Newsletter: Where Service Meets Reader Approval.
TMI Tax Updates - e-Newsletter
November 30, 2023
Case Laws in this Newsletter:
GST
Income Tax
Customs
Insolvency & Bankruptcy
Service Tax
Central Excise
CST, VAT & Sales Tax
Indian Laws
Articles
News
Notifications
Highlights / Catch Notes
GST
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Correctness of proceedings u/s 74 of the GST Act - The petitioner failed to discharge its onus to prove and establish beyond doubt the actual transaction, actual physical movement of goods as well as the genuineness of the transactions and as such, the proceedings have rightly been initiated against the petitioner under section 74 of the GST Act. - HC
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Rejection of bail - fake entities created to pass on and avail Input Tax Credit under the GST regimen (ITC) to defraud government exchequer - The ocular evidence will be through official witnesses of the department due to which there can be no apprehension of tampering, intimidating or influencing. - Bail Granted - HC
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Input Tax Credit (ITC) - Failure of the supplier to deposit the Tax / GST amount - constitutional validity of provisions of Section 16(2)(c) of the CGST Act - The impugned provisions prescribe certain conditions for the purchasing dealers to avail of the benefit. It is up to the purchasing dealer to avail of the said benefit/concession following those conditions. The prescription of the conditions cannot be considered discriminatory to contravene Article 14 - HC
Income Tax
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Addition u/s 68 - Having Two PAN and using differnt names - Validity of claim of the Assessee that he is running Hotel Management Business - Assessee neither before the lower authorities nor before us produced any evidence to substantiate its claim beyond doubt. - Additions confirmed - AT
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Validity of assessment u/s. 143(3) by change in incumbent but without issuance of order u/s. 127 - Violation of mandatory procedural provision - Assumption of jurisdiction by AO in competing the assessment proceedings u/s. 143(3) - Assessment order is not valid and set aside - AT
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Permanent Establishment in India - advertisement revenue - India-Mauritius DTAA - foreign company / Non-resident - Taj India cannot be held to be a DAPE of the assessee in India under Article 5(4)(i) of the India-Mauritius DTAA in respect of the same. - AT
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Applicability of provisions of section 115JB of the Act to the assessee bank - 'Banking Company' or 'Corresponding new bank '- corresponding new bank - We noticed earlier that the Ld CIT(A) has proceeded to decide this issue by observing that all provisions of BR Act are applicable to the Company. We notice that the Ld CIT(A) did not consider the effect of provisions of sec. 51 of the BR Act upon the assessee. - AT
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TP Adjustment - Disallowance of claim of proportionate premium paid arising on account of repayment of optionally convertible debentures - the commercial arrangement entered into by the Assessee subsequent to the filing of return of income for the relevant previous year, cannot be applied retroactively to make additional claim leading to reduction of the income returned by the Assessee. - AT
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Assessment u/s 153A - undisclosed investments - the DVO's report on standalone basis without any corroborating material cannot be construed as incriminating material and hence the additions solely on the basis of the DVO's report are not sustainable. - AT
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Undisclosed commission income - To be taxed as accommodation entry or only commission income on such transactions - The assessee cannot blow hot and cold at the same time and assert that the sum identified by the Investigating authorities be treated as tainted and the rest of the transactions be accepted at its face value to be sacrosanct. - AT
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Estimation of income on deficit gold jewellery - in search proceedings AO noted shortage of stock of gold ornaments - It is quite natural to give telescopic benefit to the assessee by observing that the jewellery found at the residence of MD of present assessee is belong to the assessee itself and due telescoping benefit to be given. As such, the finding of lower authorities that there was suppression of sale of jewellery in the hands of assessee have no legs to stand. - AT
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Exemption u/s 11 and 12 - Charitable Activity u/s 2(15) - urban development concern - the assessee is eligible for exemption u/s 2(15) of the Act related to its activities. - AT
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Penalty u/s 271B - not getting the books of account audited u/s 44AB - AO levied penalty on the assessee as the cash deposit during the F.Y. 2016-17 exceeded the threshold limit u/s 44AB of the Act, treating the same as turnover of the assessee, though he is only an agent who provided services for the Principal. - the provisions of section 273B of the Act applies to the case of the assessee since the assessee has a reasonable cause for not getting the books of account audited - No penalty - AT
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Condonation of delay filing appeal in ITAT - delay of 1326 days - In view of the decision of the supreme court, if some valid reason is there, then any period can be condoned. In this case delay was caused due to fault of the erstwhile tax consultant of the assessee. Taking into consideration all these factors, we condone the delay and admit this appeal. - AT
Customs
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Levy of anti-dumping duty - domestic industry suffered material injury or not - Import of Mono Ethylene Glycol [MEG] - The designated authority has exclusively relied upon the marginal improvement in the period of investigation - Such selective examination, particularly in the present facts where the domestic industry itself has claimed injury since 2019-20, may defeat the entire purpose of injury assessment. - Notification dated 27.10.2022 set aside - Matter restored back - AT
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Conversion of Free Shipping Bills to Drawback Shipping Bills - The Tribunal while passing the Final order has already taken into consideration the Board’s circular as well as the decisions passed on the very same issue. The Commissioner has correctly followed the direction of the Tribunal and passed the impugned order - there are no grounds to interfere with the impugned order. - AT
Indian Laws
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Dishonour of Cheque - Vicarious liability of director - The cheque is for the discharge of the loan advanced to the company for its business purpose. The petitioner had stood guarantee for the loan advanced. She cannot deny knowledge of the borrowing or issuance of cheque just because she is not the signatory of the subject cheque. - HC
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Dishonour of Cheque - onus to rebut the presumption - the discrepancy in the amount dues to be realized from the respondent accused - no fault can be found in the approach of the learned Magistrate in shifting the burden upon the original accused to prove his case beyond reasonable doubt. - HC
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Dishonour of Cheque - lack of territorial jurisdiction to try the case - The petitioners on receipt of the summons from the Court had participated in the trial cross examined the complainant and also marshalled their witnesses. At the fag end of the trial, he had filed the petition to dismiss the complaint on the ground of lack of jurisdiction. - The trial Court had considered the law and facts, balancing the interest of either side with reasoning had dismissed the petition - the order of the trial Court is well based on law and fact and to be confirmed. - HC
Service Tax
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Default in payment of service tax - Prosecution proceedings against the director of the company - offence punishable u/s 89 of Finance Act, 1994 r.w.s. 9 and 9AA of Central excise Act - Period covered is 2011-12 to 2015-16 - Prosecution launched in 2018 - If the Legislature itself thought of clarifying the position of law, it would not be appropriate for the Court to assume that something else and then to go on to punish the person for criminal offences - Proceedings quashed - HC
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Recovery of confirmed demand - Freezing the bank account of the petitioner - petitioner neither filed an appeal nor paid the tax and penalty - Considering the fact that the petitioner failed to exercise the right of appeal within the limitation period prescribed under the Statute, this Court is not in a position to extend the limitation period for filing the appeal - Petition dismissed - HC
VAT
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Valuation - works Contract - Reduction in turnover as per Rule 9 of the Value Added Tax Rules - The general rule of law in taxing statutes is that in case of any doubt the benefit should be given to the assessee. However, in case of exemption and deduction to be given, a stricter approach may be followed - The assessee clearly qualifies for the said benefit. - HC
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Adjustment of GST amount deposited by the petitioner in the financial year 2018- 19 with VAT liability - High Court allowed the adjustment - SLP against the decision of High Court dismissed - SC
Case Laws:
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GST
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2023 (11) TMI 1157
Rejection of appeal of the petitioner - Correctness of proceedings u/s 74 of the GST Act - petitioner failed to discharge its onus to prove and establish beyond doubt the actual transaction as well as the genuineness of the transactions - HELD THAT:- It is admitted fact between the parties that the goods have been shown to be purchased from M/s Krishna Trading Company, Mathura. In support thereof, tax invoice, e-way bill, weighment receipt before after loading, bilty, etc. were filed and on the basis of the said documents, ITC was availed by the petitioner. Thereafter, on scrutiny, neither M/s Krishna Trading Company was found to be in existent, nor the persons, who issued the bilty and weighment slip, was found in existent. Once the very basis to show that the movement of goods has taken place was doubted, the petitioner, apparently, failed to prove actual physical movement of goods. From the perusal of the record shows that the petitioner failed to discharge its onus to prove and establish beyond doubt the actual transaction, actual physical movement of goods as well as the genuineness of the transactions and as such, the proceedings have rightly been initiated against the petitioner under section 74 of the GST Act. Thus, no interference is called for in the impugned order - petition dismissed.
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2023 (11) TMI 1156
Rejection of bail - fake entities created to pass on and avail Input Tax Credit under the GST regimen (ITC) to defraud government exchequer - exports declared are all bogus and fake - HELD THAT:- In RATNAMBAR KAUSHIK VERSUS UNION OF INDIA [ 2022 (12) TMI 263 - SUPREME COURT] , the Hon ble Supreme Court granted bail to the petitioner therein, the facts of the case being somewhat similar to the present case. It is true that the allegation made against the petitioner is that he received the benefit of the amount that was granted to different entities to the tune of Rs. 7,79,52,045/-, obtaining refund of Rs. 7,79,52,045/- and it is contended by the prosecution/complainant that there is likelihood of the discovery of more such transaction, but it is also not disputed that the final prosecution report has been filed in the case. The petitioner was arrested on 11.07.2023, incarcerated for more than four months and the punishment provided is imprisonment which may extend to five years and fine and completion of trial in any event would take some time. Since the alleged offence constitutes the act of crediting amount of ITC through the departmental Online system, to the account of the certain entities which have been alleged to be non-existent and the money has been subsequently received by the petitioner, the evidence tendered by the opposite party/complainant would essentially be documentary and electronic. The ocular evidence will be through official witnesses of the department due to which there can be no apprehension of tampering, intimidating or influencing. This Court is inclined to grant the prayer for bail made by the petitioner subject to such stringent terms and conditions imposed - bail application allowed.
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2023 (11) TMI 1155
Validity of seizure order as well as penalty order - variation in the description of good actually found with that mentioned in the documents - requirement to examine the documents accompanying the goods at the time of seizure - HELD THAT:- The finding that the parties had under valued the goods or there was any intention to avoid payment of correct amount as tax may justify seizure and penalty but cannot be made ground to not treat the petitioner as owner of the goods. The respondents ought to have examined the documents accompanying the goods at the time of seizure in terms of their own Circular dated 31.12.2018 in determining the said issue. The order to the extent it seeks to reject the prayer for release of goods in favour of the petitioner, cannot be sustained. It is accordingly quashed to the said extent only. The second respondent is directed to reconsider the issue relating to release of goods in favour of the petitioner keeping in mind the Circular dated 31.12.2018 and the fact that invoice and e-way bill were found accompanying, the consignment of seized goods - Petition disposed off.
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2023 (11) TMI 1154
Transitional credit - Condonation of delay in obtaining permission from commissioner u/s 140(5) - application filed belatedly after five years from the prescribed date - HELD THAT:- Section 140 of the CGST Act enables a registered person to take in its electronic credit ledger, the amount of CENVAT credit/input tax credit carried forward in the return for the period up to 30/6/2017. Sub-section (5) of Section 140 prescribed a condition for taking transitional credit. The condition is that the invoice or any other duty or tax paying document pertaining to the transitional credit has to be recorded in the books of account of the registered person within thirty days from the appointed day. i.e., within 30th July, 2017. Proviso to the said Section permits such entry of invoice in the books of account beyond the thirty days period by a further period of thirty days upon permission to be obtained from the Commissioner concerned. The appellant has entered the invoices within the said extended period of sixty days. But admittedly, it did not obtain any order from the Commissioner extending the limitation period beyond thirty days. From a perusal of Sub-section (5) of Section 140 of the CGST Act, it is evident that beyond the period of thirty days, an assessee can claim the transitional credit of input tax within another thirty days only on production of an order passed by the Commissioner. The Commissioner, therefore, rightly rejected the application. As the Commissioner did not extend the limitation period, the appellant cannot claim the benefit of transitional credit regarding input tax. There are no no illegality or impropriety in the impugned judgment of the learned Single Judge - appeal dismissed.
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2023 (11) TMI 1153
Input Tax Credit (ITC) - Failure of the supplier to deposit the Tax / GST amount - Failure to produce the Tax Invoice - constitutional validity of provisions of Section 16(2)(c) of the CGST Act and Rule 36(4) of the Central Goods and Services Tax Rules - HELD THAT:- It is settled that input tax credit is in the nature of a benefit/concession and not a right extended to the dealer under the statutory scheme. The said benefit can accrue to the assessee only as per the scheme of the statute - It is equally settled that the rule-making authority can provide restrictions in extending the concession . The benefit of an input tax credit can be availed by a purchasing dealer who sells or manufactures goods using raw materials on which tax has been paid only on satisfaction of the conditions for such availment enumerated in the statute. One of the preconditions for the purchasing dealer to claim input tax credit under section 16 of the CGST Act is that he must produce the tax invoice issued by the supplying dealer. Coming to the facts of the cases, the appellants failed to produce the tax invoices despite sufficient opportunities extended. The appellants were issued a show cause notice under section 73(1) of the CGST/SGST Act. The appellants were called for a personal hearing. They did not appear for personal hearing either - The appellants did not discharge the said burden. They failed to produce any evidence to prove that they are entitled to the benefit of input tax credit. That apart, the appellants rushed to the writ court without exhausting the alternative appellate remedy. Constitutional validity of Section 16(2)(c) of the CGST Act and Rule 36(4) of the CGST Rules - HELD THAT:- It is now well settled that any tax legislation may not be easily interfered with. The court must show judicial restraint to interfere with tax legislation unless it is shown and proved that such taxing statute is manifestly unjust or glaringly unconstitutional. Taxing statutes cannot be placed, tested or viewed on the same principles as laws affecting civil rights such as freedom of speech, religion, etc. The test of taxing statutes would be viewed on more stringent tests - Nothing in the impugned provisions indicates that they discriminate between the purchasing and selling dealers. As stated already, the input tax credit is in the nature of a benefit or concession conferred under the statute. The impugned provisions prescribe certain conditions for the purchasing dealers to avail of the benefit. It is up to the purchasing dealer to avail of the said benefit/concession following those conditions. The prescription of the conditions cannot be considered discriminatory to contravene Article 14 - Nothing indicates that the impugned provisions satisfy the said test and thus manifestly arbitrary and glaringly unconstitutional. Under these circumstances, the challenge to the constitutional validity of the impugned provisions must fail. There are no illegality or impropriety in the impugned judgments - appeal dismissed.
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2023 (11) TMI 1152
Denial of claim for transitional credit in respect of inward supplies made before 01.07.2017 - petitioner s application for extending the limitation for claiming the transitional credit within the extended period of limitation of sixty days rejected - HELD THAT:- From perusal of Sub-section (5) of Section 140 of the GST Act, it is evident that beyond the period of thirty days an assessee can claim the transitional credit of input tax within another thirty days on an order passed by the Commissioner. Unless the order is passed by the Commissioner extending the period of limitation up to sixty days or less than, an assessee cannot claim the input tax credit in respect of the inward supply taken before 01.07.2017 - In the present case, the petitioner claimed input tax credit in his return after the initial period of thirty days expired, but without any order from the Commissioner extending the period of limitation beyond thirty days. It is not found that the Commissioner has committed any error of law or jurisdiction in rejecting the application which has been filed belatedly after five years from the prescribed date. As the limitation period was not extended, the petitioner has been denied the benefit of transitional credit in respect of input tax vide Exhibit P-5 order in original dated 13.03.2023. There are no substance in the writ petition - petition dismissed.
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Income Tax
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2023 (11) TMI 1151
Estimation of income - bogus purchases - CIT(A) restricted the disallowance to the extent of 12.5% impugned purchase / disputed purchase - ITAT taking the consistent the disallowance of purchase in the present case restricted to 6% of the disputed purchases - HELD THAT:- On an identical question of law [ 2023 (1) TMI 835 - GUJARAT HIGH COURT ] and held with the case of Shri Bhanwarlal Jain and others involved therein, if addition directed of 6% of the disputed purchases by noting that the profit margin in the said industry is 5% to 7% without even going by the estimation of the possible profit margin in the industry, suffice to note that in all cases relating to Shri Bhanwarlal Jain, both, the Assessing Officer and the CIT (Appeals), Mumbai, have chosen to make addition @ 3% to 5% of the bogus purchases. That view of the matter, no purpose is going to be served in interference. There are concurrent findings with sound reasons. Also decided in Mayank Diamonds Pvt. Ltd. [ 2014 (11) TMI 812 - GUJARAT HIGH COURT ] Court allowed the gross profit rate of 5% holding that 12.5% is drastically higher. In N.K. Industries Pvt. Ltd. [ 2016 (6) TMI 1139 - GUJARAT HIGH COURT ] where the Court had considered the addition of entire amount on the ground that the fictitious purchases is a factually different than what was already held at M/s. Mayank Diamonds Pvt. Ltd., (supra). In the other cases of Shri Bhanwarlal Jain also, addition rates are 3% to 5% where no further challenge possibly is there or it has not been processed further. Thus no substantial question of law arises for consideration of this court.
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2023 (11) TMI 1150
Addition u/s 68 - Having Two PAN and using differnt names - Validity of claim of the Assessee that he is running Hotel Management Business - assessee has made huge cash deposits in the bank account with Axis Bank operated in the name of Shri Rajiv Rama Pattanayak - assessee is filing two separate returns of income on two different names and PANs. - A.Y. 2010 11 - HELD THAT:- As no details are available on record as to whether TDS was deducted from the Hotel Management Charges. There are also no details regarding the purchase of raw materials for running the catering business during the year under consideration. There is no breakup of various expenses charged to the profit and loss account against the income of Rs. 14,15,620 from Hotel Management Charges. Thus, we agree with the findings of the AO that the balance sheet does not show any fixed asset that can be used as a hotel, and the profit and loss account does not show payment of rent against the use of rented premises. It is evident from the record that sufficient opportunity was granted to the assessee during the reassessment proceedings to produce the documentary evidence in support of the submission that the income is earned from the Hotel Management Business. Assessee neither before the lower authorities nor before us produced any evidence to substantiate its claim beyond doubt. Therefore, in the absence of satisfactory documentary evidence, we do not find any merit in the plea of the assessee that the income is on account of Hotel Management Business. Assessee pleaded that the entire turnover cannot be brought to tax and only the real income embedded therein would be held as suppressed income - As assessee has not discharged its onus to satisfactorily prove the incurring of expenditure for running the alleged Hotel Management Business. Ledger account of the Hotel Management receipts and salary paid to the staff is also not furnished by the assessee in the year under consideration. Therefore, in the absence of satisfactory documentary evidence, the plea of the assessee is rejected and the addition made by the AO under section 68. - Decided against assessee. Addition u/s 68 in receipts of agricultural activity - differences in address, non-mentioning of invoice no., the difference in the design of invoice, rate of paddy, and variation in the signature of the proprietor - reply to the notice issued under section 133(6) of the Act was not received from the genuine trader of the paddy - HELD THAT:- Assessee has managed to get the letter to his associates and prepared reply to it himself with forged signatures. In view of the facts and circumstances, we are of the considered view that if the Revenue doubts the genuineness of the documents submitted by the assessee then it is either required to direct the assessee to produce the person who has executed such document or issue summons to such person in this regard. The documents cannot be doubted without completing the enquiry in all respects. During the hearing, the learned AR placed on record the copy of the order passed by the learned CIT(A) for the assessment year 2013-14, wherein it was accepted that the assessee was involved in agricultural activity. However, from the record, it is evident that in the present case, the Revenue has doubted this aspect. Therefore, we deem it appropriate to restore this issue to the file of the AO for de novo adjudication after examination of all the details filed by the assessee. Assessee appeal allowed for statistical purposes. Addition of the gift received from assessee s mother - HELD THAT:- We are of the view that the AO is not an expert in handwriting and if there was any doubt regarding the mismatching of the handwriting of assessee s mother then the opinion of the expert in this field could have been taken. Once the AO has chosen not to do so, rejecting the plea of the assessee on this basis appears to be merely a pretext. As undisputed that the amount was given as a gift to the assessee in cash, and assessee s mother has already furnished documents in terms of a registered sale deed along with the reply to the notice issued under section 133(6) of the Act which was not disputed by the Revenue. Accordingly, we find no merits in placing reliance on the bank statement of the assessee s mother particularly when aforesaid evidence is not doubted by the Revenue. Revenue has also not doubted the genuineness of the 7/12 extract furnished by assessee s mother in respect of agricultural land owned by her and the certificate issued by the Gram Panchayat confirming the fact that she is a farmer. Therefore, when sufficient source i.e. receipt pursuant to the Memorandum of Understanding dated 30/01/2009, was furnished by assessee s mother, we find no basis in doubting the payment in cash as a gift to the assessee. Accordingly, the addition made by the AO on this aspect is deleted. Assessee appeal allowed. Addition in respect of gifts received from the mother, wife, and relatives. - A.Y. 2011 12 - HELD THAT:- As assessee did not furnish the bank statement of Mr. Bikash Chandra Shee or any other document to substantiate the creditworthiness of the donor. The ITR acknowledgement and gift deeds may prove the genuineness of the transaction and the identity of the donor, however, the creditworthiness of the donor is still not satisfactorily proved by the assessee. Accordingly, we find no infirmity in the findings of the learned CIT(A) in upholding the addition. Cash received from mother - Since the relief of Rs. 1,65,000 has already been granted in the year 2010-11, the balance amount of Rs. 5,35,000 can be said to have been paid by the assessee s mother from the aforesaid sum of Rs. 7,00,000 in the year under consideration. Accordingly, the addition to an extent of Rs. 5,35,000 received as a gift in cash from the mother is deleted. Regarding the balance amount of the gift received by the assessee in cash from his mother, we deem it appropriate to grant one more opportunity to the assessee, in the interest of justice, to substantiate its claim before the AO. Gift in cash received from assessee s uncle - As assessee has not submitted any bank account statement for the year under consideration to prove the genuineness of the transaction and the capacity of the donor. Accordingly, the learned CIT(A) dismissed the ground raised by the assessee on this issue. We find that even before us the documents as sought by the lower authorities have not been furnished by the assessee. Accordingly, we find no infirmity in the findings of the learned CIT(A) in upholding the addition. Gift in cash from assessee s father-in-law - As pertinent to note that the date of retirement is after the relevant financial year and thus any amount received on the retirement cannot be considered to be the source of gifting cash to the assessee. Further, apart from the aforesaid documents no other document has been placed on record which could prove the creditworthiness of the donor. The assessee has also not brought any evidence on record to controvert the detailed factual findings of the AO which have been upheld by the learned CIT(A). Accordingly, we find no infirmity in the findings of the learned CIT(A) in upholding the addition u/s 68 of the Act in respect of gift in cash received from Mr. Suresh Chandra Shee. Gift in cash from assessee s wife - Assessee filed a copy of ITR acknowledgement of the assessee for the assessment year 2011-12 wherein a gross total income of Rs. 2,79,038 has been disclosed - assessee has placed on record invoices of purchase of jewellery by his wife, however the same also does not prove the availability of funds with the assessee s wife at the time of the gift of Rs. 11,95,000 in cash. Apart from the above, the assessee has not placed on record any other document to controvert the findings of the AO and the learned CIT(A). Accordingly, we find no infirmity in the findings of the learned CIT(A) in upholding the addition of Rs. 11,95,000 under section 68 of the Act in respect of gift in cash received from assessee s wife. Assessee submitted that the gifts are received from the mother, wife, and other relatives which are covered under Explanation (e) to section 56(2)(vii) of the Act, and thus the same is not taxable - As per section 68 of the Act the assessee is required to offer an explanation about the nature and source of any sum credited to his books to the satisfaction of the AO, and in this regard, the assessee is not only required to prove the identity of the creditor and genuineness of the transaction but also the creditworthiness of the creditor, which the assessee has failed to prove in case of certain transactions as noted above. Accordingly, mere reliance on Explanation (e) to section 56(2)(vii) of the Act would not absolve the assessee from the onus cast on him u/s 68. Addition u/s 68 of the Act on the sale of ornaments - HELD THAT:- From the record, it is evident that apart from M/s Motaba Sons Jewellers, Colaba, Mumbai the assessee has claimed that it has sold the jewellery to Mahavir Jewellers. However, as evident from the record, neither notice under section 133(6) of the Act nor summons u/s 131 were issued to Mahavir Jewellers. Further, the assessee claimed that the aforesaid statement of the proprietor of M/s Motaba Sons Jewellers has been recorded at his back and no opportunity of cross-examination was granted to the assessee. Therefore, in view of the facts and circumstances as noted above, we deem it appropriate to restore this issue to the file of the AO for de novo adjudication. The AO is directed to grant the opportunity to cross-examine the proprietor of M/s Motaba Sons Jewellers, Colaba, Mumbai to the assessee. Further, the AO is directed to verify the claim of the assessee in respect of the sale made to Mahavir Jewellers and if required to also issue necessary summons/notice under the Act for complete verification. Appeal by the assessee is partly allowed for statistical purposes.
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2023 (11) TMI 1149
Validity of assessment u/s. 143(3) by change in incumbent but without issuance of order u/s. 127 - Violation of mandatory procedural provision - Assumption of jurisdiction by AO in competing the assessment proceedings u/s. 143(3) - assumption of jurisdiction by the ITO ward 1(4) without issuing any valid notice u/s. 143(2) - whether an order u/s. 127 was issued by the Ld. PCIT in the present case or not to effect the change of incumbent? - HELD THAT:- Admittedly, in the present case a notice u/s. 143(2) were issued by ITO ward 1(1) who is not having a valid jurisdiction in the case of assessee, however, subsequently the case was transferred to ITO ward 1(4), who is the jurisdictional AO for the assessee. For change of incumbent no order u/s. 127 was issued by the Ld. PCIT having jurisdiction over such officers and the assessee s case. From the report of the ITO ward 1(1) regarding issuance of order u/s. 127, mentioning that it is not necessary an order u/s. 127 should be passed. Thus, does not mean that the Assessing Officer whether the return of income were earlier filed seized to have jurisdiction, provided the assessee has residence in his area place of business, class, income etc. residence can mean permanent residence as well as current or temporary residence of some permanence , such explanations by the Ld. AO itself proves that no order u/s. 127 was issued by Ld. Principal Commissioner of Income Tax (PCIT). In a case where the assessment proceedings are initiated by an Assessing Officer and the same are later on transferred to another AO then according to section 127(4) an order u/s. 127(1) (2), irrespective of with or without concurrent jurisdiction, has to be issued at any stage of the proceedings, and shall not render necessary the reissue of any notice already issued by the Assessing Officers from whom the case is transferred. Identical issue as been dealt in the case of Shri Bangalore Narayan [ 2023 (3) TMI 1403 - ITAT BANGALORE ] as decided the issue of validity of assessment u/s. 143(3) by change in incumbent but without issuance of order u/s. 127, following the guiding principle of law laid down in the case of CIT vs Hotel Blue Moon [ 2010 (2) TMI 1 - SUPREME COURT ] wherein it is held that, issue of a legally valid notice u/s. 143(2) is mandatory for usurping jurisdiction to frame scrutiny assessment u/s.143(3) of the Act and absence of a valid notice u/s. 143(2) is not a curable defect. The view taken in the case of Hotel Blue Moon (supra) was reiterated by Hon'ble Supreme Court in another case of CIT vs Laxman Das Khandelwal [ 2019 (8) TMI 660 - SUPREME COURT ] Issuance of notice u/s. 143(2) by the non-jurisdictional AO - Also issuance of a notice u/s. 143(2)(a) of the Act by the jurisdictional AO within the prescribed time limit is mandatory, without which the assessment order passed following such proceedings in violation of provisions of section 143(2)(a) is liable to be set aside. See S.K. industries [ 2017 (5) TMI 1800 - DELHI HIGH COURT ] Thus assessment proceedings in absence of an order u/s. 127 for change of incumbent embedded with no notice issued u/s. 143(2) by jurisdictional AO, cannot be validated merely because the notice was issued earlier by an AO not having valid jurisdiction over the case of assessee. Violating mandatory procedural provision of the Act, which is prerequisite for framing an assessment u/s. 143(3) rendered the entire assessment proceedings and the assessment order passed u/s. 143(3) of the Act without jurisdiction - Decided in favour of assessee.
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2023 (11) TMI 1148
Permanent Establishment in India - Dependent Agent (DAPE) - advertisement revenue - India-Mauritius DTAA - assessee is a foreign company, registered under the laws of Mauritius engaged in the business of telecasting its sports channel - Ten Sports - assessee appointed Taj India as advertising sales agent to sell commercial advertising time to prospective advertisers and other parties in India, in connection with business of programming and telecasting on Ten Sports / Ten HD / Ten Golf channels and to collect advertisement charges from Indian exporters and advertisers on behalf of the assessee - HELD THAT:- As in respect of Advertisement revenue no material has been brought on record by the Revenue that Taj India has habitually exercised the authority to conclude the contract on behalf of the assessee. Therefore, with respect to Advertisement income, the Revenue failed to discharge the burden cast on it to prove that the twin conditions as laid down in Article 5(4)(i) of the India Mauritius DTAA are satisfied in the facts of the present case. Thus the conclusion of the coordinate bench of the Tribunal in the preceding year (cited supra) is equally applicable with respect to the Advertisement revenue and Taj India cannot be held to be a DAPE of the assessee in India under Article 5(4)(i) of the India-Mauritius DTAA in respect of the same. Accordingly, the conclusion of the learned CIT(A) on this issue is set aside and the ground raised by the assessee is allowed. P.E. with respect to its Distribution function - As per the assessee, despite the grant of authority to the Taj India to enter into agreements with third parties on behalf of the assessee, no such agreement was entered, and therefore, the twin conditions as laid down in Article 5(4)(i) of the India-Mauritius DTAA are not satisfied in the present case - HELD THAT:- It is evident from the record that no material has been brought on record by the Revenue, in the present case, to show that Taj India has habitually exercised authority to conclude the contract on behalf of the assessee. In the absence of any allegation of any change in facts or law, we find no reason to deviate from the conclusion so reached by the coordinate bench in the aforesaid decision in assessee s own case in the preceding assessment year. Accordingly, we find no infirmity in the findings of the learned CIT(A) in holding that the assessee does not have a P.E. with respect to its Distribution function. As recently the coordinate bench of the Tribunal in assessee s own case in Taj TV Ltd v/s DCIT [ 2023 (4) TMI 568 - ITAT MUMBAI ] held that advertising and subscription income received by the assessee is not taxable in India as the assessee does not have any P.E. in India. TDS u/s 195 - Non deduction of TDS on disallowance of programming cost, transponder fees, and uplinking charges - addition u/s 40(a)(ia) - HELD THAT:- We find that the coordinate bench of the Tribunal in assessee s own case in ADIT v/s Taj TV Ltd. [ 2016 (8) TMI 504 - ITAT MUMBAI ] while deciding the similar issue in favour of the assessee the programming cost is paid to the assessee to various non-resident outside India for acquiring right brought on sports events taking place outside India. Thus, such programming cost cannot be deemed to arise in India as liability to pay programming cost as assumed by the assessee company outside India and it cannot be held to be borne by any PE in India. As in the aforesaid decision, the coordinate bench of the Tribunal after taking into consideration the decision of the Hon ble Delhi High Court in CIT v/s New Skies Satellite BV [ 2016 (2) TMI 415 - DELHI HIGH COURT ] held that the definition of the term Royalty as enlarged by the Finance Act, 2012 will not have any effect on Article 12 of the DTAA. We further find that in another decision rendered in assessee s own case for the assessment year 2017-18 [ 2023 (4) TMI 568 - ITAT MUMBAI ] the coordinate bench of the Tribunal deleted the disallowance made in respect of payment of programming costs, transponder fees, and uplinking charges. Thus we find no infirmity in the impugned order deleting the disallowance of programming cost, transponder fees, and uplinking charges made under section 40(a)(i) - Decided in favour of assessee.
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2023 (11) TMI 1147
Addition on account of purchase return - variation of G.P. and N.P ratio - assessee is selling the products on consignment basis on sale of Sabyasachi products - goods are received by the assessee on consignment basis - as argued as per the double entry accounting principles, if there is an increase in cost of purchase, then there is a corresponding increase in valuation of closing stock and there will not be any impact on income - HELD THAT:- Assessee is in the business of trading as well as trader of Sabyasachi products for which assessee receives commission on the basis of consignment sale. We observe from the record that assessee s main as well as major income is from commission. It is very much visible from the statement of profit and notes forming part of the financial statements in particular Note - 14 and Note 16. It clearly shows that the assessee s main income is commission income which matches with the revenue from operation declared by the assessee. Assessee has to declare purchases and sales received from Sabyasachi products which is on consignment basis. However, as per the requirement of VAT, assessee has to declare both the purchases as well as sales in its Books of Accounts and assessee has to declare the goods kept under its control i.e., opening goods on consignment basis and total purchases for the year less purchase returns during the year under consignment. Since the goods are received by the assessee on consignment basis assessee may have to return consigned goods back to Sabyasachi in case of defective or unsold stocks. In the line of trade particularly with respect to consignment sales assessee is not the owner of the goods and he is responsible to make the sales on behalf of the other party and in return assessee is eligible to get only the percentage of agreed commission. Assessee has squared up the purchases and sales in its financial records and no doubt assessee has declared substantial amount as purchases return back to Sabyasachi. It is the responsibility of Sabyasachi to declare the above activities in its Books of Accounts. Since assessee is only a commission agent assessee has recorded the transactions to square up the sales and purchases in its Books of Accounts and declared only the commission income as its main source of income. Therefore, we are not inclined to accept the findings of the Assessing Officer in this regard. Variation in G.P and N.P ratio - As we observe that assessee has received percentage of commission lesser than the previous year turnover and also the assessee has declared additional employee cost compared to previous year, since these issues were not contested before us, we are not inclined to make further comments on these issues. Accordingly, Ground No. 1 raised by the assessee is allowed.
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2023 (11) TMI 1146
Disallowance u/s. 14A r.w.s. Rule 8D being expenditure incurred towards earning exempt income - AO noted that the assessee has claimed exemption u/s. 10(34) towards dividend and interest on tax free bonds u/s. 10 - assessee made an adhoc disallowance in relation to income not forming part of total income under proportionate expenditure of treasury department in terms of section 14A - HELD THAT:- This issue has been settled by the Hon ble jurisdictional High Court in assessee s own case for AY 2011-12 2012-13 [ 2021 (2) TMI 1366 - KARNATAKA HIGH COURT] as held assessee has admittedly not incurred any expenditure. This case pertains to income on dividend, which by no stretch of imagination can be treated to be an expenditure to attract the provisions of Section 14A of the Act. In view of aforesaid enunciation of law by WALFORT SHARE AND STOCK BROKERS (P) LTD [ 2010 (7) TMI 15 - SUPREME COURT] substantial question of law framed by this court is answered in favour of the assessee and against the revenue. Disallowance u/s. 36(1)(vii) in respect of bad debts written off by the bank - AO noted that the assessee claimed deduction of bad debts without actually writing-off the debts as irrecoverable in the individual accounts of the debtors concerned - HELD THAT:- We notice that the from the decisions of the coordinate Bench quoted by the assessee in AY 2014-15 [ 2022 (3) TMI 134 - ITAT BANGALORE] as careful reading of explanation to section 36(1)(vii) would indicate that nowhere it suggests that the proviso to section 36(1)(vii) would apply in respect of bad debt written off relating to non-rural advances. In the aforesaid view of the matter, we hold that assessee would be eligible to avail deduction of an amount of Rs. 209.94 crore representing actual write off in the books of account of bad debts relating to nonrural/urban advances in terms with section 36(1)(vii), as proviso to the said section would not apply to non-rural advances. Accordingly, we delete the addition made by AO and confirmed by ld. CIT(A) - Decided in favour of assessee. Disallowance u/s. 36(1)(viia) - calculating average aggregate advances of rural branches - AO noted that the bank has claimed a sum as deduction in respect of provision made for bad doubtful debts u/s. 36(1)(viia) and computed 10% of aggregate average advances (AAA) of the rural branches 7.5% of the total income before 36(1)(viia) provisions created in the books - AO held that only fresh advances made during the month by the rural branches should be considered for computing the AAA as per Rule 6ABA and observed certain discrepancies in the classification of rural branches by the assessee bank that 37 branches could not be classified as rural branches, as the population as per Census 2011 exceeds 10,000 in those areas, and accordingly held that incremental advances made by non-rural branches shall be excluded for computation the AAA. - HELD THAT:- We find that this issue was considered by this Tribunal in the latest judgement in assessee s own case for AYs 2014-15 2015-16 in [ 2023 (11) TMI 1022 - ITAT BANGALORE] to hold that the while calculating average aggregate advances of rural branches under section 36(1)(viia), both advance outstanding as well as fresh advances are to be considered. We further note that AO has reverted a clear factual finding in the assessment order that population in these 37 branches exceeded ten thousand as per Census 2011. Before that CIT (A) the assessee could not produce credible evidence. Considering the totality of facts, we remit this issue to the CIT(A) for verification of population of 2011 Census of 37 branches and the assessee is directed to produce the documentary evidence in support of its claim. Accordingly this ground is partly allowed for statistical purpose. Applicability of provisions of section 115JB of the Act to the assessee bank - corresponding new bank - case of the assessee is that clause (b) of sec.115JB(2) is made applicable to banking companies, since banking company is included in sec. 211 of the Companies Act. However, it is the contention of the assessee that it is not a banking company , i.e., it is a corresponding new bank - HELD THAT:- This issue also considered by this Tribunal in the latest judgement in assessee s own case for AYs 2014-15 2015-16 [ 2023 (11) TMI 1022 - ITAT BANGALORE] as held the issue has been decided as stating provisions of sec. 51 of the Act specifically states that only certain provisions of BR Act are applicable to Corresponding new bank . We noticed earlier that the Ld CIT(A) has proceeded to decide this issue by observing that all provisions of BR Act are applicable to the Company. We notice that the Ld CIT(A) did not consider the effect of provisions of sec. 51 of the BR Act upon the assessee. Hence the decision taken by him under the impression that all the provisions of BR Act are applicable to the assessee is faulted one. In our view the Ld CIT(A) should considered the effect of provisions of sec. 51 of BR Act and accordingly he should have appreciated the contentions of the assessee on the definition of banking company , provisions of sec. 211(2) of the Companies Act etc. Since these aspects go to the root of the issue, in our view, this issue needs to be examined at the end of Ld CIT(A) afresh. Accordingly, we set aside the order passed by Ld CIT(A) on this issue and restore the same to his file for examining it afresh - Thus we remit this issue also to the file of CIT(A) for fresh consideration and decision as per law in the same terms. Allowable revenue expenses - expenditure by way of penalty for violation of RBI directions - AR submitted that the amount paid to RBI was in the ordinary course of business and he further requested that the matter may be sent back to the CIT(A) for submitting necessary details, while the ld. DR supported their orders - HELD THAT:- After considering the rival submissions, we note that the assessee admitted that penalty was imposed by RBI for lapses on the part of the bank in adhering to KYC norms and deficiencies in internal control mechanism. The lower authorities held that penalty imposed for infraction of law is not an admissible expenditure. Accepting the prayer of the assessee, we remit this issue to the CIT(A) for fresh decision as per after giving proper opportunity to assessee. The assessee is also directed to furnish necessary documents in support of its claim.
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2023 (11) TMI 1145
TP Adjustment - corporate guarantee to AE constitutes an international transaction u/s 92B - CIT(A) reducing the arm s length guarantee fee rate of 2.5% determined by the Assessing Officer/TPO to 0.5% - HELD THAT:- For the Assessment Year 2008-09 and 2009-10 the Tribunal had, following the decision of the Tribunal in the case of the Assessee for the Assessment Year 2007-08 [ 2015 (5) TMI 639 - ITAT MUMBAI ] agreed with the CIT(A) that providing corporate guarantee to an AE constitutes an international transaction and had accepted the guarantee fee rate of 0.5% determined by the CIT(A) as the arm s length rate while rejecting the rate proposed by the Assessee. There is no change in the facts and circumstances of the case. Nothing has been placed before us to persuade us to depart from the view taken by the Tribunal in the case of the Assessee for the preceding assessment years on this issue.Thus we do not find any infirmity in the order passed by the CIT(A).Ground No. I II raised by the Assessee are dismissed. TP Adjustment - interest on loan to Associated Enterprises - Assessee voluntary made an adjustment in the computation of total income by computing interest at the rate of 1.53% (i.e. Average US LIBOR + 1%) in case of interest free USD loan to Aditya Birla Minacs Philippines and at the rate of 5.50% in case of interest free CAD loan to AVTL, Canada - HELD THAT:- As decided in assessee own case has accepted LIBOR plus 1% as arm s length rate of interest. Thus keeping in view the above decisions of the Tribunal in the case of the Assessee, which continue to hold the field, we do not find any merit in the contention advanced by the Assessee that no transfer pricing adjustment was warranted. The decision of CIT(A) to hold LIBOR + 1% as arm s length rate of interest in respect of loan for AEs is in line with the above decisions of the Tribunal in the case of the Assessee. Disallowance of claim of proportionate premium paid arising on account of repayment of optionally convertible debentures - CCDs were initially issued the Assessee had no obligation to pay premium, interest, or charges in relation to the CCDs as the same were convertible into equity on expiry of 60 months as per the conversion formula which was to be mutually agreed by the Assessee and the subscriber/holder of CCDs - HELD THAT:- It is admitted position that the CCDs were transferred from subscriber to holders and from holder to subsequent holders over a period of time. At the time of conversion the CCDs were held by ABNL, however, during the relevant previous year the CCDs were not held by ABNL. Therefore, the modification of terms as agreed upon between the ABNL and the Assessee, cannot change the terms and conditions which were binding upon the Assessee and the holders of CCDs at the relevant time according to which the debentures were to be compulsorily convertible into equity. Given the facts and circumstances of the present case, we are of the view that the commercial arrangement entered into by the Assessee subsequent to the filing of return of income for the relevant previous year, cannot be applied retroactively to make additional claim leading to reduction of the income returned by the Assessee. Having perused the judicial precedents cited on behalf of the Assessee, we conclude that, in view of the above, none of the judicial precedents cited apply to the factual matrix before us and therefore, the same do not advance the case of the Assessee. We confirm the order passed by the CIT(A) rejecting the claim for deduction in respect of proportionate premium on redemption of OCDs made by the Assessee during the assessment proceedings. Decided against assessee. Addition u/s 36(1)(iii) in respect of the interest and other expenses incurred for acquisition of shares of a subsidiary company - CIT(A) deleted disallowance - HELD THAT:- Tribunal [ 2016 (8) TMI 1417 - ITAT MUMBAI] , has allowed deduction for interest and other expenses incurred by the Assessee under Section 36(1)(iii)/37 of the Act on the ground of commercial expediency/exigency as such interest other expenses were incurred in connection with the loans taken by the Assessee for DBS Bank which has been utilized for making investment in AVTL, Canada which had acquired Minacs Worldwide Inc, Canada, leading to significant rise in the business of the Assessee. We note that the appeal preferred by the Assessee against the above order of the Tribunal on the issue of deletion of disallowance under Section 36(1)(iii) of the Act has been dismissed by the Hon ble Bombay High Court [ 2019 (10) TMI 760 - BOMBAY HIGH COURT] . Further, the Special Leave Petition [ 2020 (10) TMI 1213 - SC ORDER] preferred by the Revenue against the aforesaid order of the Hon ble Bombay High Court has also been dismissed on the ground of delay. Thus no infirmity in the order passed by the CIT(A) in allowing the claim for deduction. Disallowance of Employee Stock Option Scheme (ESOP) expenses - Allowable revenue expenses u/s 37(1) or not? - HELD THAT:- In view of the Special Bench of the Tribunal in Biocon Ltd. [ 2013 (8) TMI 629 - ITAT BANGALORE] allowed deduction of ESOP expenses under Section 37(1) of the Act stands confirmed by the Hon ble High Court [ 2020 (11) TMI 779 - KARNATAKA HIGH COURT] we do not find any infirmity in the order passed by the CIT(A) allowing the claim for deduction of ESOP Expenses under Section 37(1). Mark to Market loss - loss pertaining to forward contracts treated as notional loss - Assessee had claimed deduction for foreign exchange loss booked by the Assessee as Mark to Market loss pertaining to forward contracts entered into by the Assessee for hedging the foreign exchange of risk in the course of export business - AO disallowed the same holding the same to be notional loss by placing reliance upon the Instruction No. 3 of 2010 dated 23/03/2010 issued by Central Board of Direct Taxes (CBDT) - HELD THAT:- while Instruction No. 3 of 2010, dated 23/03/2010, was binding upon the Assessing Officer, the same was not binding on the courts or this Tribunal. In this regard, it could be pertinent to the refer to the judgment of M/s Suven Life Sciences Ltd [ 2017 (9) TMI 1598 - ITAT HYDERABAD] wherein the Tribunal had rejected the identical reasoning given by the Assessing Officer and allowed the claim of the Assessee for deduction of Mark to Market losses as held that the loss suffered by the assessee on account of fluctuation in the rate of foreign exchange as on the date of the balance sheet is an item of expenditure u/s 37(1) - Decided against revenue. Delayed payments of employees contribution to ESIC - Payment made after the expiry of the time specified in the applicable statute but before the filing of tax return under Section 139(1) - HELD THAT:- This issue is no longer res integra and stands decided against the Assessee and in favour of the Revenue by the judgment of the Hon ble Supreme Court in the case Checkmate Services Private Ltd [ 2022 (10) TMI 617 - SUPREME COURT] wherein the Hon ble Supreme Court has held that where an assessee failed to deposit Employees' Contribution towards Provident Fund and Employees State Insurance within due date prescribed in respective statutes, deduction under Section 36(1)(va) of the Act was not allowable. The non-obstante clause contained in Section 43B of the Act would not apply in the case of employees contribution held in trust by assessee-employer. Therefore, such assessee-employer would not be absolved from the liability to deposit employees contribution on or before the due date specified in the respective statutes as a pre-condition for claiming deduction under Section 36(1)(va) of the Act. - Decided against assessee. CIT(A) admitted the additional claim of the Assessee - HELD THAT:- As relying upon the judgment of Pruthvi Brokers Shareholders Pvt. Ltd. [ 2012 (7) TMI 158 - BOMBAY HIGH COURT] wherein after considering the judgment of Goetze India Ltd. Vs. CIT [ 2006 (3) TMI 75 - SUPREME COURT] it was, inter alia, held that the first appellate authorities was entitled to entertain and adjudicate even a new claim raised by the Assessee for the first time before the first appellate authority. Accordingly, we do not find any infirmity in the order passed by the CIT(A).
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2023 (11) TMI 1144
Addition on account of Share Application Money u/s 68 - burden of proving the creditworthiness of creditors and the genuineness of the transaction - HELD THAT:- CIT(A) found that the assessee failed to prove the genuineness of the transaction and the creditworthiness of the creditors. The initial burden of proving the creditworthiness of creditors and the genuineness of the transaction is cast upon the Assessee as per Section 68. In the present case, as the Assessee has not proved the burden cast upon it u/s 68 of the Act by providing requisite evidence before the Authorities, therefore, in our considered opinion, the Ld. CIT(A) has rightly confirmed the addition on the basis of remand report. Disallowance of addition in the fixed asset, addition on account of sundry creditors and the disallowance expenses were also remained unexplained by the Assessee before the AO or before the CIT(A). Therefore, we find no reason to interfere with the above disallowances made by the AO which has been confirmed by the CIT(A). Accordingly, we find no merit in the grounds of appeal of the assessee.
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2023 (11) TMI 1143
Assessment u/s 153A - undisclosed investments - reopening of assessment u/s 153A beyond six years but not more than ten years - relevant assessment years - evidence available to the AO was relating to the loose sheet whereby the unexplained investment of the assessee has been taken by the AO at Rs.45,00,000/- - Whether any incriminating material found during the search action? - HELD THAT:- The provisions of section 153A are in itself is separate code. After the search action u/s 132 of the Act, the assessment/reassessment is reopened for the six years preceding the date of search. However, as laid down in case of Abhisar Buildwell P Ltd [ 2023 (4) TMI 1056 - SUPREME COURT ] no addition can be made in respect of completed/unabated assessment years in assessments carried out u/s 153A in the absence of any incriminating material found during the search action. The assessment years beyond six years but not more than ten years can be reopened u/s 153A of the Act only if the AO is in possession of evidence depicting the escapement of income of aggregating Rs.50,00,000/- or more in such relevant assessment years beyond six years from the date of search. These provisions extending the assessment beyond six years and upto ten years put a stringent condition of possession of evidence with the AO of escapement of income of Rs.50,00,000/- or more. Such provisions extending the scope of assessment beyond six years from the date of search has to be construed strictly and the evidence relied upon by the AO in such assessments of extended period must be a tangible evidence. As noted above, it has been held time and again by various courts of law that the DVO's report on standalone basis without any corroborating material cannot be construed as incriminating material and hence the additions solely on the basis of the DVO's report are not sustainable. In the case of the assessee, even there is no difference found out between the investment disclosed by the assessee in the books of account as compared to the DVO's report in respect of property at Leela Bhawan Chowk, Patiala. Under the circumstances, since the evidence relating to the undisclosed investments in respect of relevant assessment years as defined in Explanation 1 to 4th Proviso of section 153A(1) was less than Rs.50,00,000/-, therefore, the reopening of the assessment of the relevant years was bad in law and the same is hereby quashed. Assessee appeal allowed.
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2023 (11) TMI 1142
Additions against unsecured loan as accommodation entries - Assessee claimed that, it may be considered as accommodation entries/circular-trading/ layering of funds and therefore suo-moto offered commission income in the range of 0.5% to 1% of the funds circulated by the company as its income - HELD THAT:- It was the assessee who had voluntarily stated before the AO that if the monies transacted through the two (2) entities are held to be tainted, then the company may be regarded as entity involved in providing accommodation entries thereby suggesting that it was not the beneficiary of the unexplained sum of Rs. 87 Lakhs but it was an aide who was facilitating the same and therefore only commission income could be inferred in relation thereto. If that be so, then as a natural corollary all the transactions conducted by the assessee during the year through its bank account has to be treated as accommodation entries facilitated by them. The assessee cannot blow hot and cold at the same time and assert that the sum to the extent of Rs. 87,00,000/- identified by the Investigating authorities be treated as tainted and the rest of the transactions be accepted at its face value to be sacrosanct. Since assessee failed to produce any material to prove the genuiness of un-secured loan (other than entries in financials), I am unable to subscribe to the contention of the assessee that it had received genuine unsecured loans out of which investments were made/purchased and therefore these transactions should be overlooked. Having held that the assessee was never engaged in business of trading in shares but providing accommodation entries in guise of the same, all the alleged purchase sale transactions conducted by the assessee was rightly regarded as accommodation entries by the AO. Estimation of commission income - As we find prima facie merit in the plea of the Ld. AR that in the facts of the case, both inward and outward remittances may not be considered as accommodation entries provided to ultimate beneficiaries which yielded commission income. Rather, the payments made/cheques issued by the assessee company would represent the accommodation entries provided by it and that the inward remittances represents the funds layered by the assessee to provide such accommodation entries. Hence, in the facts and circumstances of the case as seen from records, in my considered view, the commission income was required to be estimated only with reference to the aggregate of the debit entries found in the bank statement of the assessee and that the credit entries ought not be considered. We find force in the Ld. DR s contention that such an exercise would remain academic in absence of the bank statement of the assessee. Hence, in the fitness of the matters, the limited issue regarding quantification of commission income is set aside back to the file of the AO with direction to the assessee to produce/furnish its bank statement for verification and quantification of debit entries for estimation of commission income. The AO shall allow sufficient opportunity and time to the assessee in this regard. In case the commission income estimated comes to a figure higher than the sum originally added or the assessee fails to provide or furnish the bank statement, then the commission income as originally estimated by the AO would stand confirmed. Appeal stands partly allowed for statistical purposes.
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2023 (11) TMI 1141
Estimation of income on deficit gold jewellery - in search proceedings AO noted shortage of stock of gold ornaments as compared to the stock register maintained by the assessee - suppressed sales - estimation by applying the gross profit rate of 6.44 % on the value of the alleged deficit stock found in course of search - contention of the ld. A.R. is that same amount of jewellery was found in the residence of Managing Director of assessee during the course of search action and the same was the stock taken from the shop by Managing Director for the purpose of safe custody - HELD THAT:- As stocks have been kept in the MD s residence before bar coding of the same. It was also admitted that jewellery found at the residence of MD is also having bar code of the shop. Thus it cannot be presumed that excess stock found during the course of search action at the residence of MD is not belong to the present assessee since stock found at the residence of MD is of same quantity and it is the usual practice followed by the assessee and it has to be inferred that there was a movement of stock from assessee s shop to MD s house. Hence, there was an impugned shortage of jewellery in the hands of present assessee. It is quite natural to give telescopic benefit to the assessee by observing that the jewellery found at the residence of MD of present assessee is belong to the assessee itself and due telescoping benefit to be given. As such, the finding of lower authorities that there was suppression of sale of jewellery in the hands of assessee have no legs to stand. Accordingly, the addition is deleted and this ground of the assessee is allowed. Unexplained investment in silver articles - excess silver articles to the tune of 1.801 kgs. - HELD THAT:- The contention of the ld. A.R. is that total stock of silver articles was at 1008 kgs. On weighing the same, there was excess of silver articles to the tune of 1.801 kgs., which is very minimal and which is only 0.1786%. It may be due to weighing difference in scale due to wind or due to any other reasons. This minimum difference cannot be considered as excess silver articles found during the course of search action and due margin to be given for such minimal weighing difference. This addition is deleted. This ground of appeal of the assessee is allowed. Unexplained expenditure - additions by the ld. AO on the basis of loose slips found during the course of search action - HELD THAT: -It is an admitted fact that the department has not collected any corroborative material supporting the entries in these loose slips. In our opinion, unless it is substantiated or corroborated by any material evidence in support of such notings in the loose slips or notings in diary, the addition cannot be made by the authorities. The suspicion in the minds of the revenue authorities that the assessee has made certain payments as per the loose slips cannot be reason to make an addition. In the absence of concrete evidence brought on record by the authorities concerned, the addition cannot be made. The suspicion cannot replace the material evidence brought on record. It is also be noted that the authorities have to follow the principles of natural justice and the description of the documents in the form of loose slips are not enough to make an addition without furnishing the copy of these documents to the assessee and also without giving an opportunity of cross examination of the concerned parties, who has written these loose slips. The loose slips having certain jottings are not speaking one and it cannot be basis for any inference to make an addition. Accordingly, the addition made on the basis of unsubstantiated loose slips cannot be sustained. Accordingly, the addition is deleted and this ground of appeal of the assessee is allowed.
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2023 (11) TMI 1140
Exemption u/s 11 and 12 - Charitable Activity u/s 2(15) - Exemption denied invoking section 13(8) as there is no application of section 2(15) in the activity of the assessee - assessee is purely the urban development concern - addition made for payment towards public utility and towards Municipal Community - HED THAT:- The assessee is an Urban Development Society, and the assessee is developing land provided by the municipal community with the motive for development of Fazilka City after development the land has to be sold, so, in such circumstance, the profit has to be computed on based on two methods only, i.e. percentage completion method or the project completion method. The assessee is purely the urban development concern and claimed exemption u/s 11 and 12. The observation of the revenue is dismissed. As the assessee is eligible for exemption u/s 2(15) of the Act related to its activities. We respectfully relied on the order of Ahmedabad Urban Development Authority [ 2022 (10) TMI 948 - SUPREME COURT] that the activities of assessee is eligible for Section 2(15) of the Act. The Legal Ground of the assessee is adjudicated in favour of the assessee.
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2023 (11) TMI 1139
Penalty u/s 271B - not getting the books of account audited u/s 44AB - as alleged cash deposits made exceeded the threshold limit as per section 44AB - CIT(A) held that since the assessee failed to get his accounts audited u/s 44AB treated the cash deposits as turnover of the assessee, though it was affected on behalf of the Principal and since the assessee was getting commission and discounts on such sales - HELD THAT:- Principal i.e. Bharti Airtel Ltd. is liable to deduct tax at source. The service provider is responsible for collection of moneys from the post paid subscribers of Airtel, on behalf of Airtel in accordance with the terms of the Agreement and the Airtel shall pay the commission / incentives. The agent is liable to pay tax only on the commission / incentive received. AO levied penalty on the assessee as the cash deposit during the F.Y. 2016-17 exceeded the threshold limit u/s 44AB of the Act, treating the same as turnover of the assessee, though he is only an agent who provided services for the Principal. The only contention of the assessee is only an agent / service provider and he was under bonafide belief that he was not liable to get the books of accounts audited as the commission income was below the threshold limit and thus the assessee s case is covered u/s 273B. On similar set of facts, the decision was taken in favour of the assessee by the coordinate bench of the Tribunal in the case of Anunoy Mukherjee [ 2023 (2) TMI 1221 - ITAT KOLKATA] as held assessee is receiving commission income and tax is deducted at source by the Telecom company treating the cash deposits as amount collected on behalf of the Telecom company from various customers and deposited in the bank account and commission on such deposits is given by the Telecom company. The reasons cited by assessee prima facie found to be reasonable because the assessee was under bonafide belief that he was not liable to get the books of accounts audited as the commission income was below the threshold limit and this was the first year of the business venture taken up by the assessee and thus assessee s case is covered u/s 273B. Thus we hold that the provisions of section 273B of the Act applies to the case of the assessee since the assessee has a reasonable cause for not getting the books of account audited and the penalty shall not be imposable on the assessee u/s 271B of the Act - Decided in favour of assessee..
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2023 (11) TMI 1138
Condonation of delay filing appeal in ITAT - delay of 1326 days - sufficient Reason for delay - HELD THAT:- If we examine the explanation of the assessee then, it would reveal that basically the delay has occurred on account of lacunae by the erstwhile tax consultant of the assessee Shri S.K. Paul and the assessee did not have any malafide intention to cause the delay. Therefore, cumulative setting of all these factors would suggest that there is no deliberate delay at the end of the assessee because the assessee was not going to gain anything from delaying this appeal. It is also pertinent to note that the Hon ble Supreme Court in the case of N. Balakrishnan Vs. M. Krishnamurthy [ 1998 (9) TMI 602 - SUPREME COURT] has observed that period of delay does not matter. It is the quality of the explanation. If some valid reason is there, then any period can be condoned. In this case delay was caused due to fault of the erstwhile tax consultant of the assessee. Taking into consideration all these factors, we condone the delay and admit this appeal. Revision u/s 263 - unexplained cash deposits - as per CIT no explanation as to the nature and source of the cash deposit and as to whether the same is explained for income tax purposes given - CIT observed that AO framed the assessment without making enquiries and verifications which should have been made - HELD THAT:- As submissions were filed by the assessee regarding the cash collected from investors, depositing them in ICICI Bank account and then payments made to project organisers and thereafter the cash withdrawal from ICICI Bank account and refunded to the investors. As submissions filed by the assessee which pertains to the deal of purchase of land from Ramel Group of Industries which could not materialize, it is established that the alleged cash deposit and withdrawal are not related to the business turnover of the assessee and the same is a separate transaction. Since the assessee was able to satisfy the AO that alleged cash withdrawal are not part of the regular business carried out by the assessee of trading in goods, he accepted the contention by way of proper application of mind and took plausible view provided under the statute and did not make any addition for cash deposits. It has been consistently held that where on a particular issue, AO has conducted a detailed enquiry, called for the relevant information to which necessary compliance has been made by the assessee and ld. Assessing Officer took a plausible view which may or may not be beneficial to the revenue but the assessment order is not erroneous, then under such circumstances, the jurisdiction u/s 263 of the Act, cannot be invoked. As considering the fact that issue referred in the show cause notice u/s 263 of the Act, in respect of source of cash deposited in the bank account of the assessee held with ICICI Bank, assessee having successfully explained the said transaction before the ld. Assessing Officer after passing through detailed enquiry and again before ld. Pr. CIT, the submissions were made giving proper details in which the ld. Pr. CIT failed to find any specific error as no such defect has been recorded in the impugned order. Therefore, since detailed enquiry has been conducted by the ld. Assessing Officer on the issue raised in the show cause notice and a plausible view has been taken, we are of the considered view that ld. Pr. CIT erred in assuming jurisdiction u/s 263 - Decided in favour of assessee.
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Customs
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2023 (11) TMI 1137
Conversion of Free Shipping Bills to Drawback Shipping Bills - Period of limitation - Monetary limit involved in the appeal - HELD THAT:- The Review Committee has put forward grounds challenging the Final order passed by the Tribunal dt. 30.09.2021 directing the adjudicating authority to verify and allow the conversion of shipping bills. When the order passed by the department denying the request for conversion has been set aside by the final order dt. 30.09.2021 passed by Tribunal, the only remedy available for the department is to file an appeal against such order before the Higher Forum. The Tribunal while passing the Final order has already taken into consideration the Board s circular as well as the decisions passed on the very same issue. The Commissioner has correctly followed the direction of the Tribunal and passed the impugned order - there are no grounds to interfere with the impugned order. Same is sustained. Monetary limit involved in the appeal - HELD THAT:- On perusal of records, it is seen that the matter does not involve any duty, penalty or fine, or confiscation of goods and it falls below Rs.50 lakhs and therefore falls under the new Litigation Policy with regard to Customs cases to be filed before the Tribunal. The appeal falls within the monetary limits of litigation policy. Appeal filed by Revenue dismissed.
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2023 (11) TMI 1136
Exemption from Customs Duty - import of Boron Ore - applicability of Sr.No. 130 of customs notification No. 15/2017-CUS dated 30.06.2017 - period from 26.12,2017 to 11.05.2020 - HELD THAT:- It is found that the eligibility of the exemption on import of Boron Ore was in dispute in many cases and a bunch of appeals have been disposed of by this Tribunal in the case of PRADIPKUMAR P PATEL VERSUS C.C., AHMEDABAD [ 2023 (1) TMI 1318 - CESTAT AHMEDABAD] , wherein the Tribunal has remanded the matter to the Adjudicating Authority. Since, in the above decision of this Tribunal identical issue that of in the present appeal is involved, it is in the interest of justice that the present matter may also be remanded and to be decided by passing a de-novo order by the Adjudicating Authority considering the observation made in the above decision. Appeals are allowed by way of remand to the Adjudicating Authority.
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2023 (11) TMI 1135
Levy of anti-dumping duty on the imports of MEG from Kuwait, Saudi Arabia and United States of America (subject countries) - Validity of Notification dated 27.10.2022 - domestic industry suffered material injury in terms of the provisions contained in the Customs Tariff (Identification, Assessment and Collection of Anti-Dumping Duty on Dumped Articles and for Determination of Injury) Rules, 1995 or not - HELD THAT:- It can be seen that there has been a significant increase in imports from the subject country in the period of investigation, in excess of the demand supply gap. Further, since financial year 2019-20, the imports have started coming at dumped prices and the landed value of such imports has been even below the raw material prices. Thus, evidently there has been a significant increase in dumped imports from financial year 2019-20 onwards. It needs to be noted that though in the period of investigation there was a slight decline in subject imports as compared to financial year 2019-20, such decline was on account of Covid-19 pandemic and, therefore, cannot undo the previous increase - it can be concluded that there has been an increase in dumped imports in the period of investigation as compared to 2017-18 and 2018-19. The accepted position on record is that even in the absence of volume injury to the domestic industry during the period of investigation, the price effect of dumped imports by itself would be a sufficient factor for examining whether the dumped imports are causing material injury to the domestic industry. It is seen that with respect to the factors relevant for assessing the price injury of the domestic industry, the designated authority has relied only on the increase in profit and return on investment in the period of investigation as compared to 2019-20, and has ignored the fact that the profit and return on investment has remained significantly below 2017-18 and 2018-19 level. The designated authority, in the present case, has exclusively relied upon the marginal improvement in the period of investigation as compared to 2019-20 and has ignored the trends over the years before that. Such selective examination, particularly in the present facts where the domestic industry itself has claimed injury since 2019-20, may defeat the entire purpose of injury assessment. The inevitable conclusion, therefore, is that the designated authority would have to re-examine the matter in the light of the observations made above. For this purpose, the designated authority shall give an opportunity to both the appellant and the respondents for submitting their written submissions and after examination of the submissions and after considering the observations made, give its final findings. The final findings of the designated authority contained in the Notification dated 27.10.2022 are, accordingly, set aside and the matter is remitted to the designated authority to give final findings - Appeal allowed.
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Insolvency & Bankruptcy
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2023 (11) TMI 1134
Contempt petition - CIRP proceedings - Preferential, undervalued, extortionate, fraudulent or wrongful trading - Pre-mature application or not - whether the Business Service Agreement (BSA) is valid and legal for which the Resolution Professional is cognizant and has initiated the Transaction Review Audit of various transaction to ascertain, whether any transaction fall under the ambit of preferential, undervalued, extortionate, fraudulent or wrongful trading under the provision of the Code? - HELD THAT:- Taking into consideration the entire facts and circumstances prevailing at the time when the application was filed and at the time the order was passed that when the application was filed a serious question was raised about the legality and validity of BSA and the Adjudicating Authority was of the view that RP has already initiated transaction review audit of various transactions, therefore, the application was premature at that stage but the apprehension of the applicant therein was found legitimate and necessary directions were given to the RP. Since, the order dated 31.05.2023 by which the interim protection was granted to KCPL (Appellant) has been upheld by the Hon ble Supreme Court because the civil appeal filed against the order dated 31.05.2023 has been dismissed, therefore, it is directed that this order of stay dated 31.05.2023 shall continue till the decision of the applications filed under Section 45 and 66 of the Code by the RP. The Adjudicating Authority is further directed to make all efforts to decide as early as possible the applications filed under Section 45 and 66 of the Code by the RP to the earliest but not later than 3 months from the date of passing of this order - appeal disposed off. Second appeal - this filed by TNSI Retail Pvt. Ltd. on being aggrieved against the observation of the Adjudicating Authority recorded in the impugned order that the apprehensions of the Applicants are legitimate - HELD THAT:- There are not much substance in this appeal because after the receipt of transaction review audit, prima facie it is evident that there are issues involved which have been brought to the notice of the Adjudicating Authority by the RP by filing of the applications under Section 45 and 66 of the Code, therefore, this appeal is found to be without merit and the same is hereby dismissed. Third appeal - HELD THAT:- TNSI is a 100% subsidiary of FRL, therefore, the board can be changed by the RP or he can take it over and follow the direction issued in the impugned order - the contention of the Appellant not agreed with - appeal dismissed. Contempt petition - HELD THAT:- Since the appeal is being disposed of as the entire matter is again under consideration by the Adjudicating Authority by virtue of applications filed under Section 45 and 66 of the Code by the RP, there are no substance in the present petition as well and the same is hereby dismissed. It is hereby ordered that the stay regarding the Appellant shall operate in respect of the area in its possession in the aforesaid Mall - Matter disposed off.
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Service Tax
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2023 (11) TMI 1133
Recovery of confirmed demand - Freezing the bank account of the petitioner - petitioner neither filed an appeal nor paid the tax and penalty - non-registration under Finance Act - HELD THAT:- The petitioner neither filed an appeal nor paid the tax and penalty as determined, and therefore, notice under Section 87(b) of Chapter V of the Finance Act 1994 came to be issued for freezing the bank account of the petitioner. It was also said that the total amount outstanding was Rs. 1,05,73,062/- - petitioner neither made use of the statutory remedy of appeal within the time prescribed as per Section 85(3A) of the Finance Act 1994 nor did he reply to the notice issued in Ext .P7 and after the expiry of the maximum period of appeal of three months, the petitioner approached this Court by filing this writ petition. This Court does not exercise the appellate jurisdiction against the Order-in-Original. It also cannot be said that the Order-in-Original is without jurisdiction or that there has been a violation of the principle of natural justice. Considering the fact that the petitioner failed to exercise the right of appeal within the limitation period prescribed under the Statute, this Court is not in a position to extend the limitation period for filing the appeal - Since the order does not appear to be without jurisdiction, nor has there been a violation of Article 14 of the Constitution of India inasmuch as the petitioner was issued show cause notice, he filed a reply, and he was also granted an opportunity of hearing, there are no ground to interfere with the impugned order and notice in Exts. P6 and P8. Petition dismissed.
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2023 (11) TMI 1132
Default in payment of service tax - Prosecution proceedings against the director of the company - offence punishable u/s 89 of Finance Act, 1994 r.w.s. 9 and 9AA of Central excise Act - Period covered is 2011-12 to 2015-16 - Prosecution launched in 2018 - CIRP Proceeding under IBC - Closure of Liquidation proceedings against Corporate Debtor since the company was sold as going concern - all the liabilities, dues of the company stand extinguished as per the provisions of IBC - HELD THAT:- A perusal of record discloses that the Liquidator of the accused No. 1-company has filed application praying for closure of the liquidation process of the corporate debtor and the National Company Law Tribunal, Hyderabad Bench-II vide order dated 07.02.2023 held that the assets of the Corporate Debtor were sold to the successful bidders; that as seen from Form-H, an amount of Rs. 10,23,89,263/- realized from the sale of Liquidation Estate was distributed among the stake holders as per Section 52 or 53 of the Code, 2016 and that the Final Report discloses that the Liquidator has sold the Corporate Debtor as a going concern as such it is a fit case for closure of liquidation process, and accordingly ordered for closure of the liquidation proceedings against the corporate debtor. As per the judgments of the Hon ble Supreme Court in 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 ] and various other Courts, the amendment, which comes into existence subsequent to the launching of the proceedings are not applicable to the past acts. The laws or amendments made shall be prospective in nature and not retrospective and they cannot be ex post facto laws for punishing the accused. If the Legislature itself thought of clarifying the position of law, it would not be appropriate for the Court to assume that something else and then to go on to punish the person for criminal offences. Therefore, this Court is of the considered opinion that the petitioner shall not be punished for the offences registered under the amended provisions, which come into existence subsequent to the launching of the proceedings. Petition allowed.
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2023 (11) TMI 1131
Legality and validity of the order-in-original dated 23.03.2023 passed by respondent No. 1 - respondent No. 1 did not put the petitioner on notice regarding production of original supporting documents - non-taxability of the services rendered - HELD THAT:- The ends of justice would be met if an opportunity is granted to the petitioner to produce the relevant documents in support of its claim that services rendered by the petitioner are exempted from service tax in terms of the notification dated 20.06.2012. The impugned order-in-original dated 23.03.2023 is set aside - matter remanded back to the file of respondent No. 1 who shall give due opportunity of hearing to the petitioner and thereafter pass a fresh order in accordance with law - petition allowed by way of remand.
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2023 (11) TMI 1130
Levy of Service tax - reimbursement of expenses - inclusion in the assessable value or not - appellant provided services of promotion, marketing of petroleum products, customer care and other auxiliary services on behalf of their client M/s BPCL - HELD THAT:- It is found that the appellant was only operating the BPCL filling stations which was COCO outlet and were getting reimbursement of expenses as shown by them in their monthwise statement annexed at page 76 to 81 of the paper book. Further, it is found that the Chartered Accountant has also certified that the appellant was only getting reimbursement of expenses viz. salary/wages for manpower, conveyance, tea and coffee remuneration of operator. In view of the decision of the Hon ble Apex Court in the case of UNION OF INDIA AND ANR. VERSUS M/S. INTERCONTINENTAL CONSULTANTS AND TECHNOCRATS PVT. LTD. [ 2018 (3) TMI 357 - SUPREME COURT] reimbursible expenditure is not includable in the taxable value. We also find that once the appellant has deposited to Rs. 2,40,598/- before the issuance of show cause notice vide two TR6 challans both dated 31.05.2007 which is also noted in the show cause notice then in that situation the show cause notice should not have been issued. Further, it is also found that the imposition of penalty under both the Sections 76 78 is also not tenable in law. The impugned order is not sustainable in law - Appeal allowed.
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2023 (11) TMI 1129
Levy of service tax - amounts collected as reimbursement of electricity charges - reimbursement of air conditioning charges - invocation of Extended period of Limitation - penalty - HELD THAT:- Reimbursable expenses have been held to be not consideration for service by the High Court of Delhi in case of INTERCONTINENTAL CONSULTANTS AND TECHNOCRATS PVT. LTD. VERSUS UOI. ANR. [ 2012 (12) TMI 150 - DELHI HIGH COURT] - thus, no service tax can be charged on the reimbursable expenses which the appellant had collected towards providing electricity and air conditioning. Invocation of Extended period of Limitation - HELD THAT:- Since the issue decided on merits in favour of the appellant insofar as the demand of service tax on these two expenses is concerned, and since the appellant is not contesting the rest of the demand, the question of invoking extended period of limitation need not be examined. Levy of penalty - HELD THAT:- The appellant had reasonable cause for failure to pay service tax and, therefore, by invoking section 80, the penalties are set aside. The appeal is partly allowed by setting aside the demand of service tax on reimbursable expenses towards electricity and air conditioning collected by the appellant and upholding the rest of the demand with interest.
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Central Excise
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2023 (11) TMI 1128
Availment of irregular credit - Clandestine Removal - failure to maintain proper records of receipt, issue and consumption of raw materials/inputs required for manufacture of the finished goods, being MS ingots and MS fabrication - HELD THAT:- From analysis of data in the balance sheet for the period 2004 05 to 2007-08, it appeared that there is great variation in production parameters including the power consumption per unit of production of ingots. The basic raw materials required for manufacture of MS ingots are sponge iron, pig iron and/or scrap. Sponge iron was also used in plants using coal-based technology and gas-based technology. The percentage of usage of charge mix was maximum 30% in the case of gas based sponge iron, and it may be as high as 80% in case of coal-based sponge iron. The yeild was also higher by 2% in case of gas-based sponge iron. Admittedly, Appellants have maintained sufficient records of their transactions, production, etc. They have furnished regular returns and other prescribed forms which have not been found to be untrue or wrong - It is further found that the demand raised for alleged clandestine production and clearance of finished goods and raw materials is vague and not based on any proper prescribed norms. Further such demand is hit by the ruling of Hon ble Supreme Court in the case of COMMISSIONER OF C. EX., MEERUT-I VERSUS RA CASTINGS PVT. LTD. [ 2010 (9) TMI 669 - ALLAHABAD HIGH COURT] . CENVAT Credit - HELD THAT:- The items in question, viz., MS angles, bars, coils, beams, plates, channels, etc., have admittedly been used in the factory of production. It is found that part of these inputs have been used in the fabrication of EOT Crane, which is used for material handling inside the factory. It is further found that some of the items like MS bars, which are required to stir the molten steel during production, get melted and become part of the molten steel in the furnace and thus, gets consumed in the manufacture of finished goods. Further, inputs like new plates and coils have been used in repair of the furnace lining, which has to be done periodically. Thus, the Appellants have rightly taken Cenvat credit and the disallowance of credit is bad during the period under dispute. The impugned order set aside - appeal allowed.
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2023 (11) TMI 1127
Interpretation of the word exemption - applicability of Notification No. 23/2003-CE was amended by Notification No. 22/2006-CE - exemption from SAD on the goods cleared from the factory in the shape of sample quoting not for sale in DTA - HELD THAT:- Admittedly in the present case there is no ambiguity in the notification and the issue needs to be considered by interpreting the notification strictly not by referring to the context etc as stated by the impugned order. Undisputedly the goods in dispute were not taxable because only that turnover was subject to tax which was a commercial transaction and the clearance of the samples was excluded from the taxable turnover as per Section 7 of the U P Vat Act, 2008. In the present case the goods in dispute are not specified in schedule I or Schedule IV of the U P VAT Act hence are not exempt from payment of VAT, but the clearance of samples from EOU are not part of the taxable turnover as per the provisions of this Section 7. The transactions in respect of sample do not fall under the category of exempt goods as defined by the U P Vat Act, 2008. These clearances were not subjected to the VAT in view of the provisions contained in Section 7. The wordings of proviso of the notification No No 23/2003-CE dated 31.03.2003 as amended by Notification No 22/2006-CE dated 01.03.2006 are unambiguous and they refer to exempt goods under VAT Act. In the present case the goods are not specified as exempt goods as defined under the VAT Act, but are not the part of taxable turnover. The impugned order is without any merits - appeal allowed.
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CST, VAT & Sales Tax
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2023 (11) TMI 1126
Adjustment of GST amount deposited by the petitioner in the financial year 2018- 19, which inadvertently could not be deposited in the financial year 2017-18, but deposited by the petitioner in the month of June 2018 i.e. financial year 2018-19 - circular dated 31.12.2018 as well as provisions of Section 39(9) of the GST Act - it was held by High Court that Both the assessing authority as well as the appellate authority have committed the said misreading of GSTR-9, hence both the impugned orders cannot stand and are set aside. HELD THAT:- There are no reason to interfere in the matter - SLP dismissed.
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2023 (11) TMI 1125
Valuation - works Contract - Reduction in turnover as per Rule 9 of the Value Added Tax Rules - cement imported from outside the State of U.P. - reduction in expenses from 21% to 10% - HELD THAT:- The general rule of law in taxing statutes is that in case of any doubt the benefit should be given to the assessee. However, in case of exemption and deduction to be given, a stricter approach may be followed, as per catena of judgments of the Supreme Court, to examine whether the assessee is eligible for such benefit - In the present case, there is no factual dispute of goods having been imported from outside the State of U.P. and, therefore, the assessee clearly qualifies for the said benefit. In light of the same, the question is answered in favour of the assessee and against the Department - the revision application is dismissed.
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2023 (11) TMI 1124
Return of the balance amount kept by the Revision Petitioner on behalf of the customers - sale proceeds for levy of tax for imposing penalty under section 67 of the KVAT Act or not - sufficient material exists for imposing penalty or not - penalty confirmed based on presumptions and surmises or not - non-speaking and cryptic order - failure to grant opportunity to the petitioner for adducing further evidence or not - HELD THAT:- On the facts of the instant case, when it is found that the petitioner dealer had clearly contravened the terms of the Central Government Scheme that proposed benefits to purchasers of coir looms subject to their complying with a particular procedure for securing the said benefits, the contention of the petitioner cannot be accepted that, who was a person entrusted with the task of supplying the looms that the supply of parts of the loom (in lieu of a complete loom) for a lesser consideration should be considered as legal and proper and that his tax liability would therefore be only in respect of the reduced consideration received for the parts of the loom actually sold to the customer. The legal presumption to be drawn in the instant case, in the backdrop of the Central Government Scheme, is that the amounts received by the petitioner from the bank represented the actual consideration for the supply of the coir looms, which the petitioner was obliged to sell to the beneficiaries of the Scheme. The obvious illegality also cannot be accepted that would arise if, as contended by the petitioner, it is a fact that he had colluded with the customer and supplied only parts of a loom, instead of an actual loom, and refunded a part of the amounts received from the bank to the customer. In the absence of any evidence to suggest that the loom itself was not sold, it is opined that the impugned order of the Commissioner does not require to be interfered with. This O.T. Revision is disposed off by answering the questions of law raised in favour of the revenue and against the petitioner assessee.
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2023 (11) TMI 1123
Violation of principles of natural justice - petitioner was not given a fare and reasonable opportunity to defend his case - HELD THAT:- All the notices which were issued to the petitioner went unserved. Which apparently establishes the fact that the petitioner had never received any communication for replying to the show cause notice issued or for that matter, the notice of personal hearing is concerned. Another aspect which needs to be considered is that, according to the petitioner, the establishment stood closed as an impact of COVID-19 pandemic. In addition, it was also seized by the bank authorities on account of the default on the part of the landlord in repayment of loan availed, which further gave rise to the petitioner not being available at the concerned address where notices were issued - Even on 23.06.2023, when the petitioner furnished his reply to the said show cause notice, there was still sufficient time left for the department for concluding the proceedings within a stipulated period of time i.e. till 06.07.2023. Yet the respondents, for the reasons best known, choose not to grant an opportunity of personal hearing to the petitioner and proceeded to decide the matter on merits. When the petitioner had entered appearance on 23.06.2023, in all fairness of the requirement of law, the respondent No. 2 could have called upon the petitioner to make his representation by way of a personal hearing and thereafter could have proceeded to decide the case on its own merits. In the absence of the same, we are having hesitation in holding that it would be hit by the principles of natural justice and the action on the part of the respondent No. 2 amounts to denial of a fare and reasonable opportunity to the petitioner before an impugned order is passed. The matter stands remitted to the respondent No. 2, the petitioner herein is directed to enter appearance before the respondent No. 2 on 12.09.2023 - Petition disposed off.
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Indian Laws
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2023 (11) TMI 1122
Dishonour of Cheque - no proper service of notice - complainant has not proved his case - do the question of rebuttal arise? - HELD THAT:- Once the cheques are placed before the Court and the petitioner has not denied the signatures available in the cheques, except a general denial that he has not issued the cheques, he has not given any explanation. The Trial Court has rightly drawn the presumption under Sections 118 and 139 of Negotiable Instruments Act and once the issuance of cheque is proved by the complainant, the same has to be rebutted and no such rebuttal evidence is placed by the petitioner. Though he has been examined before the Court, in his chief evidence, except denying the service of notice and issuance of cheques, no material is placed before the Court to substantiate this contention. The First Appellate Court also having reassessed the material on record, in Para No.13, taken note of both oral and documentary evidence placed on record and with regard to proving of the transaction, the complainant has relied upon Exs.P11 to P17, credit bills and in order to rebut the claim of the complainant, no documents are produced and though the accused took the contention that those three cheques were issued to the son of the complainant towards chit transaction, nothing is stated in his chief evidence that those three cheques were given to the son of the complainant his evidence is silent with regard to the same and the defence has remained as a defence. Thus, no error committed by the Trial Court and the First Appellate Court in appreciating both oral and documentary evidence placed on record and unless the Trial Court and the First Appellate Court fail to consider the material on record, the question of invoking revisional jurisdiction does not arise. The Court can exercise its revisional jurisdiction, only if the material evidence is not considered by the Courts below and if the order suffers from its legality and correctness. The petitioner has not made out any ground to exercise revisional jurisdiction and there is no merit in the revision - answered in negative. The revision petition is dismissed.
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2023 (11) TMI 1121
Dishonour of Cheque - Acquittal of accused - insufficient funds - trial Court has recorded the statement accused/respondent on the basis of affidavit instead of examination-in-chief - Section 145 of Negotiable Instruments Act, 1881. Whether the appellant/complainant has made out a ground to remand the matter to the trial Court for fresh disposal in accordance with law? - HELD THAT:- On perusal of the provisions of Section 145 of Negotiable Instruments Act, 1881, it is clear that the trial Court has not followed the provisions of Section 145 of the said Act, and the evidence of the accused by way of affidavit is not permissible in law. Relying on the evidence of accused DW1, along with the material contradiction of PW2, the trial Court has acquitted the accused. Since the accused had not adduced his evidence in accordance with law, the same cannot be looked into by this Court. Hence, it is just and proper to remit the matter to the trial Court with a direction to provide opportunity to the accused to adduce his evidence in accordance with law. Accordingly, complainant has made out a ground to interfere with the impugned judgment of acquittal and also to remand the case to the trial Court. Judgment of acquittal dated 03rd February, 2014 passed in CC No.81 of 2010 by the Additional Civil Judge and JMFC, Ramanagar, is set aside and the case is restored to file - Matter is remitted back to the trial Court with a direction to provide opportunity to the accused to adduce his oral evidence in accordance with law - appeal allowed.
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2023 (11) TMI 1120
Dishonour of Cheque - Amount of cheques are not paid even after statutory notice was served - presumption in favour of complainant - rebuttal of presumption - exercise of jurisdiction under section 482 of Cr.P.C. or Article 226 of the Constitution of India - section 138 of NI Act - HELD THAT:- The Court after prima facie verifying material on record issued process for the offence punishable under section 138 of N.I.Act. The trial of the offence is at large before the learned Trial Court. It is to be noticed that in offence under section 138 of N.I.Act, provision of law provides for presumption under section 139 of N.I.Act - The complainant being holder of the cheques and in view of the fact that signature on the cheques is not denied by the accused / petitioner, legal presumption shall be drawn that cheques were issued for discharge of debt or any other liability. This presumption stands till it has been discharged. Presumption under section 139 is rebuttable presumption. It is system of reverse onus burden. In case of MS NARAYANA MENON @ MANI VERSUS STATE OF KERALA ANR. [ 2006 (7) TMI 576 - SUPREME COURT] the Hon ble Apex Court has considered sections 118(a), 138 and 139 of Negotiable Instrument Act and held that presumption both under section 118(a) and 139 are rebuttable in nature. Looking back to the contention raised by the petitioner, it is the case of the petitioner that there is difference in agreement to sell and complaint regarding number of flats and therefore, it cannot be said that questioned cheques were given for discharge of any liability. This argument was canvassed with a view to submit that transaction is different. Cheques in question is given for transaction for flat Nos.C/402 to C/406 as per agreement on record but the complainant has mentioned that cheques in question has been given for transaction for flat Nos.C/202 to C/ 206. Mere there is difference regarding flat numbers in agreement and complaint, it would not attract submission that cheques were not given for any legal liability. There may be typographical mistake. Burden can be discharged under section 139 of NI Act by the petitioner after leading evidence either by cross examining the complainant or by leading necessary evidence. No mala fide or vexatious claim are found. The case deserves trial. No case is made to exercise power vested under section 482 of Cr.P.C. to quash the proceedings. Needless to say that jurisdiction under section 482 of Cr.P.C. or Article 226 of the Constitution of India is requires to be exercised in circumspection and sparingly. The person calling Court to exercise such jurisdiction needs to establish from record that proceedings against him is manifestly mala fide and vexatious. In the present case, the petitioner has failed to make out such case. The petition does not deserve consideration and requires to be dismissed in limine - petition dismissed.
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2023 (11) TMI 1119
Dishonour of Cheque - Vicarious liability of director - Section 141(1) of the Negotiable Instruments Act, 1881 - HELD THAT:- Mere extracting the expression used in Section will not satisfy the requirement to hold a director vicariously liable for the offence under Section 138 of Negotiable Instruments Act, 1881. The averment of the complaint must satisfy the test, whether there are averments to prima facie satisfy the Court taking cognizance that the person deemed to be guilty of offence have role in the conduct of the business and in charge of the company - As far as the instant case, the cheque is for the discharge of the loan advanced to the company for its business purpose. The petitioner had stood guarantee for the loan advanced. She cannot deny knowledge of the borrowing or issuance of cheque just because she is not the signatory of the subject cheque. This Criminal Original Petition is dismissed.
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2023 (11) TMI 1118
Dishonour of Cheque - presumption with regard to existence of consideration amount - onus to rebut the presumption - shifting the burden upon the original accused to prove his case beyond reasonable doubt - HELD THAT:- While responding to such defence, the complainant has fairly accepted the fact about the actual outstanding amount dues from the complainant to be Rs.8,99,000/-, whereas the cheque in dispute appears to be figures of Rs.9,99,000/-. In the opinion of this Court, the aforesaid contradiction goes to the root of the matter. It straightway hit the presumption drawn in favour of the complainant under Section 118(a) of the Negotiable Instruments Act, which permits the Court to raise presumption with regard to existence of consideration amount. Section 139 of the Negotiable Instruments Act further permits the Court to raise presumption with regard to the cheque being issued towards discharge of legally recoverable debt as on the date of the presentation of the cheque. It is a settled legal position that in absence of any challenge to the signature on the disputed cheque, the statutory presumption available under Section 118 and Section 139 of the Act comes into play. The aforesaid statutory provision permits the Court to raise presumption against the respondent accused. The onus is upon the accused on the issuance of cheque to rebut the presumption that the cheque was not issued for discharge of any debt or liability under Section 138 of the Act. However, such presumption is subject to probable defence to be raised by the accused to create doubt with regard to existence of any debt or liability. In case of Rangappa Vs. Sri Mohan [ 2010 (5) TMI 391 - SUPREME COURT ], the Hon ble Supreme Court held that the standard of proof to discharge of such presumption can be in the form of probable defence which is weighed on the scale of preponderance of probabilities - As noticed hereinabove, in the present matter, the learned Court below has consciously and carefully taken into consideration this aspect, which has emerged on record to arrive at finding with regard to the discrepancy in the amount dues to be realized from the respondent accused, coupled with the fact that the original complainant has failed to offer any explanation with regard to the additional amount of Rs.1 Lakh - no fault can be found in the approach of the learned Magistrate in shifting the burden upon the original accused to prove his case beyond reasonable doubt. The discrepancy noted in the amount due against the respondent accused against which the cheque is alleged to have been issued goes to the root of the matter, which can be treated as material contradiction. In the opinion of this Court, no arguable case is made out to entertain a present application seeking leave to appeal. Hence, present application is hereby rejected - In view of dismissal of the application seeking leave to appeal, Criminal Appeal No.34 of 2023 stands disposed of.
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2023 (11) TMI 1117
Dishonour of Cheque - lack of territorial jurisdiction to try the case - bone of contention by the petitioners is that the complainant who was initially maintaining his account in Nanganallur Branch of Indusind Bank, had given a request on 12/04/2022 to transfer his account to Kilpauk Branch - HELD THAT:- At the outset it has to be recorded that, the provisions of Negotiable Instruments Act, 1881 empowers the Magistrate to try complaints under Section 138 of NI Act summarily. Therefore, the trial Court, which has taken cognizance of the complaint and proceeded to try as summary trial, is well within the law and Clause (m) of Section 461 of Cr.P.C will not apply to the facts of this case - At the most, it could be error of taking cognizance of a complaint under Section 190 (1)(a) of Cr.P.C and proceeding thereon. Such irregularity will not vitiate the trial. Whether the trial Court has assumed territorial jurisdiction, which is not vested on it? - HELD THAT:- Having given request for transfer to Kilpauk Branch and presenting the cheque at Kilpauk Branch, the complaint is filed before Metroplitan Magistrate (FTC-1) Egmore, which deemed to have territorial jurisdiction. The petitioners on receipt of the summons from the Court had participated in the trial cross examined the complainant and also marshalled their witnesses. At the fag end of the trial, he had filed the petition to dismiss the complaint on the ground of lack of jurisdiction. In view of this Court, the request for transfer of his account to Kilpauk Branch made by the complainant on 12/04/2022, which is prior to the presentation of the cheques and subsequent presentation of the cheques at Kilpauk branch saves the complaint from being vitiated. The irregularity what so ever had not caused prejudice to either side, the petition filed after examining the witnesses and at the fag end of the trial is another factor which desists this court to exercise its power under Section 482 Cr.P.C. In view of the peculiarity of the facts in this case, a strict interpretation of the explanation to Section 142 of Negotiable Instruments Act will be against the spirit of the legislative intend. The trial Court had considered the law and facts, balancing the interest of either side with reasoning had dismissed the petition. On appreciation of law and facts, which are unique to the present case, this Court hold that the order of the trial Court is well based on law and fact and to be confirmed. Petition dismissed.
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2023 (11) TMI 1116
Dishonour of Cheque - validity of acquittal of accused - seeking reversal of conviction imposed - HELD THAT:- The respondent did not refuse the case of the appellant in his chief examination and he took defence stating that the case was filed with other ulterior motive to deny payment of sales commission which was allegedly due to him. The respondent, in his cross-examination, has admitted that the purchase orders and other defence documents of the respondent did not contain any signatures, which was not credible enough to prove that the respondent has no liability with the appellant. The respondent has admitted in his cross examination, the modus operandi followed by Ex.P.5 to Ex.P.10 and Ex.P.18 to Ex.P.21 which are invoices and stock transfer challans - the defence raised by the respondent also fails to ground for the reasons discussed. Hence, this Court has no hesitation to hold that in view of the discussion in the preceding paragraphs, the appellant is entitled for statutory presumption and in the absence of any positive evidence much less any evidence to rebut the statutory presumption by the accused, the charge under Section 138 of N.I. Act stands proved and hence, the reasoning rendered by the lower Appellate Court stands vacated and the same is set aside - this Court holds that the appellant has produced sufficient material in support of the charge and the respondent has not let in any positive evidence to rebut the presumption. Consequently, the conviction and sentence passed by the trial Court is hereby restored. Appeal allowed.
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2023 (11) TMI 1115
Dishonour of Cheque - conviction of accused - settlement arrived at between the parties - compounding of the case - HELD THAT:- Having taken note of the fact that the petitioner accused and the complainant-respondent have settled the matter, the complainant has received the entire amount of cheques and the complainant has no objection in compounding the offence, therefore, this Court sees no impediment in accepting the prayer made on behalf of the accused-petitioner for compounding of offence while exercising power under Section 147 of the Act as well as in terms of guidelines issued by the Hon ble Apex Court in DAMODAR S. PRABHU VERSUS SAYED BABALAL H. [ 2010 (5) TMI 380 - SUPREME COURT ], wherein the Hon ble Apex Court has held since Section 147 was inserted by way of an amendment to a special law, the same will override the effect of Section 320(9) of the CrPC, especially keeping in mind that Section 147 carries a non obstante clause. In K. SUBRAMANIAN VERSUS R. RAJATHI REP. BY P.O.A.P. KALIAPPAN [ 2009 (11) TMI 1013 - SUPREME COURT ], it has been held by the Hon ble Apex Court that in view of the provisions contained in Section 147 of the Act read with Section 320 of Cr.P.C., compromise arrived at can be accepted even after recording of the judgment of conviction. Since, in the instant case, the petitioner-accused after being convicted under Section 138 of the Act, has compromised the matter with the complainant and has paid the entire amount of cheques to the complainant, prayer for compounding the offence can be accepted in terms of the aforesaid judgments passed by the Hon ble Apex Court. The application is allowed and matter is ordered to be compounded.
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