sale price need not to be affixed. It is the submission of the appellant that they have not affixed retail sale price on such medicament and it is also mentioned on the package of the Medicament that it is not for a retail sale and it is for use by Government Hospitals and Some Institutional Buyers. In this fact the medicaments are not sold in retail and the retail sale price need not to be affixed. Consequently, the valuation of the said goods cannot be insisted upon under Section 4A of Central Excise Act, 1944. This bench in the case of in the case of Zydus Healthcare Ltd [ 2019 (10) TMI 810 - CESTAT AHMEDABAD ] under the same set of facts held that valuation of Medicament Supplied to Government Hospitals/ Institutional Buyers shall be governed by Section 4 and not Section 4A. This Tribunal has already taken a consistent view that the Medicament Supplies to Government Hospitals and Institutional Buyers shall be valued in terms of Section 4 and not Section 4 (A). Therefore, the issue is no longer res integra - Appeal allowed - decided in favor of appellant.

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• 2022 (11) TMI 40
  CENVAT Credit - common inputs used in manufacture of taxable as well as exempt goods - demand @ 8% of the value of exempted goods proposed in terms of Rule 57 AD(2)(b) of Central Excise Rules, 1994 and and rule 6(3)(b) of Cenvat Credit Rules, 2002 and 2004 - HELD THAT:- The provision of erstwhile Rule 57 AD of Central Excise Rules, 1944 and Rule 6(3)(b) of Cenvat Credit Rules, 2002/2004 clearly stipulates that the cenvat credit in respect of input used in the manufacture of exempted final product is not admissible. It is also found that the entire objective of allowing the cenvat credit is to avoid the cascading effect of duty on the final product. When the final product is not dutiable, there is no reason to allow the cenvat credit on the inputs used in such final products. Therefore, the adjudication order is absolutely proper and legal, which does not require any interference. Appeal dismissed.

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• 2022 (11) TMI 39
  Recovery of dues - existence of dues as per the resolution plan approved by NCLT or not - HELD THAT:- From the terms of the resolution plan approved by the NCLT, it prima facie appears that the appellant is not liable to pay any dues. However, this tribunal is not competent to decide regarding the recovery of any dues. It is the department who has to decide whether any dues is recoverable or otherwise, in the light of the resolution plan approved by the NCLT. As per the resolution plan approved by the NCLT and in the light of Hon ble Supreme Court judgment in the case of GHANASHYAM MISHRA AND SONS PRIVATE LIMITED THROUGH THE AUTHORIZED SIGNATORY VERSUS EDELWEISS ASSET RECONSTRUCTION COMPANY LIMITED THROUGH THE DIRECTOR ORS. [ 2021 (4) TMI 613 - SUPREME COURT] , it prima facie appears that the adjudged dues cannot be recovered by the department however, this issue has to be decided by the department and not by this tribunal. For this reason, that firstly, there is no provision made in the Customs and Central Excise Act to give effect of NCLT proceedings. This tribunal being creature under the Customs Act, even though the Insolvency and Bankruptcy Code have over riding effect over all the other acts, in absence of any explicit provision under the Customs/Central Excise Act, this tribunal cannot decide finally whether the adjudged amount can be recovered by the department or otherwise. This issue has to be resolved by the respondent. The appeals became infructuous and is dismissed - the Central Board of Indirect Taxes Customs may consider issuing guideline/procedure for dealing with the case before this tribunal wherein, against the assesse s company IBC proceeding has been initiated.

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• CST, VAT & Sales Tax

• 2022 (11) TMI 38
  Permission to revise the returns - issuance of appropriate C Forms - correction of functioning of the DVAT Portal - HELD THAT:- The instant writ petition is disposed of, with a direction to revise returns for the periods mentioned in the relevant prayer clauses incorporated in the writ petition. Furthermore, the respondents will also issue C-Forms and/or F-Forms to the petitioner, subject to verification of entitlement on merits and not on the ground of limitation - Petition disposed off.

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• Indian Laws

• 2022 (11) TMI 37
  Dishonor of Cheque - legally enforceable debt or not - opportunity was provided to the accused to adduce defence evidence, no defence evidence was adduced - Preponderance of probabilities - HELD THAT:- It is the settled law that in order to execute a decree, the decree must be one capable of execution and the terms thereof shall be sufficient to get the same executed. It is unexceptionable that a court executing a decree cannot go behind the decree; it must take the decree according to its tenor; has no jurisdiction to widen its scope and is required to execute the decree as made - In the case on hand, no final award passed and the prosecution also was not terminated at any point of time. Therefore, it cannot be held that the dispute was settled by passing a final award, having the trappings of a civil court decree under Section 21 of the Legal Services Authorities Act. Therefore, this contention cannot be appreciated. The law is clear on the point that when the complainant discharged the initial burden to prove the transaction led to execution of the cheque, the presumption under Sections 118 and 139 of the N.I Act would come into play. No doubt, these presumptions are rebuttable and it is the duty of the accused to rebut the presumptions and the standard of proof of rebuttal is nothing but preponderance of probabilities - It is the settled law that power of revision available to this Court under Section 401 of Cr.P.C r/w Section 397 is not wide and exhaustive to re-appreciate the evidence to have a contra finding. In this case, the trial court sentenced the accused to pay a fine of Rs.4,00,000/- and in default of payment of fine, six months imprisonment was ordered. Fine was ordered to paid as compensation to the complainant under Section 357(1)(b) of Cr.P.C. - In the appeal, the appellate court modified the sentence by enhancing the fine amount to Rs.5,80,000/-. The concurrent verdicts of conviction as well as sentence imposed by the trial court do not require any interference at the hands of this Court and therefore, the revision must fail - this revision petition fails and it is, accordingly, dismissed.

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• 2022 (11) TMI 36
  Grant for interim injunction under Order XXXIX Rules 1 2 of the Code of Civil Procedure, 1908 rejected - Order XXXIX Rule 4 of the CPC - Claim for right to the exclusive use of the colours or the colour combination appearing in the Subject Design not made - third-party products available in the market, similar to subject design - novelty in respect of the combination of colours and the placement of the label indicating the maximum retail price (MRP) - registration of the Subject Design did not include any such claim of novelty - whether the Subject Design lacked novelty and originality? Whether registration of the Subject Design is proscribed under Section 4(a) and 4(c) of the Designs Act? HELD THAT:- It is not unusual for small players to copy designs, which have become popular. It is not necessary for the proprietor of a design to pursue its remedies against each dealer/manufacturer selling infringing products. It is possible that the benefits of pursuing a particular infringer may not be commensurate with the cost and effort for doing so. It is understandable that a design holder would evaluate its options including on commercial considerations - The rights of a proprietor of a registered design is not diluted merely because there are multiple infringers; the design holder retains the right to interdict infringement of the registered design notwithstanding that it has not proceeded against some of the infringers. This Court is unable to accept that a finding that the Subject Design lacked novelty and originality which necessarily was required to be determined with reference to the date when the Subject Design was registered could be arrived on the basis of the market survey without any evidence as to when the said products were introduced in the markets by their respective sellers. In terms of Section 4 of the Designs Act, a design, which is not new or novel or has been disclosed prior to registration or is otherwise not significantly indistinguishable from a known design or a combination of designs thereof, cannot be registered. For a design to be registered, it must be original and novel; not disclosed in any manner prior to registration; and it should be significantly distinguishable from a known design or a combination of known designs. Thus, a mere trade variant, which is a combination of known designs, would not be entitled to protection under the provisions of the Designs Act - Indisputably, if a design is not significantly distinguishable from a known design or combination of designs, it cannot be registered by virtue of Section 4(c) of the Designs Act. However, the market survey conducted by the parties would neither answer the question whether the Subject Design was original or novel at the time of registration, nor assist in determining whether the Subject Design was significantly distinguishable from the known designs at the time of registration of the Subject Design. The conclusion of the learned Single Judge is not based on the findings that the Subject Design is indistinguishable from designs that were known at the time of the registration. It is based on the, prima facie, opinion that there are products with similar designs currently available in the market. Thus the prima facie conclusion of the learned Single Judge is not well founded. Appeal allowed.

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• 2022 (11) TMI 35
  Res ipsa loquitur - Breach of duty of care - Alleged gross medical negligence and deficiency in service causing death of their only child during surgery for squint correction - Section 21 of the Consumer Protection Act, 1986 - incorrect dosage of atropine and improper timing - HELD THAT:- Several studies revealed that there is no uniform fasting practice for children before effective surgery. Fluids in small quantity are acceptable 2-3 hours prior to GA. The Complainant No. 2 (father) signed the Informed Consent. The child was not administered Atropine in correct dose at proper time. There are no importance to the pre-medication by Atropine for Antisialagogues to decrease the flow rate of saliva is not routinely used. In the recent days it is not regularly in practice by the Anesthetist - the Tracheal intubation is a standard technique used during GA. Local anesthesia was not resorted to as it requires the co-operation of the child. The mask anesthesia was not resorted to in any head and neck surgery which also obstructs the surgical field of eyes. Tracheal Intubation may be done under deep inhalation anesthesia (Halothane) or with the use of other muscle relaxants. In the Instant case, as the vocal cord was anterior, it was not possible to intubate the patient in the first attempt. It is not clear from the record that Scoline was administered before first intubation, as such the possibility cannot be ruled out. It was the Oculocardiac Reflex (OCR), also known as the Aschner reflex or trigeminovagal reflex (TVR). It is a reduction in the heart rate secondary to direct pressure placed on the eyeball. It is defined by a decrease in heart rate by greater than 20% following globe pressure or traction of the extraocular muscles. Most commonly, the reflex induces bradycardia. However, OCR also has a reported association with reduced arterial pressure, arrhythmia, asystole, and even cardiac arrest. This reflex has most notably been depicted during ophthalmologic procedures, more specifically during squint/strabismus Ocular Surgery - in the instant case the Intra-Operative diagnosis of OCR was missed and the child suffered Cardiac Arrest. The patients who are considered at-risk for the OCR should warrant particular attention. It is well established that a hospital is vicariously liable for the acts of negligence committed by the doctors engaged or empanelled to provide medical care [ 2004 (10) TMI 637 - SUPREME COURT] . It is common experience that when a patient goes to a hospital, he/she goes there on account of the reputation of the hospital, and with the hope that due and proper care will be taken by the hospital authorities. If the hospital fails to discharge their duties through their doctors, being employed on job basis or employed on contract basis, it is the hospital which has to justify the acts of commission or omission on behalf of their doctors - It is held that the OP-1 Sankara Nethralaya to be vicariously liable for the acts of omission and commission committed by the OP-2 and 3 as being jointly and severally liable to pay compensation to the Complainants. Having medical negligence conclusively attributed to the treating doctor at Sankara Nethralaya and having regard to that the Complainants lost their only son, in the ends of justice, the compensation of Rs. 1 Crore is just and fair in the instant case - since, the Cardiologist - Dr. Bhaskaran has not been arrayed as a party, therefore, monitory liability cannot be fixed upon him, and therefore, the OP-1 is held vicariously liable. Accordingly, we direct the Sankara Nethralaya (OP-1) to pay Rs. 85 lakh; the Anesthetist, Dr. R. Kanan (OP-3) shall pay Rs. 10 lakh and the operating Ophthalmologist, Dr. T.S. Surendran (OP-2) shall pay Rs. 5 lakh to the parents of the deceased child (Complainants) within 6 weeks from today. Beyond 6 weeks, the amount shall carry interest at 9% per annum till its realization. The OP-1 shall further pay Rs. 1 lakh towards cost of litigation. The Complaint is partly allowed.

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