Newsletter: Where Service Meets Reader Approval.
TMI Tax Updates - e-Newsletter
November 4, 2024
Case Laws in this Newsletter:
GST
Income Tax
Customs
Insolvency & Bankruptcy
PMLA
Service Tax
Central Excise
Indian Laws
Articles
News
Notifications
Circulars / Instructions / Orders
Highlights / Catch Notes
GST
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Accused granted bail in Rs. 8.90cr GST evasion case after depositing Rs. 60L; to pay 10% more.
The court granted regular bail to the accused in a case involving evasion of GST u/ss 132(1)(d) etc. of the Central Goods and Services Tax Act, 2017. The allegations were that the accused caused a loss of Rs. 8.90 crore, collected as GST from various firms but not deposited with the government. The accused had already deposited Rs. 60 lakh and expressed willingness to deposit 10% (Rs. 90 lakh) of the alleged amount within seven days. Considering the recovery procedure under Chapter XV of the Act, the deposit made, the undertaking to deposit further amount, the principle of "bail is the rule and jail is an exception", and the concept of personal liberty under Article 21, the court allowed the bail application subject to fulfillment of conditions imposed.
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Tax evasion allegations: GST fraud probe, parallel proceedings allowed.
Validity of show cause notice u/s 74(1) of CGST Act, 2017 and Section 20 of IGST Act, 2017 for tax evasion and concealment. Parallel proceedings by DGGI, Haryana GST Intelligence Unit, and Assistant Commissioner, CGST. Petitioner alleged excess ITC availed but not reflected in GSTR-2A, indicating wrongful availment. Court held issuance of notice u/s 73 and dropping it does not prevent proceedings u/s 74. While Assistant Commissioner requested tax deposit, DGGI only sought queries; no proceedings initiated u/s 74. Allegations of fraud prima facie reflected in show cause notice. HCL Infotech case distinguished. Petition dismissed, allowing tax authorities to proceed under provisions of the Act.
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Mismatch between GSTR-3B & 2A; Court accepts error, sets aside assessments for 2017-18 to 2020-21 for reconsideration on 10% payment.
Petitioner challenged impugned orders, recovery notices and bank attachment notice due to mismatch between GSTR-3B and GSTR-2A. Court accepted petitioner's contention of error in filing GSTR-3B, supported by certificate. Considering respondent's submission, Court set aside four assessment orders for 2017-18 to 2020-21, remanding matters to State Tax Officer for fresh consideration. Condition imposed on petitioner to pay 10% of disputed tax amount within four weeks for setting aside orders to take effect. Petition disposed of by way of remand.
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High Court validates using Electronic Credit Ledger for pre-deposit payment under GST appeals.
The High Court quashed the impugned letter directing payment of pre-deposit through Electronic Cash Ledger, holding that utilizing the Electronic Credit Ledger for pre-deposit payment u/s 107(6)(b) of the CGST Act is valid. The court ordered the petitioner's appeal to be heard on merits, considering the pre-deposit payment from the Electronic Credit Ledger as sufficient compliance with Section 107(6)(b) of the CGST Act.
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Improper tax demand without fair hearing opportunity. Petitioner rectified excess input tax credit claimed.
Non-application of mind by respondent and violation of principles of natural justice. Petitioner unable to file immediate reply due to authorized person's illness. Excess ITC availed rectified/reversed in subsequent monthly returns and GSTR-3B filed. Respondent passed impugned orders for tax liability, penalty, and interest without considering rectification. Petitioner's applications seeking rectification rejected without hearing. Impugned orders outcome of non-application of mind, violating natural justice by not hearing petitioner. Orders set aside, matters remanded to respondent for fresh consideration. Petition allowed by way of remand.
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Breach of natural justice: Petitioner's defense rights violated, reply ignored despite submission.
Violation of principles of natural justice occurred as the valuable right of the petitioner to defend through a reply and right to personal hearing was denied. The finding that the petitioner failed to submit a reply is factually incorrect as the reply was received by the respondents, evident from the portal recording "Reply furnished, pending for order by tax officer." Failure to consider the petitioner's reply amounts to gross violation of principles of natural justice. Consequently, the impugned order cannot sustain judicial scrutiny and is liable to be set aside. The High Court disposed of the writ petition by setting aside the impugned order and directed the Authority to consider the petitioner's reply to the show-cause notice and proceed further in accordance with law.
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Pre-Deposit Amount in VAT Returns Wrongfully Denied Refund, Commercial Tax Dept. Directed to Refund Within 30 Days.
The petitioner's denial of refund of input tax credit debited as a pre-deposit was challenged. The court held that the non-inclusion of freight and pumping charges collected by the petitioner from customers into the taxable value of Ready Mix Concrete (RMC) supplied cannot be grounds for denying refund. The pre-deposit amount debited in returns for the Assessment Years 2015-2016 under the Tamil Nadu Value Added Tax regime cannot be denied refund invoking a circular, as the substantial questions of law have been answered in favor of the petitioner. The Commercial Tax Department cannot deny refund after accepting pre-deposit through debit in VAT Returns and considering Revision Orders. u/s 142(6)(a) and (b) of the Tamil Nadu Goods and Services Tax (TNGST) Act, 2017, the pre-deposit amounts must be refunded. The impugned intimations invoking the circular and denying refund are quashed, and the respondents are directed to refund the amount to the petitioner within thirty days.
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Clerical error in GSTR-1 filing, rectification ordered; authorities to consider revised representation expeditiously.
The petitioner was directed to resubmit the representation to rectify the clerical mistake of wrongly filing details under Column B2C instead of Column B2B in the GSTR-1. The respondents were instructed to consider the revised representation and pass appropriate orders on merits expeditiously, preferably within three months, strictly following Circular No. 183/15/2022-GST dated 27.12.2022. The petition was disposed of.
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Non-speaking order on ITC mismatch and GST return discrepancies set aside, remanded for fresh hearing.
The High Court found the order passed by the authority to be violative of principles of natural justice as it was a non-speaking order that failed to address the objections raised by the petitioner. The issues involved input tax credit mismatch between GSTR-3B and GSTR-2A/GSTR-5, and discrepancies between GSTR-1 and e-way bill outward supplies. The impugned order was set aside, and the authority was directed to consider the petitioner's objections, provide an opportunity for personal hearing, and pass a speaking order within twelve weeks, in accordance with law. The petition was disposed of by way of remand.
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Unblocking ITC & revocation of GST registration suspension: Taxpayer's relief through legal remedy.
In this legal case, the court addressed the issue of unblocking Input Tax Credit (ITC) and revocation of suspension of registration. The court granted liberty to the petitioner to make a representation to the concerned authority regarding the Input Tax Credit that was blocked due to suspension of registration. If such a representation is filed, the authority must pass an appropriate order within two weeks from the date of receipt, in accordance with the law. Consequently, the court disposed of the writ petition.
Income Tax
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Tax Reassessment Validity: Harmony Between Joint Assistant Commissioner and Faceless Scheme.
The High Court examined the validity of reassessment notices issued u/s 148 of the Income Tax Act by the Joint Assistant Commissioner (JAC) in light of the Faceless Assessment Scheme formulated u/s 151A. The key points are: The Act allows reassessment based on information from Risk Management System (RMS), audit objections, information from other countries, information u/s 135A schemes, or orders of Tribunals/Courts. The JAC can form an opinion based on such information and initiate reassessment proceedings u/s 148A. Information gathered during searches/surveys is also deemed as "information" for reassessment purposes under Explanation 2 to Section 148. The Faceless Assessment Scheme segregates the initiation of reassessment proceedings by the JAC from the actual faceless assessment by the National Faceless Assessment Centre (NFAC). The JAC examines information from RMS/other sources and forms an opinion on reassessment, while the NFAC conducts the actual faceless assessment through automated allocation. Rendering the JAC's powers redundant under the faceless scheme would conflict with beneficial construction principles and undermine provisions for comprehensive data analysis and informed decision-making. The High Court upheld the validity of notices issued by the JAC, observing a harmonious distribution of functions between the JAC and NF.
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Examining Income Tax Settlement Commission's wide powers and finality of immunity order.
The Income Tax Settlement Commission (ITSC) has wide powers under Chapter XIX-A to examine and evaluate all aspects of an application for settlement, including calling for reports, directing further inquiries, and holistically examining matters beyond the disclosures made by the applicant. The essential ingredients for granting immunity u/s 245H are cooperation by the applicant in computing total income and full and true disclosure of income, which are the same prerequisites for computation u/s 245D(4). Once the ITSC finds these conditions satisfied, its order granting immunity cannot be questioned separately, as both provisions are premised on identical considerations. The ITSC's order has finality u/s 245I, and can only be reviewed on grounds provided in Chapter XIX-A. Interfering with the grant of immunity would amount to questioning the acceptance of the application itself, which cannot be done if the statutory conditions were found satisfied. The principle of severability cannot be invoked as the considerations for computation and immunity are not distinct.
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Tax Dept's reopening of assessment on share premium from Singapore co. quashed after accepting genuineness earlier.
Reopening of assessment u/s 147 for addition u/s 68 on share premium received by petitioner from Gold Singapore was challenged. Reassessment proceedings initiated primarily due to Gold Singapore not carrying out business activities in Singapore and acting as a conduit for investments in Indian companies. However, in assessment order for AY 2012-13, Assessing Officer accepted the transaction of share application money/share capital received from Gold Singapore without any addition and also accepted the status of the holding company. The identity, creditworthiness of Gold Singapore, and genuineness of the transaction were accepted by the Department while framing assessments for AY 2012-13, 2015-16, and 2020-2021. The transaction of investment of share capital in the petitioner company was examined in subsequent assessment years and accepted in completed assessments/reassessments u/s 143(3). Once the nature and source of receipts were satisfactorily explained/proved and the Assessing Officer did not contradict the explanation/information given by the assessee, there was no cause for initiating reassessment action for the impugned AYs 2008-09 & 2011-12. The impugned notices issued u/s 148 and the proceedings initiated pursuant thereto were quashed, decided in favor of the assessee.
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Tax reassessment legality scrutinized due to lack of proper sanction.
Reassessment proceedings' validity questioned due to lack of appropriate authority's sanction u/s 151. Legality of jurisdiction, assessment orders, and notices issued under Income Tax Act examined. Held that if assessment order and notices u/ss 148A and 148 contravene Sections 151A and 151 as interpreted in Hexaware and Siemens cases, Appellate and Revisionary Authorities, bound by jurisdictional High Court decisions, must consider this legal position. Petitioner can raise such contentions before these authorities. Writ petitions adjudicating issues pending before Appellate Authority should not be entertained when it can decide per High Court rulings. Petitioner should pursue pending appellate and revisionary proceedings. If assessment order and Section 148 notice prima facie illegal per Hexaware and Siemens, they should not be given effect until appellate and revisionary proceedings decided.
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Tax deducted at source (TDS) statements processed wrongly, penalty quashed for years before law change.
Section 234E late fee levy for TDS statements processed u/s 200A challenged. Court observed Section 200A introduced from 01.06.2015, not applicable for assessment years 2012-13, 2013-14. In absence of Section 200A provisions, late fee u/s 234E ought not to have been imposed while processing TDS applications u/s 200A. Consequently, impugned Demand Intimation Letters set aside as liable.
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Bank wins on interest, bad debt deduction; unclaimed balances not taxable. Listing fees deductible as revenue expense.
The High Court held that the assessee, a banking company, is entitled to exclude interest earned from securities on an accrual basis for income tax purposes. It can claim deduction of bad debts on total average outstanding rural advances without restricting it to incremental advances made during the year. Non-rural bad debts written off and debited to the reserve account can be claimed as a deduction u/s 36(1)(vii). Balances lying unclaimed with the bank for more than three years cannot be treated as income. The assessee is bound to follow the mercantile system of accounting as per the Income Tax Act, Companies Act, and RBI guidelines. The Court ruled that share listing fees are allowable as revenue expenditure and cannot be treated as capital expenditure. Regarding deduction u/s 36(1)(vii) and 36(1)(vii)(a), the issue was remitted to the Assessing Officer to re-examine in light of the Supreme Court's decision in Catholic Syrian Bank Limited. The assessee is entitled to depreciation on account of shifting securities from the available for sale category to the held to maturity category. The assessee is also entitled to deduction of amortization loss/expenses on government securities classified as held to maturity.
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Widow's share transfer not taxable; bank deposits need explanation after wife's demise & hearing.
Petitioner's NRO account deposits were subject to TDS deduction; transferred shares from deceased wife's account not taxable. Respondents classified petitioner as resident, demanded tax on deposits as unexplained investments and transferred shares as purchase of securities. Petitioner unable to explain due to wife's demise and personal commitments. Order passed without opportunity of hearing, violating natural justice. Order set aside, matter remanded for fresh consideration after allowing petitioner to file reply/objections and personal hearing.
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Rejecting CBDT circular's time limit, Court allows late compounding of tax offences for non-habitual offenders.
Rejection of a compounding application filed beyond the prescribed time limit as per the CBDT circular. The High Court held that the CBDT cannot issue a circular contrary to the object of the provisions, and fixing a time limit for filing a compounding application is not permissible u/s 279(2) of the Income Tax Act. The Court ruled that once an offence is compoundable by law, its compoundability cannot be restricted by imposing a time limit. The impugned order was set aside, and the matter was remanded to the respondent to consider the compounding application on record, as the petitioner was not a habitual offender.
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Tax tribunal rules no deemed dividend if shareholder loan is mere journal entry, not actual cash payment.
Deemed dividend u/s 2(22)(e) was added by the Assessing Officer (AO) on the grounds that the assessee, a director and substantial shareholder in a private company, had received a loan from the company. The assessee contended that the provisions apply only to actual cash payments, not journal entries. The Tribunal observed that the addition was based on advances presented as mere journal entries, suggesting no actual loan was received. The assessee consistently explained this before the authorities, but it was not adequately examined. The Tribunal held that since the assessee's contention of no sum being received, only a journal entry passed, was not verified, the CIT(A)'s order was liable to be set aside for lack of findings on this crucial aspect. The assessee's appeal was allowed.
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Telecom distributor's cash deposits treated as business turnover, not income.
Assessee, a distributor of SIM cards and vouchers for Vodafone Mobile Services Limited, earned commission on sales to retail shops. Cash deposits were considered business receipts reinvested in purchasing new SIM cards and vouchers, with consistent fund rotation reflected in bank statements provided to authorities. CIT(A) erred in treating entire sales as income without considering business turnover and payments to Vodafone. ITAT directed AO to calculate estimated profit at 1% on transactions, quashing addition u/s 69A as source of deposits was established. Interest u/ss 234A, 234B, and 234C was denied due to income below taxable limit. ITAT emphasized careful handling of such cases by AOs as adjudicators and investigators. Assessee's appeal was allowed, providing relief from addition of Rs. 1,51,77,749.
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Tax Tribunal allows contingency expenses recorded in books against Cost to Completion report.
Disallowance of contingency expenses claimed by the assessee. The Assessing Officer (AO) disallowed the contingency expenses despite acknowledging that the total cost figure in the Cost to Completion (CTC) report matched the total cost figure in the books of accounts. The Tribunal held that the contingency expenditure, though initially budgeted, is eventually recorded in the books of accounts as actual expenditure. The Tribunal observed that the AO himself admitted that the total cost figure in the CTC report matched the total cost figure in the books of accounts. Since the contingency figures were recorded against the total expenditure, it is illogical to assume that the assessee booked bogus expenditure and generated cash outflow. The Tribunal emphasized that in survey operations, the onus is on the revenue authorities to provide cogent evidence that the assessee incurred expenses not recorded in the books of accounts. As the impugned expenditure was found recorded in the regular books of accounts, the allegation of non-compliance with Standard Operating Procedure (SOP) is irrelevant. The Tribunal directed the AO to delete the additions from the captioned appeals.
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Tax law: Spouse's income clubbed, exemption on reinvesting home sale proceeds allowed.
Applicability of Section 64(1) and Section 54F of the Income Tax Act. Section 64(1) allows for the inclusion of a dependent spouse's income in the assessee's taxable income. The Tribunal held that the assessee's wife was dependent, and her income was rightly included in the assessee's return u/s 64(1). Regarding Section 54F, which provides exemption from long-term capital gains on the sale of a residential property if the proceeds are invested in another residential property, the Tribunal held that the investment in two adjacent flats by the assessee's wife qualified as a single residential unit. Therefore, the assessee was eligible for the exemption u/s 54F, despite the amendment restricting it to one residential unit from April 1, 2015. The Tribunal relied on previous judicial precedents and allowed the assessee's appeal.
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Assets Depreciation Dispute: Trust Records Scrutiny Ordered.
The assessee trust claimed depreciation on assets, but the documents like balance sheet, income and expenditure account, and depreciation chart were not signed by auditors, chairman or accountant. The issue of depreciation claim requires verification of records to determine if assets were considered for application of income earned. Therefore, the matter was restored to the Assessing Officer to verify records, allow depreciation benefit u/s 11 after granting reasonable opportunity of hearing to the assessee. Regarding payment to a specified person, there is no provision to add advance given to income. Relying on a case, it was held that when money advanced for an agreement was returned with interest after cancellation, it cannot be treated as violation of Section 13(1)(c). Hence, this ground was allowed. Additions on account of interest-free advances given to various persons were confirmed. It was held that a mere book entry cannot be income unless income has actually resulted. The reduction in income was part of an agreement for a long-term managing agency arrangement, not a gift. Considering the facts and legal position, the additions were upheld.
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Unutilized amount withdrawn from Capital Gain Account Scheme taxable after 3 years of transfer, not in transfer year.
Assessee claimed deduction u/s 54F for amount deposited in Capital Gain Account Scheme (CGAS) on transfer of capital asset. Unutilized amount withdrawn from CGAS account in succeeding year cannot be taxed in year of transfer. As per Section 54F(4) proviso, unutilized amount withdrawn from CGAS account is taxable in previous year when three-year period from date of transfer expires. Assessee transferred capital asset on 29.07.2015, so three-year period expired on 29.07.2018 (A.Y. 2019-20). Unutilized Rs. 1 crore withdrawn from CGAS in A.Y. 2019-20 is taxable in that year, not in year of transfer. Authorities erred in taxing Rs. 1 crore as long-term capital gain in year of transfer. Decided in assessee's favor.
Customs
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Premature petition dismissed, anti-dumping duty investigation on PVC resins to continue as per rules.
The petitioner, an end user of PVC Suspension Resins, challenged the ongoing anti-dumping duty investigation initiated by the respondent authority. The court dismissed the petition as premature, stating it would jeopardize the investigation process under the relevant rules. The court refrained from interfering at this stage on the merits, considering the petition premature, and allowed the respondent authority to continue with the investigation as per the prescribed rules and procedures.
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Imported goods correctly classified as Naphtha, not Natural Gas Liquid (NGL), by appellant. Revenue failed to prove otherwise.
Onus on Revenue to establish imported goods classifiable under Tariff Item 2710 1220 as Natural Gasoline Liquid (NGL) not discharged. Classification of goods as Naphtha under Tariff Item 27101290 declared by appellant held correct. When department fails to discharge burden of proving claimed classification, entire proceeding vitiated. Settled law that if department doesn't discharge onus for classification claim, appellant's declared classification upheld.
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Customs exemption granted without end-use certificate per Notification, despite contrary Circular.
Appellant availed exemption under Sr. No. 108(1) of Notification No. 23/98-Cus, which unconditionally exempts goods without requiring an end-use certificate. Department denied exemption citing CBIC Circular No. 74/1998-Cus mandating end-use certificate, which is ultra vires the Notification as conditions not prescribed therein cannot be imposed through circulars. Tribunal held that in absence of condition for end-use certificate in the Notification, exemption cannot be denied on that ground. Impugned order set aside, appeal allowed.
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Customs duty refund rightfully granted, unjust enrichment claim rejected for lack of evidence.
The appellant filed bills of entry claiming exemption under Notification No. 46/2011-Cus, which was denied during re-assessment. The Commissioner (Appeals) rectified this mistake u/s 154 of the Customs Act, 1962, allowing the exemption. The department's stay application against this order was rejected. Consequently, a refund of Rs. 4,87,208/- was sanctioned and paid to the appellant. A show cause notice was issued to reject the refund claim, but it did not raise the unjust enrichment issue. The Commissioner (Appeals) brought in the unjust enrichment angle and remanded the matter to re-examine the issue. However, the unjust enrichment issue was never raised in the show cause notice. The Assistant Commissioner had already examined and found no unjust enrichment, which the Commissioner (Appeals) did not contradict. Hence, the Tribunal held that there was no need to re-examine the unjust enrichment issue and set aside the Commissioner (Appeals)' order as legally untenable, finding no infirmity in sanctioning the refund.
IBC
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Tribunal overrules dissolution order; mandates liquidation before corporate dissolution under IBC.
The Appellate Tribunal set aside the Adjudicating Authority's order directing a transaction audit and allowing the application for dissolution u/s 54 of the IBC and Regulation 14 of the Liquidation Regulations. The scheme of the IBC mandates that dissolution is a subsequent step after complete liquidation, which was not undertaken in this case. The CIRP was completed without a resolution plan, despite publication of Form-G twice. No liquidation order was passed u/s 33(1). Since the CoC, consisting of the sole Financial Creditor who initiated CIRP, decided not to contribute towards liquidation costs and the CIRP period ended, the RP should have intimated the Registrar of Companies for striking off the company's name instead of resorting to Section 54. The Appellate Tribunal's judgment in Shyson Thomas was distinguished as a case where the Adjudicating Authority exercised its jurisdiction to direct dissolution.
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Property Dispute: Developer's Land Possession for Project Upheld Under IBC.
The Appellate Tribunal ruled that the Resolution Professional (RP) was entitled to possess the land admeasuring 10.81 acres, where the corporate debtor had constructed the Canary Greens project. The development agreement envisaged 50% shares to the owners and 50% shares (10.81 acres) to the developer. The corporate debtor, having obtained development rights through agreements, was in possession of the project land. The definition of 'property' under the IBC includes development rights, as clarified by the Supreme Court. The Adjudicating Authority erred in observing that the RP could not prove physical possession, as sufficient evidence established the corporate debtor's possession. The Appellate Tribunal held that the Adjudicating Authority was competent to decide the possession issue without relegating it to a civil court. Excluding the 10.81 acres from the corporate insolvency resolution process, as sought by the owners, was not warranted.
Indian Laws
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Businessman's false assurances lead to criminal charges for cheating, breach of trust, and intimidation.
Offence u/ss 420/406/506/120B of the Indian Penal Code, 1860. Complainant/Respondent No. 2 induced by accused to part with money on false pretext of return and repayment assurance. FIR registration mandatory u/s 154 Cr.P.C. if information discloses cognizable offence. No bar under Cr.P.C. for FIR registration while complaint pending before Magistrate. Petitioner No. 2's claim of signing blank documents untenable as educated businessman. Facts warrant no quashing of FIR against Petitioner No. 2 u/ss 420/406/506/120B IPC. Petition dismissed.
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Delayed cheque presentation exceeding validity negates criminal liability.
Cheque dishonored due to delayed presentation beyond statutory validity period. Trial and appellate courts erred in not appreciating significance of 'outdated/stale' memo, which negates cause of action u/s 138 NI Act. Revisional court can only rectify jurisdictional errors or patent defects in law. Appeal allowed, judgments set aside, complaint dismissed as not maintainable, accused acquitted u/s 138 NI Act, fine/compensation refunded.
PMLA
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Accused granted bail due to prolonged delay in trial, long incarceration violating constitutional rights of speedy trial & personal liberty.
Bail granted to accused in money laundering case due to prolonged delay in trial proceedings and long incarceration, violating constitutional rights. Section 45 PMLA cannot override Article 21 guaranteeing speedy trial. Courts have power to grant bail considering totality of circumstances, nature of allegations, delay not attributable to accused. Bail is rule, jail exception. Constitutional mandate of personal liberty prevails over statutory provisions when trial inordinately delayed. Prolonged custody without trial violates fair trial and liberty. Accused released on bail with conditions after considering evidence, flight risk, joining investigation, interim bail conduct.
Service Tax
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Banks to pay service tax on entire Merchant Discount Rate, including interchange fee paid to issuing bank.
The Supreme Court held that the acquiring bank should pay service tax on the entire Merchant Discount Rate (MDR), which includes the interchange fee payable to the issuing bank, rather than separately taxing the interchange fee received by the issuing bank. The use of the conjunction 'and' in the relevant provision indicates the legislative intent to tax the MDR as a whole, without bifurcating it. Taxing the MDR at the first point of collection by the acquiring bank facilitates ease of tax collection and avoids revenue loss. The Revenue Department had all relevant data and could have ascertained the position before issuing show cause notices demanding separate taxation of the interchange fee. As the service tax on the entire MDR has already been paid, no separate tax is payable on the interchange fee component.
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Provident Fund Contributions Mired in Tax Evasion Allegations - Penalties Upheld.
Service tax demand and interest were raised on the amount towards provident fund. Penalties u/ss 76, 77, and 78 of the Finance Act, 1994 were imposed. The extended period of limitation u/s 73(1) of the Finance Act, 1994 was invoked. The appellant was aware of providing taxable services and short-paid service tax, despite issuing invoices indicating service tax payable and collecting it from the service recipient. They did not file ST-3 returns on time as specified by law, suppressing information with the intent to evade taxes. The demand by invoking the extended period and imposing penalties cannot be disputed. The appellant's submissions were inconsistent, initially not contesting the show cause notice but later challenging the applicable rates without substantiation. The CESTAT rejected the challenge to the First Appellate authority's order, finding no merit.
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Premature Resignation Notice Pay Recovery Not a Taxable Service: Tribunal Overrules Tax Demand.
The issue pertains to the taxability of notice pay or amounts recovered by employers from employees upon premature resignation. The department contended that such recovery falls under the category of 'agreeing to an obligation to refrain from an act' u/s 66E of the Finance Act, 1994, and is thus a taxable service. However, the Tribunal held that the matter is settled by the Madras High Court's decision in GE T&D, which ruled that notice pay received by an employer from an employee for premature resignation does not constitute consideration for service rendered by either party. Consequently, the Tribunal set aside the impugned order confirming the service tax demand on such notice pay recoveries, as it does not qualify as a taxable service under the law.
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Service tax refund rejected due to self-assessment without challenge despite potential entitlement.
Refund claim for service tax paid under reverse charge mechanism on transportation of raw material was rejected. The appellant had self-assessed and filed returns without contesting, later filing refund claims directly. It was held that refund proceedings cannot modify assessments already made as per Supreme Court's ruling in ITC Limited case. Delhi High Court in BT (India) Pvt. Ltd. case held ITC Limited's rationale applies to service tax refunds too. Since appellant did not challenge self-assessments wherein no refund was due, refund claim was correctly rejected despite potential entitlement otherwise. Refund proceedings are execution proceedings, cannot alter assessments, like decree cannot be modified in execution.
Central Excise
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Manufacturer's activities on bought-out items: Manufacturing or not?
The appellant undertook several activities on bought-out items, raising the issue of whether these processes amounted to manufacture liable for excise duty. For certain finished products like "EOLIA SHOWER ONLY TRIM", the activities performed transformed individual parts into a complete product with a distinct identity, end-use, and nomenclature, amounting to manufacture u/s 2(f) of the Central Excise Act, 1944. Regarding items like "BOTTLE TRAP" and "FLOOR DRAIN", the appellant claimed the Physical Vapor Deposition (PVD) process merely changed color and made products rust-free, not constituting manufacture. However, applying the Supreme Court's ratio in UNION OF INDIA VERSUS JG. GLASS INDUSTRIES LTD., the PVD process was found essential for product usability by preventing corrosion, qualifying as manufacture incidental to finished goods production u/s 2(f). Consequently, the appeal was partly allowed and partly dismissed by the Appellate Tribunal.
Case Laws:
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GST
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2024 (10) TMI 1613
Grant of Regular Bail - evasion of GST - offences punishable under Sections 132 (1) (d), etc. of the Central Goods and Services Tax Act, 2017 - HELD THAT:- The allegations against the applicant are that he caused a loss of Rs. 8.90 crore, an amount collected as GST from various firms, which he did not deposit with the Government. The procedure for the recovery of such tax is governed by the provisions of the Central Goods and Services Tax Act, 2017, Chapter XV. Section 76 specifies that if tax is collected but not paid to the Government, then the Act itself prescribes the procedure and mode for initiating recovery proceedings. The applicant has already deposited 60 Lakh Rupees before the authority. The applicant has expressed his willingness to deposit 10% of the alleged amount. In this regard, an undertaking has been filed on his behalf stating that the applicant is ready to deposit Rs. 90,00,000/- (Ninety Lakh Rupees) within a period of seven days. This Court has also taken into consideration the law laid down by the Hon'ble Apex Court in the case of SANJAY CHANDRA VERSUS CBI [ 2011 (11) TMI 537 - SUPREME COURT] as well as in the case of GUDIKANTI NARASIMHULU AND ORS. VERSUS PUBLIC PROSECUTOR, HIGH COURT OF ANDHRA PRADESH [ 1977 (12) TMI 143 - SUPREME COURT] . Obviously, the conclusion of trial will take time and keeping the accused behind the bars is nothing but amounts to pre-trial conviction and therefore, considering the celebrated principle of bail jurisprudence is that bail is a rule and jail is exception as well as the concept of personal liberty guaranteed under Article 21 of the Constitution of India, present application deserves consideration. Considering the nature of the allegations made against the applicant/s in the FIR, without discussing the evidence in detail, prima facie, this Court is of the opinion that this is a fit case to exercise the discretion and enlarge the applicant/s on regular bail. Hence, the present application is allowed. The applicant/s is/are ordered to be released on regular bail on fulfilment of conditions imposed - bail application allowed.
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2024 (10) TMI 1612
Direction for release of goods - opportunity of hearing provided or not - violation of principles of natural justice - HELD THAT:- It appears that the petitioner has challenged the order dated 09.01.2023 before the respondent No. 3-Deputy Commissioner of State Tax Appeals-8 (Surat) and the same is pending - During the pendency of the petition, it appears that the respondent No. 3 has granted the opportunity of hearing to the petitioner from time to time. From the case proceedings placed on record by the learned Assistant Government Pleader, it appears that the petitioner did not remain present on 23rd October, 2024 and therefore, the respondent No. 3 has granted another opportunity of hearing by letter dated 24.10.2024 to the petitioner to remain present for further hearing as the learned advocate for the petitioner who appeared before the respondent No. 3 on 26.09.2024 prayed for further hearing through video conference. The petitioner is disposed of so as to enable the respondent No. 3 to pass the appropriate order in accordance with law in the Appeal filed by the petitioner.
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2024 (10) TMI 1611
Validity of SCN u/s 74 (1) of the CGST Act, 2017 read with section 20 of the IGST Act, 2017 - evasion and concealment of tax - parallel proceedings conducted by the DGGI and the Haryana State GST Intelligence Unit as well as Assistant Commissioner, CGST - HELD THAT:- It is found that the contentions raised by the petitioner are wholly misconceived. Issuance of notice under section 73 of the Act and dropping the same would not prevent the authorities from independently initiating proceedings under section 74 of the Act. The said proposition has also been accepted by the Allahabad High Court in HCL INFOTECH LTD VERSUS COMMISSIONER, COMMERCIAL TAX AND ANOTHER [ 2024 (9) TMI 1644 - ALLAHABAD HIGH COURT ]. So far as the question raised by the petitioner with regard to parallel proceedings being conducted by the DGGI and the Haryana State GST Intelligence Unit as well as Assistant Commissioner, CGST is concerned, it is found that while the Assistant Commissioner, CGST issued a letter dated 10.03.2023 to the petitioner requesting him to deposit the tax liability, the office of the DGGI only issued notice seeking certain queries. However, none of the authorities, either of the CGST or the DGGI have proceeded or initiated proceedings under section 74 of the Act. it is apparent that the allegations against the petitioner are that while he is stated of having availed excess to the tune of Rs. 8,84,57,976/- under head IGST; Rs. 23,44,08,735/- in CGST and Rs. 23,43,95,663/- under SGST, however, same is not appearing in GSTR-2A which reflects that the taxpayer has not deposited the tax liability in the Government treasury and has availed the same wrongfully. Resultantly, the notice has been issued to the petitioner. The proceedings under section 74 of the Act are comprehensively and completely laid down under the provisions of the Act, and this Court would not in any manner cause hindrance in the disposal of the proceedings. The writ petition cannot be entertained for the said purposes, more so when prima facie the show cause notice specifically reflects the allegations which the tax authorities feel to reflect of a fraud having been committed by the petitioner. The case and facts of HCL Infotech Ltd. are found to be different from the present case and it cannot be said that the notice does not reflect the allegations. Petition dismissed.
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2024 (10) TMI 1610
Violation of principles of natural justice - assessment order passed without affording an opportunity of personal hearing - prayer to remand the matter back to the first respondent on condition that the petitioner shall pay 10% of the disputed tax amount - HELD THAT:- As far as this case is concerned, without providing an opportunity of personal hearing to the petitioner, the first respondent has passed the impugned assessment order. Therefore, this Court is of the opinion that the impugned assessment order passed by the first respondent is liable to be quashed and it is just to afford an opportunity of personal hearing to the petitioner to put forth his case. The Assessment Order bearing Ref.No.ZD330424197172H dated 25.04.2024 passed by the first respondent and the Communication dated 25.09.2024 addressed to the second respondent by the first respondent are quashed and the matter is remanded back to the first respondent for fresh consideration on condition that the petitioner shall pay 10% of the disputed tax amount to the first respondent, within a period of four weeks from the date of receipt of a copy of this order. After making such payment, the petitioner shall produce the payment proof before the first respondent - Petiiton disposed off by way of remand.
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2024 (10) TMI 1609
Challenge to impugned orders, recovery notices and bank attachment notice - mismatch of GSTR-3B and GSTR-2A - HELD THAT:- According to the petitioner, there was an error crept while filing the Form GSTR-3B. In this regard, a certificate was also obtained by the petitioner and the same was perused and accepted by the learned Government Advocate appearing for the respondent. In such case, this Court is of the view that as contended by the learned Government Advocate appearing for the respondent, it is just and necessary to provide an opportunity to the petitioner to establish their case before the respondent. In such view of the matter, this Court is inclined to set aside the impugned assessment orders. The four assessment orders dated 19.12.2023 came to be passed by the respondent pertaining to the Assessment Years 2017-18, 2018-19, 2019-20 and 2020-21 are set aside and the matters are remanded to the 1st respondent/The State Tax Officer for fresh consideration on condition that the petitioner shall pay 10% of disputed tax amount to the respondent, in each assessment order, within a period of four weeks from today (19.10.2024) and the setting aside of the impugned orders will take effect from the date of payment of the said amount - Petition disposed off by way of remand.
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2024 (10) TMI 1608
Challenge to impugned Letter, directing payment through Electronic Cash Ledger, insofar as it has been issued arbitrarily and in violation of Article 14 of the Constitution - compliance with Section 107(6)(b) of the CGST Act using the Electronic Credit Ledger - HELD THAT:- Considering the facts of the present case, the amount paid by the petitioner as pre-deposit in compliance of section 107 (6) (b) of the CGST Act utilizing the amount of Electronic Credit Ledger is required to be considered valid and impugned letter dated 25.04.2023 issued by the respondent No. 2 directing the petitioner to pay pre-deposit amount through Electronic Cash Ledger is therefore, hereby quashed and set aside. Therefore, the appeal filed by the petitioner is required to be heard on merits by considering the payment of pre-deposit by the petitioner from Electronic Credit Ledger as a sufficient compliance of the provisions of section 107 (6) (b) of the CGST Act. The petition is accordingly disposed of.
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2024 (10) TMI 1607
Violation of principles of natural justice - neither the SCN nor the impugned order of assessment has been served by tendering to the petitioner or by registered post, instead it was uploaded in the common portal - mismatch between GSTR-2A and GSTR-3B - HELD THAT:- The impugned order is set aside and the petitioner shall deposit 25% of the disputed tax within a period of two (2) weeks from the date of receipt of a copy of this order. On complying with the above condition, the impugned order of assessment shall be treated as show cause notice and the petitioner shall submit its objections within a period of four (4) weeks from the date of receipt of a copy of this order along with supporting documents/material. If any such objections are filed, the same shall be considered by the respondent and orders shall be passed in accordance with law after affording a reasonable opportunity of hearing to the petitioner. Petition disposed off.
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2024 (10) TMI 1606
Violation of principles of natural justice - non-applicatjon of mind - petitioner not heard before passing such orders - availment of excess ITC - HELD THAT:- Unfortunately, the petitioner could not file reply immediately to such notice, owing to the fact that the petitioner's Authorized Person, who is taking care of the statutory compliance was not well. However, the excess ITC availed by the petitioner was already rectified/reversed by the petitioner during the monthly returns filed in the subsequent months and to the extent GSTR-3B was also filed, however, the respondent, without considering the said aspect, as if, the petitioner has availed ITC in entirety, passed the impugned orders towards tax liability as well as equivalent amount towards penalty/interest. Though the petitioner filed Applications dated 04.05.2024 and 12.07.2024 setting out such details along with relevant documents and sought for rectification, the respondent, without any application of mind, rejected the Applications by virtue of the impugned orders dated 10.05.2024 and 27.08.2024 respectively. Therefore, this Court is of the view that the impugned orders are nothing but an outcome of total non application of mind and also suffer from violation of principles of natural justice, as the petitioner has not been heard before passing such orders. Hence, this Court is inclined to set aside the same. The impugned orders dated 23.04.2024 as well as the Rejection Orders dated 10.05.2024 and 27.08.2024 respectively are set aside - the matters are remanded to the respondent for fresh consideration - petition allowed by way of remand.
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2024 (10) TMI 1605
Violation of principles of natural justice - valuable right of the petitioner to defend through reply as well as right of personal hearing was taken away - HELD THAT:- The learned counsel for the respondents could not explain the finding given in the portal. The said recording in the portal i.e., Reply furnished, pending for order by tax officer makes it clear that the petitioner s reply to show-cause notice was received by the respondents. Thus, finding given by the Authority in the impugned order that the petitioner failed to submit his reply is factually incorrect and cannot sustain judicial scrutiny. If the reply of the petitioner is not considered, the principles of natural justice were grossly violated. For this singular reason alone, the impugned order cannot sustain judicial scrutiny and the same is liable to be set aside. The Writ Petition is disposed of by setting aside the impugned order dated 25.04.2024 and the Authority is directed to consider the reply filed by the petitioner to the show-cause notice dated 27.12.2023 and proceed further in accordance with law from that stage.
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2024 (10) TMI 1604
Denial of refund of input tax credit debited by the petitioner as a pre-deposit - non-inclusion of the freight and pumping charges collected by the petitioner from its customers into taxable value of the Ready Mix Concrete (RMC) manufactured and supplied by the petitioner to its customers - HELD THAT:- The amount of pre-deposit debited by the petitioner in the returns filed by the petitioner for the respective months for the Assessment Years 2015- 2016 from its input tax credit claimed under the Tamil Nadu Value Added Tax regime is now sought to be denied vide Impugned Intimations all dated 25.11.2021 invoking the Circular No.05/2015/MM3/15440/2013 dated 06.02.2015. The Court is of the view that refund of the aforesaid amounts cannot be denied, since the substantial questions of law now has been answered in favour of the petitioner in terms of the order passed in Tax Case (Revision) Nos.10 and 11 of 2013 dated 13.12.2018. Further, having accepted the pre-deposit of input tax credit through a debit in the VAT Returns and having considered the Revision Orders passed on 14.09.2021, it is not open for the Commercial Tax Department now to turn around and deny the refund stating that the petitioner had not complied with the Order dated 25.03.2015 passed by this Court. As per Section 142(6)(a) and (b) of the Tamil Nadu Goods and Services Tax (TNGST) Act, 2017, the amounts paid as pre-deposit has to be refunded back - the Impugned Intimations all dated 25.11.2021 invoking the Circular No.05/2015/MM3/15440/2013, dated 06.02.2015 at this belated point of time seeking to deny refund are liable to be quashed and are accordingly quashed with consequential reliefs. The respondents are therefore directed to refund the amount to the petitioner within a period of thirty (30) days from the date of receipt of a copy of this order - Petition allowed.
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2024 (10) TMI 1603
Direction to open the online portal in order to rectify the clerical mistake committed in wrongly filing the detail under Column B2C without mentioning GST number of the recipient instead of Column B2B in the GSTR-1 - Ipetitioner submits that the representation dated 20.09.2021 of the petitioner deserves to be considered and disposed by the respondents - HELD THAT:- The grievance of the petitioner is justified. The petitioner is therefore directed to resubmit the representation strictly in accordance with the Circular No.183/15/2022-GST (F.No.CBIC-20001/2/2022- GST) dated 27.12.2022. The respondents are directed to consider the revised representation and pass appropriate orders on merits as expeditiously as possible preferably within a period of three months from the date of filing of the revised representation strictly in accordance with Circular No.183/15/2022-GST (F.No.CBIC- 20001/2/2022-GST) dated 27.12.2022. Petition disposed off.
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2024 (10) TMI 1602
Violation of principles of natural justice - non-speaking order - objections of the petitioner not dealt - Input mismatch of Input Tax Credit (ITC) on comparison between GSTR-3B GSTR-2A and GSTR-3B GSTR-5 - Discrepancy between GSTR-1 and E-Way bill outward supplies - HELD THAT:- The objections of the petitioner have not been dealt with by the respondent while passing the impugned order, the impugned order suffers from the vice of being a non-speaking order and thus, the same is liable to be set aside, more so, when there was a specific direction of this Court in the earlier round of litigation to pass a speaking order. The impugned order passed by the respondent dated 21.05.2024 is set aside. The respondent/authority shall consider the objections filed by the petitioner and pass speaking order in accordance with law, after affording an opportunity of personal hearing to the petitioner, within a period of twelve (12) weeks from the date of receipt of a copy of this order - Petition disposed off by way of remand.
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2024 (10) TMI 1601
Unblocking of ITC - Revocation of suspension of registration - HELD THAT:- This Court is hereby disposing of the writ petition with the liberty granted as sought for, to the writ petitioner, to bring to the notice of the concerned authority by making representation that the Input Tax Credit which has been blocked in consequence of suspension of registration be dealt with by passing an appropriate order - If such representation will be filed, the authority concerned will take decision in accordance with law within a period of two weeks from the date of receipt of such representation. Petition disposed off.
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2024 (10) TMI 1600
Condonation of delay in filing the revocation application - compliance with all the requirements of paying the taxes, interest, late fee, penalty etc. due - HELD THAT:- The delay in Petitioner s invoking the proviso to Rule 23 of the Odisha Goods and Services Tax Rules (OGST Rules) is condoned and it is directed that subject to the Petitioner depositing all the taxes, interest, late fee, penalty etc. due and complying with other formalities, the Petitioner s application for revocation will be considered in accordance with law. Petition disposed off.
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2024 (10) TMI 1599
Condonation of delay in filing the revocation application - compliance with all the requirements of paying the taxes, interest, late fee, penalty etc. due - HELD THAT:- The delay in Petitioner s invoking the proviso to Rule 23 of the Odisha Goods and Services Tax Rules (OGST Rules) is condoned and it is directed that subject to the Petitioner depositing all the taxes, interest, late fee, penalty etc. due and complying with other formalities, the Petitioner s application for revocation will be considered in accordance with law. Petition disposed off.
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2024 (10) TMI 1598
Condonation of delay in filing the revocation application - compliance with all the requirements of paying the taxes, interest, late fee, penalty etc. due - HELD THAT:- The delay in Petitioner s invoking the proviso to Rule 23 of the Odisha Goods and Services Tax Rules (OGST Rules) is condoned and it is directed that subject to the Petitioner depositing all the taxes, interest, late fee, penalty etc. due and complying with other formalities, the Petitioner s application for revocation will be considered in accordance with law. Petition disposed off.
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2024 (10) TMI 1597
Challenge to assessment order - petitioner was not provided a reasonable opportunity to contest the tax demand - violation of principles of natural justice - Petitioner also remitted 10% of the disputed tax demand - HELD THAT:- The petitioner averred in the affidavit that he carried on trade of electrical goods on a small scale and that his consultant had not brought to his knowledge the initiation of proceedings against him. While this explanation is not wholly convincing since the petitioner is under an obligation to monitor the GST portal on an on going basis, it should not be lost sight of that the tax demand was confirmed without the petitioner being heard. The petitioner has also remitted 10% of the disputed tax demand. Solely for the purpose of providing the petitioner with an opportunity to contest the tax demand, the impugned order is set aside on condition that the receipt of 10% of the disputed tax demand be verified before re-assessment is undertaken - petition disposed off.
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2024 (10) TMI 1596
Violation of principles of natural justice - petitioner was not aware of the impugned order until receipt of an urgent notice dated 23.02.2024 by post - no Input Tax Credit (ITC) was claimed in respect of the purchase of the car since such purchase was not related to the petitioner's business - HELD THAT:- The record shows that the petitioner did not reply to the show cause notice or participate in proceedings culminating in the impugned order. As a consequence, the petitioner was unable to contend and establish that no ITC was availed of in respect of the purchase of the BMW car - the petitioner submits that the petitioner agrees to remit 10% of the disputed tax demand as a condition for remand. Since the petitioner did not have a reasonable opportunity to contest the tax demand, the interest of justice warrants providing the petitioner with such opportunity, albeit by putting the petitioner on terms. The impugned order is quashed and the matter is remanded to the respondent for reconsideration subject to the condition that the petitioner remits 10% of the disputed tax demand as agreed to with in a period of 15 days from the date of receipt of a copy of this order - Petition disposed off by way of remand.
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2024 (10) TMI 1595
Maintainability of petition - availability of alternative remedy - Challenge to assessment order - expenditure incurred by the petitioner towards price difference was treated as taxable supply under the applicable GST enactments - HELD THAT:- On examining the impugned order, it is evident that tax demands under six heads were considered therein. Proceedings were preceded by a show cause notice to which the petitioner replied. A personal hearing was admittedly provided to the petitioner. The issue on which learned counsel focussed attention pertains to price difference in relation to steel products sold by the petitioner. Undoubtedly, the adjudication of this issue would entail consideration of disputed questions of fact, which cannot be conveniently addressed in proceedings under Article 226 of the Constitution of India. The impugned order was issued on 21.12.2023 and the period of limitation, without condonation, expired on or about 21.03.2024. The petitioner is still within the condonable period. In these circumstances, it is just and appropriate that if the petitioner files an appeal within a reasonable period, such appeal be considered and disposed of on merits. The petition is disposed of by permitting the petitioner to file a statutory appeal within a period of 15 days from the date of receipt of a copy of this order.
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2024 (10) TMI 1594
Condonation of delay in filing the revocation application - compliance with all the requirements of paying the taxes, interest, late fee, penalty etc. due - HELD THAT:- The delay in Petitioner s invoking the proviso to Rule 23 of the Odisha Goods and Services Tax Rules (OGST Rules) is condoned and it is directed that subject to the Petitioner depositing all the taxes, interest, late fee, penalty etc. due and complying with other formalities, the Petitioner s application for revocation will be considered in accordance with law. Petition disposed off.
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2024 (10) TMI 1593
Condonation of delay in filing the revocation application - compliance with all the requirements of paying the taxes, interest, late fee, penalty etc. due - HELD THAT:- The delay in Petitioner s invoking the proviso to Rule 23 of the Odisha Goods and Services Tax Rules (OGST Rules) is condoned and it is directed that subject to the Petitioner depositing all the taxes, interest, late fee, penalty etc. due and complying with other formalities, the Petitioner s application for revocation will be considered in accordance with law. Petition disposed off.
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2024 (10) TMI 1592
Challenge to assessment order - personal hearing was not offered after receipt of the petitioner's reply - violation of principles of natural justice - HELD THAT:- The documents on record include the petitioner's reply on 20.06.2023. Such reply was referred to in the impugned order and treated as a reply to the show cause notice. Although the petitioner is not blameless in as much as much as the petitioner did not reply to the intimation within a reasonable time or reply to the show cause notice, in view of breach of the mandatory requirement of subsection (4) of Section 75, the impugned order calls for interference. The impugned order dated 09.10.2023 is quashed and the matter is remanded for reconsideration. The petitioner is permitted to submit any documents in support of the reply with in a maximum period of two weeks from the date of receipt of a copy of this order - petition disposed off by way of remand.
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2024 (10) TMI 1591
Challenge to assessment order - assessing officer failed to act in accordance with the mandate under Section 5 of the Central Goods and Services Tax Act 2017 - opportunity of hearing provided or not - violation of principles of natural justice - HELD THAT:- The documents on record evince that principles of natural justice were adhered to not only by providing an opportunity to the petitioner to contest the tax demand, but by also providing a personal hearing to the petitioner. The petitioner responded both to the intimation and show cause and even submitted written synopsis before the assessing officer. The petitioner does not assert that documents submitted by him were disregarded in course of assessment. In these facts and circumstances, no case is made out to exercise discretionary jurisdiction under Article 226 of the Constitution of India. Petition is dismissed by leaving it open to the petitioner to avail of the statutory remedy.
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2024 (10) TMI 1590
Challenge to allotment done in favour of O.P. No.4 - failure to satisfy requirement of the tender documents more particularly the Sealed Limited Tender Enquiry Notice - HELD THAT:- Since the petitioner has not satisfied the requirement as per the tender documents, this Court does not find any illegality or irregularity to have been committed by the tendering authority. The writ petition merits no consideration and the same stands dismissed.
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2024 (10) TMI 1589
Seeking direction to the respondent to allow the application of the petitioner seeking cancellation of the GST - HELD THAT:- With the consent of the parties, the petition is taken up for hearing today. 4. Petitioner applied for cancellation of the GST registration on 27.12.2023. However, a query was raised on 31.01.2023 seeking additional information to which as per the petitioner reply has been duly submitted, however, the application has not yet been disposed of. The petition is disposed of directing the respondent to dispose of the application of the petitioner seeking cancellation of the GST registration within a period of four weeks from today.
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2024 (10) TMI 1588
Violation of principles of natural justice - order u/s 73 of the OGST Act passed without granting any opportunity of personal hearing to the Petitioner - HELD THAT:- Without expressing any opinion on the merits of the case, since the Deputy Commissioner of State Tax while passing the order dated 14.11.2022 has not been given opportunity of hearing to the Petitioner, the said order cannot be sustained in the eye of law. Accordingly, the order dated 14.11.2022 is liable to be quashed and is hereby quashed. Therefore, this Court remits back to the very same authority to rehear the matter afresh in accordance with law after giving opportunity of hearing to the Petitioner taking into consideration the ratio decided by this Court in KHANI KHYATIGRASTA GRAMYA COMMITTEE VERSUS THE COMMISSIONER OF COMMERCIAL TAX GST AND ANOTHER [ 2023 (11) TMI 1220 - ORISSA HIGH COURT ]. The writ petition stands disposed of by way of remand.
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2024 (10) TMI 1587
Territorial Jurisdiction - Challenge to impugned Summons dated 26.02.2024 issued to the petitioner s establishment located in Pune, Maharashtra - Section 70 of the Central Goods and Services Tax Act, 2017 - present writ petition has been filed before this Court only on the ground that the registered office of the petitioner s establishment is at Hyderabad and the requirement under the summons was for checking the liability of all the units under the petitioner s establishment (Pan India) - HELD THAT:- The summons to the petitioner s establishment has been issued at the office situated at Pune, Maharashtra and the office of respondent No.3, who has issued the summons, is situated at Mumbai, Maharashtra. As both the addresses, at which the summons has been issued and the authority who has issued the summons being located in the State of Maharashtra itself, it is opined that the jurisdiction for challenging the impugned summons dated 26.02.2024 would not lie with the High Court for the State of Telangana, but would be before the High Court which has the territorial jurisdiction over Pune as well as Mumbai. The present Writ Petition is disposed of reserving the right of the petitioner to avail appropriate remedies available to them under law.
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Income Tax
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2024 (10) TMI 1586
Validity of notices of reassessment - Compliance of reassessment notices with the Faceless Scheme of Assessment - whether a notice u/s 148, if issued by the JAO, would sustain in light of the scheme formulated in accordance with Section 151A ? - whether the Section 148 notice was rendered invalid on the ground of having been issued by the JAO? - HELD THAT:- As we view Explanation 1 of Section 148 of the Act, it becomes apparent that an assessing officer could form an opinion that income chargeable to tax had escaped assessment on the basis of (a) information which comes to light through the RMS (b) an audit objection (c) information received under agreements with nations (d) information made available to the JAO in terms of a scheme notified under Section 135A or (e) information on which further action is warranted in consequence to an order of a Tribunal or a Court. It is thus manifest that apart from information which is made available to the JAO pursuant to the RMS, the Act contemplates a decision to commence reassessment also being founded or based upon other inputs which are noticed in clauses (a) to (e) of Explanation 1. In essence, the Act permits reassessment not only on RMS data but also on a variety of other specified inputs ensuring a broader foundation for initiating reassessment. In terms of Explanation 2 to Section 148, information that may come to the fore consequent to a search or survey, is also, by virtue of the legal fiction incorporated therein, deemed to be that which would constitute information and be viewed as suggestive of income chargeable to income having escaped assessment. The material that may be gathered in the course of a search or survey also thus constitutes information which comes to be placed in the hands of the JAO and which may form the basis for formation of opinion of whether reassessment is merited. Information relevant for assessment - In cases where questions of capital gains are at issue, the AO stands conferred with the power to make a reference to a Valuation Officer for an estimation of value, including the fair market value of any asset, property or investment. This power which stands individually conferred upon the AO stands enshrined in Section 142A of the Act. TOLA also introduced Section 142B and which in turn empowered the Union Government to frame a scheme for the purposes of faceless inquiry or valuation. In exercise of that power, the Union Government has framed a scheme which came to be notified on 30 March 2022. Origins of faceless assessment - A careful reading of that clause shows that the draftsman has used a comma immediately after the phrase shall be through automated allocation . Yet another comma appears after the phrase for issuance of notice . It thus appears to have been the clear intent of the author to separate and segregate the phases of initiation of action in accordance with RMS, the formation of opinion whether circumstances warrant action under Section 148 of the Act being undertaken by issuance of notice and the actual undertaking of assessment itself. Beyond the specific use of punctuation within Clause 3, a comprehensive reading of the Faceless Reassessment Scheme 2022, supported by the extensive material presented by the respondents, bolsters the clear intent underlying each phase of the faceless assessment process. As we had noticed in the preceding parts of this decision, the RMS and the Insight Portal pushes information to the JAO and is principally not concerned with faceless assessment at all. The RMS essentially enables the JAO to firstly examine the veracity of disclosures made and examine the return against various parameters and information which has been collated by the Directorate of Systems. It thus provides the JAO with an insight in respect of various transactions to which the assessee may be connected as well as data pertaining to that assessee which has otherwise been aggregated and mapped on the basis of material existing on the system of the respondents. The respondents would, therefore, appear to be correct in their submission that when material comes to be placed in the hands of the JAO by the RMS, it would consequently be entitled to initiate the process of reassessment by following the procedure prescribed under Section 148A. If after consideration of the objections that are preferred, it stands firm in its opinion that income was likely to have escaped assessment, it would transmit the relevant record to the NFAC. It is at that stage and on receipt of the said material by NFAC that the concepts of automated allocation and faceless distribution would come into play. The actual assessment would thus be conducted in a faceless manner and in accordance with an allocation that the NFAC would make. This, in our considered opinion, would be the only legally sustainable construction liable to be accorded to the scheme. Our conclusion would thus strike a harmonious balance between the evaluation of information made available to an AO, the preliminary consideration of information for the purposes of formation of opinion and its ultimate assessment in a faceless manner. We are also, in this regard, guided by the principles of beneficial construction and thus avoiding an interpretation that would render portions of the Act or the Faceless Assessment Scheme superfluous or ineffective should be avoided. To assert that the JAO s powers become redundant under the faceless assessment framework would conflict with beneficial construction, as it would undermine provisions specifically established to support comprehensive data analysis and informed decision-making, such as the JAO s access to RMS and Insight Portal information. We are fully cognizant of the contrarian view which was expressed in this respect in Hexaware Technologies and which stands reflected in para 36 of the report which has been extracted hereinabove. However, for reasons assigned in the preceding parts of this decision, we find ourselves unable to concur with the interpretation accorded by the Bombay High Court upon Clause 3 of the Faceless Reassessment Scheme 2022. As was noted by us earlier, Clause 3 clearly contemplates the initial enquiry and formation of opinion to reassess being part of one defined process followed by actual assessment in a faceless manner. It thus divides the process of reassessment into two stages and when viewed in that light it is manifest that it strikes a just balance between the obligation of the JAO to scrutinise information and the conduct of assessment itself through a faceless allocation. The distribution of functions between the JAO and NFAC is complimentary and concurrent as contemplated under the various schemes and the statutory provisions. This balanced distribution underscores the legislative intent to create a seamless integration of traditional and faceless assessment mechanisms within a unified statutory framework. This we so hold and observe since we have, principally, been unable to countenance a situation where the JAO stands completely deprived of the jurisdiction to evaluate data and material that may be placed in its hands. We, accordingly and for all the aforesaid reasons find ourselves unable to sustain the challenge as addressed. The contention that the impugned notices are liable be quashed merely on the ground of the same having been issued by the JAO is thus negated. Accordingly, while we dismiss these writ petitions
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2024 (10) TMI 1585
Scope and extent of the power which the Income-tax Settlement Commission could exercise - Deputy Commissioner of Income Tax seeks to impugn the order of the Income Tax Settlement Commission [ITSC] as granted immunity to the respondent nos. 1 and 2 from prosecution and penalty proceedings - whether it would be open for the writ petitioner to assail the order of the ITSC only to the extent of according immunity from prosecution and penalty as contemplated u/s 245H - HELD THAT:- In the facts of the present case, faced with a situation where the ITSC had at no stage come to conclude that the applications as made were liable to be rejected either on the ground that the respondents had failed to make a full and true disclosure or that they had failed to cooperate in the proceedings. If these twin conditions were found to be satisfied for the purposes of Section 245D (4), we fail to appreciate how the said issue could be questioned or reagitated while examining the validity of the discretionary power exercised by the ITSC u/s 245H. In our considered opinion, once the condition of full and true disclosure is held to be satisfied, the same would not partake a separate or different hue for the purposes of Section 245H. Any view to the contrary if taken, would surely result in an incongruous situation arising. This since it would constrain the Court to hold that the test of full and true disclosure applies differently for the purposes of computation and grant of immunity. We bear in consideration the indubitable fact that while the power to grant immunity stands enshrined in a separate provision in Chapter XIX-A, the said power is exercised contemporaneously by the ITSC while disposing of an application for settlement. The statute does not prescribe the power of computation and grant of immunity being exercised on the basis of tests and precepts which could be said to be separate or distinguishable. Section 245H postulates the power of immunity being liable to be invoked identically on a full and true disclosure of income and cooperation rendered before the ITSC. Thus, both Section 245D (4) as well as Section 245H are premised on identical considerations. It would thus be incorrect to uphold the contention of a perceived dichotomy between the opinion with respect to full and true disclosure under Section 245D and that which would guide Section 245H. Regard must also be had to the fact that the Act undoubtedly confers a finality and conclusiveness upon orders made by the ITSC. This becomes evident from a reading of Section 245I and which proscribes any matter or issue which stands concluded by an order of the ITSC being reopened in any proceedings under the Act. That the Legislature clearly intended to imbue finality upon an order of the ITSC is further underscored by Section 245I using the expression save as otherwise provided . Thus, an order Chapter XIX-A could be reviewed or reopened only on grounds set out therein and on no other. Supreme Court in Kotak Mahindra [ 2023 (9) TMI 1231 - SUPREME COURT] held that the essential ingredients liable to be borne in consideration by the ITSC for the purposes of grant of immunity are cooperation by the applicant in the computation of total income in the settlement proceedings and a full and true disclosure of income being made. The settlement is premised on a full and true disclosure before the ITSC irrespective of the disclosures or discoveries that may be made before an Assessing Officer. Income-tax Settlement Commission is conferred wide powers by virtue of the provisions enshrined in Chapter XIX-A to examine and evaluate all aspects relating to an application for settlement that may come to be made before it. By virtue of the statutory powers so conferred, the Income-tax Settlement Commission's jurisdiction to examine and inquire is not confined merely to the disclosures that an applicant may choose to make. This is evident from the statutory provisions empowering and enabling it to call for reports from the Principal Commissioner/Commissioner as also the framing of directions for further inquiry and investigation being undertaken. Chapter XIX-A in our considered opinion thus enables the Income-tax Settlement Commission to holistically examine all aspects that may be said to arise from the application submitted for its consideration and enabling it to accord a full and complete closure to all disputes. The power conferred upon the Income-tax Settlement Commission not being confined merely to the matters spoken of and covered by the application but also extending to any other matter relating to the case was an aspect which came to be highlighted in a decision handed down by a Division Bench of the court in Tahiliani Design P. Ltd. [ 2021 (2) TMI 106 - DELHI HIGH COURT] Thus we find that the order of the ITSC clearly does not merit interference under Article 226 of the Constitution. Invocation of the principle of severability - The power to sever and to disgorge a part which is offending and unsustainable could be wielded, provided it does not impact the very foundation of an order. However, and as we had noticed hereinabove, the considerations for the framing of an order u/s 245D (4) and 245H do not proceed on a consideration of factors which may be said to be distinct or independent. Both are informed by and founded upon cooperation and full and true disclosure and which are the essential prerequisites for computation of the settlement amount as well as consideration of grant of immunity. The aforenoted two factors thus constitute the very substratum of an application for settlement. Interfering with the grant of immunity on grounds as suggested by the writ petitioner would essentially amount to the Court questioning the validity of the acceptance of the application itself by the ITSC. If the twin statutory conditions were found to be satisfied and thus meriting an order of settlement u/s 245D (4) being rendered, the position would not vary or undergo a change when it come to the question of grant of immunity. We thus find ourselves unable to countenance the challenge as raised. WP dismissed.
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2024 (10) TMI 1584
Reopening of assessment u/s 147 - Addition u/s 68 on share premium received by the petitioner from Gold Singapore - reassessment proceedings had been initiated primarily for the reason that Gold Singapore does not appear to be carrying out any business activities in Singapore and has been floated to act as a conduit for further investments in Indian companies - HELD THAT:- As in the assessment order AY 2012-13, AO has accepted the transaction of share application money/share capital received from Gold Singapore without any addition in that regard and also accepted the status of the holding company i.e. Gold Singapore. The identity and creditworthiness of Gold Singapore and the genuineness of the transaction has been accepted by the Department while framing assessments for AY 2012-13, 2015-16 and 2020-2021. The transaction of investment of share capital in the petitioner company has been duly examined in subsequent assessment years and accepted in completed assessments/reassessments under Section 143 (3) - Once the nature and source of receipts have been satisfactorily explained/proved and AO has not contradicted the explanation/information given by the assessee, there lies no cause for initiating the reassessment action for the impugned AYs 2008-09 2011-12. Thus, we are of the opinion that the reasons for initiation of the impugned assessment proceedings do not survive and therefore the impugned notices issued u/s 148 of the Act and the proceedings initiated pursuant thereto are quashed. Decided in favour of assessee.
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2024 (10) TMI 1583
Validity of reassessment proceedings - applicability of Section 151 of the provisions of the Act as the sanction has not been granted by the appropriate authority as specified under the said provisions - Legality of jurisdiction and assessment orders and notices issued under the Income Tax Act - HELD THAT:- Once the petitioner has availed of an alternate remedy as provided under the Income Tax Act, namely of a substantive appeal being filed, and if the assessment order as also the notices issued to the petitioner prior thereto under Section 148A and under Section 148 are contrary to the substantive provisions of Section 151A and Section 151 of the Act, as interpreted by this Court in Hexaware [ 2024 (5) TMI 302 - BOMBAY HIGH COURT] and Siemens [ 2023 (9) TMI 552 - BOMBAY HIGH COURT] the Appellate Authority as also the Revisionary Authority, being bound by the said decisions of the jurisdictional High Court, need to consider such legal position. Thus, the petitioner is not precluded from raising all such contentions, as raised before us in the present proceedings, before the said authority. Accordingly, we are of the opinion that the proceedings which are pending before the CIT (A) as also the Revisionary proceedings be decided considering the contentions of the petitioner, namely, as to whether the impugned assessment order as also the notice under Section 148 of the Act is illegal when tested on the law as declared by this Court in the aforesaid decisions. An approach ought not to be followed that when the appellate authority is already seized with the proceedings, we entertain writ petitions to adjudicate what can certainly be adjudicated by the appellate authority, considering the said decisions of this Court. As rightly pointed an approach otherwise would create a situation that all matters which are pending before the Appellate Authority, and which are supposed to be decided in accordance with law involving issues on applicability of the decisions of this Court in disposing of the proceedings, would be required to be entertained by this Court. Certainly, such approach cannot be adopted by the Court. We are hence of the opinion that it would be appropriate that the assessee pursues such pending proceedings as already filed before the appropriate Appellate Authority or Revisionary Authority. Accordingly, we are not persuaded to entertain the present proceedings which assail the assessment order when appeal is already filed by the petitioner as also the revision proceedings are pending. We find substance in Petitioner s contention that if prima facie the petitioner is correct that the impugned assessment order as also the notice issued u/s 148 if it is illegal and contrary to the law laid down by this Court in Hexaware and Siemens (supra), the same ought not to be given effect, till the appellate proceedings and revisionary proceedings are decided.
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2024 (10) TMI 1582
Reopening of assessment u/s 147 - assessment order u/s 143 (3) wherein no addition was made on the issue of tax deducted at source and cash deposits - HELD THAT:- It is not in dispute that the petitioner has filed reply to the notice issued u/s 142 (1) of the Act during the regular course of assessment and after considering the same, the assessment order was passed u/s 143 (3) of the Act. On a bare perusal of the reasons recorded, it is apparent that the respondent AO has assumed jurisdiction on perusal of the assessment record, in absence of any fresh tangible material which was not considered during the course of regular assessment proceedings which would amount to mere change of opinion. Therefore, as held in case of Kelvinator of India Ltd. [ 2010 (1) TMI 11 - SUPREME COURT] the AO could not have assumed the jurisdiction to reopen the assessment. In view of above settled legal position, the petition succeeds and is accordingly allowed. Impugned notice issued u/s 148 of the Act is hereby quashed and set aside.
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2024 (10) TMI 1581
Penalty u/s 271 (1) (c) - defective notice u/s 274 - Tribunal has on facts found that the notice which was served upon the Assessee for seeking his explanation was not clear and unambiguous and Assessing Authority concerned had not recorded its satisfaction with regard to one of the two limbs or on both the limbs indicated in clause (c) of sub-section 1 of Section 271 - HELD THAT:- Assessing Authority was itself not clear, whether it was a case of concealment of particulars of income by the Assessee or his failure to furnish correct particulars of such income - Assessee too was deprived of a clear opportunity to give the explanation in view of the confusion created by the Assessing Authority itself. It is in these circumstances, the Tribunal, after relying upon the several precedents, came to the correct conclusion that it was a case where the Assessee had not given the proper opportunity to offer his explanation and, therefore, the impugned order of imposition of penalty was vitiated being in violation of the principles of natural justice. Tribunal also found fault with the requisite satisfaction which the Assessing Authority was required to arrive at before initiating the penalty proceedings. Be that as it may, the order impugned before us does not suffer from any illegality and, therefore, there is no case made out for interference with the judgment of the Tribunal - Decided against revenue.
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2024 (10) TMI 1580
Maintainability of appeal on low tax affect - as submitted that the issue involved in the present case relates to Double Taxation Avoidance Agreement and would therefore fall in the exceptions - HELD THAT:- Firstly, as we accept the argument raised by learned counsel for the respondent with regard to the case not falling within exception to clause l(ii) of para 3.1 which is only with respect to litigation arising out of disputes related to TDS/TCS matters in both domestic and international taxation charges, wherein disputes relating to appeals of international taxation charges with the applicability of provisions of Double Taxation Avoidance Agreement would fall. Even otherwise, the questions of law raised by the appellant in the present case stand adequately answered by the Apex Court in Engineering Analysis 2021 (3) TMI 138 - SUPREME COURT] Review petitions having been already dismissed, we do not find any reason to further keep this case pending for adjudication. Appeal is dismissed accordingly.
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2024 (10) TMI 1579
Revision u/s 263 - scrutiny assessment order u/s 143(3) - HELD THAT:- Insofar as the scrutiny assessment that has been made by the AO is concerned, as we have seen the order passed by the assessing officer u/s 143(3) on 30.12.2019, where nothing has been stated as to what are all the inputs and documents which have been sought for under the scrutiny assessment order from the assessee and what are all the documents which have been filed by the assessee, whether those documents have been perused and verified and only thereafter the assessing officer has come to the conclusion to confirm the income as admitted under the return. These are the issues which ought to have been gone into by the assessing officer. But, those issues are conspicuously absent in the assessment order dated 30.12.2019. The issues that have been found out by the revisional authority with regard to the increase of share premium to the extent of Rs. 14.84 Crores and also the non-disclosing of the source or non-verification of the source if it is disclosed by the assessee with regard to the cash deposits during demonetization period to the extent and also so much of cash deposits in the bank account of the assessee are all the issues which had been found by the revisional authority. When those issues have not been verified or scrutinized properly by the assessing officer, there would be prejudice to the Revenue. Hence, the revisional authority has invoked the revisional power u/s 263(3), which of course, in the considered opinion of this Court, rightly. Therefore, absolutely there is no reason to interfere with the decision taken by the revisional authority in passing the assessment order u/s 263 on 29.03.2022 as well as the order passed by the Tribunal which is impugned herein.
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2024 (10) TMI 1578
Rejection of stay petition filed u/s 220(6) - importance of considering prima facie case, financial stringency, and balance of convenience in stay petitions - HELD THAT:- The law on this aspect has been settled by this Court in its decision rendered in Kannammal Vs. Income Tax Officer [ 2019 (3) TMI 1 - MADRAS HIGH COURT] as held that Circulars and Instructions as extracted above are in the nature of guidelines issued to assist the assessing authorities in the matter of grant of stay and cannot substitute or override the basic tenets to be followed in the consideration and disposal of stay petitions. The existence of a prima facie case for which some illustrations have been provided in the Circulars themselves, the financial stringency faced by an assessee and the balance of convenience in the matter constitute the 'trinity', so to say, and are indispensable in consideration of a stay petition by the authority. The Board has, while stating generally that the assessee shall be called upon to remit 20% of the disputed demand, granted ample discretion to the authority to either increase or decrease the quantum demanded based on the three vital factors to be taken into consideration. The assessing officer has merely rejected the petition by way of a non-speaking order. Assessing Officer ought to have taken note of the conditions precedent for the grant of stay as well as the Circulars issued by the CBDT and passed a speaking order. Of course the petition seeking stay filed by the petitioner is itself cryptic. The issue on this aspect is also covered by a decision of the Hon'ble Supreme Court in LG Electronics India Private Limited [ 2022 (5) TMI 120 - SC ORDER] Thus we set aside impugned order and AO is directed to pass orders de novo on the stay application filed by the petitioner in the light of the discussion as aforesaid.
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2024 (10) TMI 1577
Levy of late fee u/s 234E - processing TDS statements under Section 200A - HELD THAT:- In the present case, the respondent had imposed the late fee only under Section 234E of the Act for the assessment years 2012-2013, 2013-2014. However, Section 200A of the Act was not introduced during the said assessment years and it was introduced only with effect from 01.06.2015 . Therefore, in the absence of any provisions under Section 200A of the Act, the respondents ought not to have imposed late fee under Section 234E while processing the applications for TDS under Section 200A. Hence, in such view of the matter, this Court is of the opinion that the impugned Demand Intimation Letters are liable to be set aside.
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2024 (10) TMI 1576
Validity of Faceless Assessment order passed w/o perusing documents filed by the Petitioner - HELD THAT:- Considering the submissions made by Petitioner, in the present case since the 2nd Respondent Faceless Assessment Officer had no occasion to peruse the documents filed by the Petitioner, at the time of personal hearing since those are yet to be uploaded in the web portal. Petitioner submitted that now the Petitioner is ready to upload the documents in the web portal as sought for by the Respondents and seeks three months time. This Court is inclined to set aside the impugned Assessment Orders. Accordingly, this Court passes the following order: (i) The orders impugned herein are set aside and the matters are remanded back to the authority concerned. (ii) The Respondents concerned shall take steps to open/activate the Department Portal within a period of three months from the date of receipt of a copy of this order. (iii) The Petitioner is directed to upload the documents sought for by the Respondents within a period of three months from the date of activation of the Department Portal. (iii) On uploading of such documents by the Petitioner, the respondent concerned shall consider the same and issue a 14 days clear notice by fixing the date for personal hearing to the petitioner and the Faceless assessment officer shall provide personal hearing through video conferencing and thereafter, pass appropriate orders on merits and in accordance with law, after hearing the petitioner, as expeditiously as possible as contemplated u/s 144B.
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2024 (10) TMI 1575
Validity of order made u/s 147 r.w.s. 144 and penalty order for the same year -petitioner would submit that the petitioner is a non tax payer - sale consideration received on the sale of the immovable property should be assessed as income from short term capital gain - as contended that the petitioner is an illiterate and do not know online filing of replies to the assessment, etc., in this regard, the petitioner relied on the Power of Attorney Agent to file give suitable replies to the respondents, but, the said Power of Attorney did not respond to the notices properly, which resulted in the impugned orders passed against the petitioner. HELD THAT:- Petitioner, being an unlettered and also a non-tax payer, was ignorant of any of the notices/communications which were sent by the respondent-Income Tax Department through online Portal only when the recovery proceedings came to be initiated against the petitioner, the petitioner became aware of the impugned proceedings. Though Respondents raised strong objection to the plea taken by the petitioner by stating that ''Ignorantia Juris Non Excusat , since the petitioner is common plebian, there wouldn't have been any occasion for him to open and view the online portal then and there. In the said scenario, it is sheer clear that the petitioner is totally unaware of the proceedings being initiated by the respondent- Income Tax Department. That apart, the sale was made in the year 2013-14, whereas, impugned proceedings were initiated in the year 2021, therefore, the petitioner, being a non-tax payer, cannot be expected to view the Portal after a lapse of 8 eight years. Thus, the reasons assigned by the petitioner for not responding to the communications sent by the respondent- Department is genuine and reasonable. Thus, this Court, in the interest of justice, is inclined to set aside the impugned orders, as the same were passed in violation of principles of natural justice, however, the same subject to the payment of Rs. 5,000/- to the Advocate Clerk Association, High Court.
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2024 (10) TMI 1574
Exclude interest earned from securities on accrual basis for the purpose of income tax - assessee is entitled for deduction of bad debts on the total average outstanding rural advances made by the bank at the end of the accounting year without restricting the deduction to incremental advance made during the year - non-rural bad debts written off and debited to reserve account can be claimed as deduction of bad debt u/s 36(1)(vii) - balances lying unclaimed with the bank for more than 3 years cannot be treated as income of the assessee - assessee is a banking company bound to follow mercantile system of accounting as per Income Tax Act, Indian Companies Act, RBI guidelines - HELD THAT:- The issue was covered by the decision of this Court in the case of City Union Bank Limited, [ 2007 (2) TMI 187 - MADRAS HIGH COURT] and that of the Hon'ble Supreme Court in the case of Brooke Bond India Ltd. vs. Commissioner of Income Tax [ 1997 (2) TMI 11 - SUPREME COURT] - Substantial question of law at Sl.No.1 and 4 require no further deliberation as the substantial questions of law has already been answered by this Court in the above case. Allowance of deduction of amortization loss/expenses on Government securities classified as Held to Maturity Category - Tribunal held that share listing fees is allowable as revenue expenditure and cannot be treated as capital expenditure - HELD THAT:- Hon'ble Supreme Court has answered the issues arising in Brooke Bond India Ltd. [ 1997 (2) TMI 11 - SUPREME COURT] placing reliance on its earlier decision in the case of Punjab State Industrial Development Corpn. Ltd [ 1996 (12) TMI 6 - SUPREME COURT] held though the increase in the capital results in expansion of the capital base of the company and incidentally that would help in the business of the company and may also help in the profit making, the expenses incurred in that connection still retain the character of a capital expenditure since the expenditure is directly related to the expansion of the capital base of the company. Deduction u/s 36(1)(vii) and 36(1)(vii)(a) - We are inclined to remit the issue back to the Assessing Officer to re-examine the issue afresh in the light of the decision of SC in Catholic Syrian Bank Limited [ 2012 (2) TMI 262 - SUPREME COURT] as the matter would require a proper redetermination as to whether the Respondent/Assessee had correctly computed the deduction under Section 36(1)(vii) (a) of the Income Tax Act, 1961 to limit deduction to the extent of difference between the debt or part thereof written off in the previous year and credit balance in the provision for bad and doubtful debts account made under clause (vii)(a) to Section 36. Proviso to Section 36(1)(vii) relates to cases covered under Section 36(1)(vii)(a) and has to be read with Section 36(2)(v) of the Act. Depreciation is to be allowed on on account of shifting of securities from available for sales category (AFS) to held to maturity category (HTM) - HELD THAT:- This issue is covered by the decision of United Commercial Bank [ 1999 (9) TMI 4 - SUPREME COURT] as held whether the assessee is entitled to the particular deduction or not will depend upon the provision of law relating thereto and not on the view which the assessee might take of his rights nor can the existence or absence of entries in the books of account be decisive or conclusive in the matter. In the present case, the question is slightly different. For reasons, the Central Government, in exercise of the powers conferred by Section 53 of the Banking Regulation Act, and on the recommendation of the RBI, permitted the assessee not to disclose the market value of its investment in the balance sheet required to be maintained as per the statutory form. But as the assessee was maintaining its accounts on mercantile system, he was entitled to show his real income by taking into account market value of such investments in arriving at real taxable income. On that basis, therefore, the Assessing Officer has taxed the assessee. Entitlement for deduction of amortization loss/expenses on Government securities classified as Held to Maturity Category - HELD THAT:- The issue is answered against the revenue in terms of the decision of The Lakshmi Vilas Bank Limited, Karur [ 2020 (11) TMI 945 - MADRAS HIGH COURT] In the result, Substantial Question of Law are answered against the revenue in favour of the Respondent/Assessee. However, for re-examination of the benefit claim under Section 36(1)(vii) and 36(1)(vii)(a) of the Income Tax Act, 1961 are concerned they are remitted back to the Assessing Officer to pass a fresh order on merits and in accordance with law.
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2024 (10) TMI 1573
Deposits made in the Non-Resident Ordinary (NRO) Account and the TDS was already deducted for the said deposits - petitioner is not liable to pay any tax amount for the same and since the shares were transferred from his deceased wife's account due to her demise, same is also not taxable - respondents had classified the petitioner as a Resident and demanded tax amount by adding the deposits made in his account as unexplained investments and also adding the shares, which were transferred to his account, after the demise of his wife, as purchase securities HELD THAT:- In the present case, it appears that the due to the demise of petitioner's wife, her shares were transferred to the NRO account of petitioner. According to the petitioner, the said transaction is not taxable. Further, it appears that the alleged deposits were made in the Non- Resident Ordinary (NRO) Account of the petitioner, for which, the TDS was already deducted. Hence, the petitioner was under the impression that he is not liable to file any returns - show cause notice dated 21.03.2024 was issued and draft assessment order dated 28.03.2024 was also passed by the respondents. However, due to the demise of his wife and other personal commitments, the petitioner was not in a position to explain these aspects to the respondent. Therefore, the impugned order came to be passed by the 1st respondent on 21.05.2024. In the present case, it appears that the due to the demise of petitioner's wife, her shares were transferred to the NRO account of petitioner. According to the petitioner, the said transaction is not taxable. It appears that the alleged deposits were made in the Non- Resident Ordinary (NRO) Account of the petitioner, for which, the TDS was already deducted. Hence, the petitioner was under the impression that he is not liable to file any returns. Under these circumstances, the show cause notice dated 21.03.2024 was issued and draft assessment order dated 28.03.2024 was also passed by the respondents. However, due to the demise of his wife and other personal commitments, the petitioner was not in a position to explain these aspects to the respondent. Therefore, the impugned order came to be passed by the 1st respondent on 21.05.2024. It appears that no opportunity of personal hearing was provided to the petitioner prior to the passing of impugned order. Hence, this Court is of the view that the impugned order was passed in violation of principles of natural justice since it is just and necessary to provide an opportunity to the petitioner to establish their case on merits. That apart, the reason assigned by the petitioner for non-filing of reply, appears to be genuine. In such view of the matter, this Court is inclined to provide an opportunity to the petitioner by setting aside the impugned order dated 21.05.2024 passed by the 1st respondent. Accordingly, this Court passes the following order:- (i) The impugned order dated 21.05.2024 is set aside and the matter is remanded to the 1st respondent for fresh consideration. (ii) The petitioner shall file their reply/objection along with the required documents, if any, within a period of three weeks from the date of receipt of copy of this order. (iii) On filing of such reply/objection by the petitioner, the 1st respondent shall consider the same and issue a 14 days clear notice, by fixing the date of personal hearing, to the petitioner and thereafter, pass appropriate orders on merits and in accordance with law, after hearing the petitioner, as expeditiously as possible.
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2024 (10) TMI 1572
Rejection of compounding application - application was filed beyond the period of limitation, as stated in Para 7(ii) of the CBDT circular dated 16.09.2022 - petitioner submits that there is no time limit for filing of the compounding application - HELD THAT:- The judgment of this Court in Jayshree's case [ 2023 (11) TMI 1110 - MADRAS HIGH COURT] this Court has categorically held that the CBDT cannot issue a circular contrary to the object of the provisions. The explanation, which empowers the CBDT to issue circular, is only for the purpose of implementation of the provisions of the Act with regard to compounding of offences and not for the purpose of fixing a time limit for filing the application for compounding of offences and therefore, the same is contrary to the provisions of the Act and hence, it is not permissible in terms of Section 279(2) of the IT Act. As already stated even as per the guidelines issued by the authorities in the circular dated 06.09.2022, the petitioner cannot be considered as a habitual offender, as he has committed default only in two cases and in one case, the offence has already been compounded. This Court is of the view that once the nature of offence is compoundable by virtue of the provisions of the Act, nature of compoundability of the said offence cannot be taken away by fixing a time limit for filing the compounding application. The law laid down by this Court in the aforesaid judgment is squarely applicable to the facts of the present case. Hence, the impugned order is liable to be set aside and it is accordingly set aside. Writ petition Allowed - The matter is remanded back to the respondent and the respondent is directed to take up the application for compounding of offences on record.
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2024 (10) TMI 1571
Calculation of deemed rent on unsold stock in trade - Addition representing notional rental income in respect of unsold flats forming part of closing inventory of the appellant - HELD THAT:- It is an admitted fact that Income Tax Appellate Tribunal, Pune Benches, Pune is consistently of the view that prior to assessment year 2018-19 notional rent/deemed rent cannot be calculated on the unsold flats/properties held as stock in trade. As respectfully following the above decision passed in the case of Jayant Avinash Dave [ 2023 (11) TMI 334 - ITAT PUNE] we hold that during the period under consideration deemed rent/notional rent on the annual letting value of flats/shops held as stock in trade cannot be calculated. Therefore, we direct the AO to delete the addition made on account of deemed rent/notional rent on the property held in closing stock as stock in trade. Thus, the ground of appeal raised by the assessee is allowed.
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2024 (10) TMI 1570
Disallowance u/s 43B for non-payment of Service Tax - neither the tax amount was received from the customer nor was the service tax amount debited to profit and loss account - HELD THAT:- We find that the assessee is a works contractor mainly doing contract work for BSNL. It is the contention of assessee that due to cash crunch BSNL was unable to make payment to various contractors including the assessee. It is his submission that the assessee has not received service tax and Goods Service Tax amount for the period under consideration and other contract amount was also not received by him since last 3 years. The assessee is said to have filed case against the BSNL under MSME Samadhan and also wrote various letters to Finance Minister of Government of India for early settlement of his dues. The case of the assessee is that he has not received payment of service tax and Goods Service Tax for the period under consideration and in the cases relied on by Addl./JCIT(A)-3, Bengaluru the amount of service tax was already received by the parties and not paid to the Government Exchequer. Accordingly, in our considered opinion, the case laws relied on by ld. Addl./JCIT(A)-3, Bengaluru do not apply in the present case. We find in the case of CIT vs. Ovira Logistics Pvt. Ltd [ 2015 (4) TMI 684 - BOMBAY HIGH COURT] dismissed the departmental appeal and confirmed the order passed by ITAT wherein disallowance made u/s 43B was deleted. As in the present case it is the case of the assessee that it has not at all received the service tax and Goods Service Tax from the contractee. Since it is the contention of the ld. Counsel for the assessee that it has not at all received the service tax and Goods Service Tax, therefore, we deem it proper to restore the matter back to the file of the ld. Addl./JCIT(A)-3, Bengaluru with a direction to verify as to whether the assessee has actually received the services tax and Goods Service Tax from the contractee and decide the issue in the light of judgements passed by the Hon ble Bombay High Court. Addl./JCIT(A)-3, Bengaluru shall provide due opportunity of hearing to the assessee. The assessee is hereby also directed to respond to the notices issued by the ld. Addl./JCIT(A)-3, Bengaluru and furnish requisite documents and evidences in support of his claim that it has not received the amounts in question. Thus, the grounds of appeal raised by the assessee are allowed for statistical purposes. Appeal filed by the assessee stands allowed for statistical purposes.
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2024 (10) TMI 1569
Validity of reopening of assessment - service of notice u/s. 148 as barred by limitation - HELD THAT:- CIT(A) has noted that the notice u/s. 148 was issued on 31.03.2017 which was the last day for validly issuing notice u/s. 148. Since the AO had issued the notice u/s. 148 of the Act on 30.03.2017 and there is no evidence to prove that the same has been issued after 31.03.2017, and even if the assessee received the notice only on 03.04.2017, according to us, it would not vitiate the notice issued u/s. 148 of the Act; and in the absence of any evidence to show that the notice has been issued after 31.03.2017, we are not inclined to accept such a plea and reject the same being devoid of merit. Challenging action of the PCIT granting approval for re-opening of assessment - PCIT has granted sanction/ approval for 172 cases on a single day - Since the assessee didn t file any RoI, the AO reopened the assessment to verify the source of the deposits. Therefore, the action of the AO to re-open the assessment can t be faulted as such; and it is further noted that like assessee, department flagged the cases of 172 similar persons who all didn t file any return of income for the year under consideration and similarly deposited cash in their respective bank account, therefore, the AO in order to verify the nature and source of the cash deposit, has consolidated the cases for approval of the PCIT to reopen which was granted by Ld.PCIT, which action cannot be faulted. It is further noted that the AO in this case has given the reasons for reopening in the format on 27.03.2017, which proposal was put up before the JCIT who gave his recommendation on 29.03.2017 and the Ld.PCIT granted approval on 30.03.2017 and pursuant thereto, AO had issued notice u/s. 148 of the Act on 31.03.2017 which action can t be faulted on the peculiar facts and circumstances of the case. Addition of cash deposits - Since the bank account maintained in Corporation Bank has not been disclosed by the assessee to the department, and the assessee has owned up the money deposited and withdrawn as her own money, the highest bank balance in the bank during the relevant year under consideration is deemed to be undisclosed money of the assessee. The Hon ble Allahabad High Court in the case of Bhaiyalal Shyam Behari. [ 2005 (1) TMI 424 - ALLAHABAD HIGH COURT] observed that the assessee was entitled to take up the plea of the addition of the peak credit which only need to be treated as the income of the assessee. In order to make a plea of peak credit, the assessee has to lay down the factual foundation that all cash credit entries in the books of accounts belongs to the assessee i.e. it is the assessee s own money. Then only the question of peak credit can be validly raised. In the present case, the assessee has owned up the cash which was deposited withdrawn as her own money, and therefore, the plea of the assessee that the peak-credit need to be only taken into consideration as her income in the facts and circumstances of the case needs to be accepted especially considering the fact that the AO for AYs 2011-12 2012-13 has accepted the RoI filed by the assessee to the to the tune of Rs. 1,79,420/- and Rs. 2,19,610/- and finding that the peak-credit in the bank is to the tune of Rs. 5,66,533/- and taking opening balance as on 01.04.2009 i.e. Rs. 54,526/-, the maximum highest balance in the bank during 365 days in respect to AY 2010-11 is found to be Rs. 5,12,007/- and the assessee returned income is Rs. 2,47,280/-, balance amount of Rs. 2,64,727/- is directed to be sustained and the balance amount to be deleted [i.e. assessee gets a relief of Rs. 26,74,240 minus 2,64,727 = Rs. 24,09,513/-]. Appeal filed by the assessee is partly allowed.
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2024 (10) TMI 1568
Disallowance of deduction claimed u/s. 80P - non filing of ROI within the due-date u/s. 139(1) - delay in filing of return u/s. 139(1) of the Act was due to belated statutory audit carried out as per the Tamil Nadu Co-operative Societies Act, 1983 on 31.12.2018 - HELD THAT:- Assessee being an Agricultural Cooperative Society registered under the Tamil Nadu Co-operative Societies Act, 1983 had to carry out statutory audit as per the said Act and pursuant to that statutory audit under the Tamil Nadu Co-operative Societies Act, 1983, was over only on 31.12.2018. And the assessee belatedly filed the return on 20.03.2019 and had filed condonation application on 19.03.2019, which is pending before the CBDT. In this context it is noted that in the case of Mavilayi Service Co-operative Bank Ltd. [ 2021 (1) TMI 488 - SUPREME COURT] held that deduction claimed u/s. 80P of the Act shouldn t be denied, because, it is benevolent provision enacted by the Parliament to encourage and promote the cooperative sector in general. Therefore, we set aside the impugned order and restore the appeal back to the file of the CIT(A) with a direction to adjudicate the grounds of appeal raised by the assessee (u/s.80P of the Act) after CBDT passes order on the condonation petition filed before it. Appeal filed by the assessee is allowed for statistical purposes.
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2024 (10) TMI 1567
Addition made after rejecting the books of accounts of the assessee - HELD THAT:- AO has nowhere given a finding that the assessee has not regularly followed the method of accounting as specified u/s.145(1). And it is also not the case of the AO that the assessee has not computed the income in accordance with the accounting standard notified u/s. 145(2) of the Act. Thus, according to us, the condition for invoking sec.145(3) of the Act is not satisfied in the facts of the case. And merely based on suspicion, conjectures and surmises, the action of the AO to express his dissatisfaction about the correctness or completeness of the accounts, when assessee s books are audited cannot be accepted. By merely copying/reproducing Rule 6F of the Rules, and sec.145(3) AO cannot justify his action of rejecting the books of accounts which was regularly maintained by the assessee and which have undergone auditing u/s. 44AB of the Act. Therefore, we don t countenance the action of the CIT(A) upholding the action of the AO rejecting the books of accounts of the assessee. And since we accept the log-book maintained by assessee in accordance to Rule 6F of the Rules and note that there is no other material referred to in assessment order or impugned order to support the addition. Hence, the addition can t be legally sustained. It is a settled position of law that the statement of a person can t be used against a person/ assessee without it being tested on the touch stone of cross-examination as held in the case of CIT v. Odeon Builders (P) Ltd. [ 2019 (8) TMI 1072 - SUPREME COURT] - Therefore, looking from any angle, even if the statement of Ms. G. Subhadra is considered, still the addition cannot be sustained, without it being tested by cross-examination. Appeal filed by the assessee is allowed.
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2024 (10) TMI 1566
Deduction u/s 80IA - interest income from FDRs can be considered as income derived from the eligible infrastructure business - term derived from has been interpreted in various judicial pronouncements to require a direct and immediate nexus between the income and the business - HELD THAT:- In the present case, the FDRs were created as a direct consequence of the loan condition imposed by PNB, which was essential for financing the infrastructure project. The FDRs were not independent investments but were integral to the business s financing structure. The interest income arising from these FDRs was incidental to the core business activity of infrastructure development and thus should be considered as profits derived from the business for the purposes of Section 80IA(4) of the Act. Hon ble Gujarat High Court, in CIT v. Shah Alloys Ltd. [ 2016 (8) TMI 1191 - GUJARAT HIGH COURT] held that interest income earned on FDRs maintained as margin money for securing business loans qualifies as business income when the FDRs are closely linked to the business s financial structure. This principle is squarely applicable to the present case, as the FDRs were created to fulfil the bank s conditions for the loan used to finance the infrastructure project. We note that the reliance on Tuticorin Alkali Chemicals Fertilisers [ 1997 (7) TMI 4 - SUPREME COURT] by AO and the CIT(A) is misplaced. In Tuticorin Alkali Chemicals Fertilisers, the interest income arose from surplus funds that were parked in FDRs, unrelated to the core business activity. Here, the FDRs were created as part of the business financing for the infrastructure project, and the interest income is a direct outcome of the financial requirements of the business. Therefore, the principle laid down in Tuticorin Alkali Chemicals Fertilisers does not apply to the facts of this case. The assessee's audited financial statements, as presented by the AR, clearly confirm that the loan obtained from PNB was exclusively used for the infrastructure project. No unsecured loans or other financial obligations appear on the balance sheet. Thus, the FDRs were solely for the project, further supporting the claim that the interest income earned from the FDRs is part of the business income eligible for deduction. SPV nature of the assessee, and the judicial precedents discussed, the interest income earned from the FDRs, which were created as part of the financing arrangement for the infrastructure project, qualifies as business income derived from the eligible business u/s 80IA(4). AO s disallowance as upheld by the CIT(A) was incorrect. The disallowance is hereby set aside, and the assessee s claim for deduction u/s 80IA(4) of the Act is allowed.
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2024 (10) TMI 1565
Deemed dividend u/s. 2(22)(e) - assessee was a director and substantial shareholder in M/s. Mahavir Submersible Pvt. Ltd., holding 49.71% of the total shares and the assessee had received a loan from the aforesaid company - AO held that any payment made by a company, particularly one not substantially held by the public, to a substantial shareholder or a concern in which that shareholder has a significant interest, should be treated as deemed dividend to the extent of the company's accumulated profits - assessee contended that the provisions of Section 2(22)(e) of the Act only apply to actual cash payments, not journal entries, HELD THAT:- The subsequent hearings revealed that the addition of deemed dividend was based on the advances from MSPL, which were presented as mere journal entries, suggesting that no actual loan had been received. During these proceedings before us, it emerged that the explanation concerning the journal entry had already been presented to PCIT in earlier proceedings u/s 263 as noted that the AO had not adequately examined the issue in the original assessment, rendering the order erroneous and prejudicial to revenue interests. Consequently, the AO was directed to revisit the matter. We observe that the assessee had also reiterated this explanation before the CIT(A), emphasizing that the advance was recorded as a journal entry. This Bench acknowledged that this information had been consistently available with the Revenue Authorities throughout the proceedings. Given this context, this Bench decided that there was no need for further hearings regarding the admission of evidence, as these were not indeed new submissions. Therefore, it is clear that the AO and CIT(A) had not verified or considered the appellant's explanation adequately during their assessments, especially when the assessee has all throughout contended that the advance was recorded as a journal entry. However, this aspect / submission was omitted to be considered by the AO / CIT(A). Accordingly since the contention of the assessee has all throughout been that no sum was received by the assessee, but a mere journal entry was passed and therefore there is no occasion to invoke the provisions of section 2(22)(e) of the Act has not been examined or verified by the Revenue Authorities, we are of the considered view that the order passed by Ld. CIT(Appeals) is liable to be set aside in absence of any finding on the above contention of the assessee. Assessee appeal allowed.
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2024 (10) TMI 1564
Rejection of deduction u/s 54F - assessee has purchased a new house property beyond the period of two years from the date of sale - HELD THAT:- Tax authorities are not right in taking into consideration the events that took place in the subsequent years. Accordingly, we are of the view that they are not justified in rejecting the deduction claimed by the assessee u/s 54F of the Act. With regard to the events that took place subsequently, i.e., purchase of land, the Ld.AR disputed the assertion of the AO that the said land consisted of residential building. He submitted that the same was watchman out house, which cannot be considered to be a house. He further submitted that the assessee has started construction of the building thereon subsequently. In any case, in our view, all these facts need to be examined only in the subsequent years and not during the year under consideration. Accordingly, we set aside the order passed by Ld.CIT(A) on this issue and direct the AO to allow deduction u/s. 54F of the Act claimed by the assessee. Appeal filed by the assessee is allowed.
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2024 (10) TMI 1563
Addition ex parte and taxed the assessee u/s 115BBE - unexplained money u/s 69A - Consideration of cash deposits as business receipts - HELD THAT:- Assessee being a distributors of sim card, vouchers and easy vouchers of Vodafone Mobile Services Limited and earned commission on sale of Sim Card sale to various retail shops in and around the city. The amount received out of the sales were business receipts deposited in the bank account of the assessee and reinvested in purchase of new sim cards and vouchers from Vodafone Mobile Services Limited. There is a consistent rotation of funds in the Bank statement. We also find that the assessee has furnished bank statement of Bank of Maharashtra showing the entire deposits and payments made to Vodafone Mobile Services Limited. CIT(A), NFAC, has not considered the fact as well as documents submitted by the assessee and has not pointed out any defect in the documents furnished by the assessee and made addition of entire sale as business income and confirmed the addition made by the AO at ₹ 1,53,31,937, without considering the same being business turnover and consequent abatement of payment were made to Vodafone Mobile Services Limited for purchase of Sim Card and vouchers. He only harped upon about the non compliance of various notices. Considering the facts of the case, we hereby direct the AO to calculate estimated profit @1% at ₹ 1,53,311, on transactions of ₹ 1,53,31,060, being the net income of the assessee which will meet the ends of justice. Consequently, the addition made u/s 69A of the Act is hereby quashed since the nature and source of deposit is clearly established. Needless to mention here that there will be tax liability in the hands of the assessee since income is below basic exemption limit. Thus, grounds no.1 to 9, are allowed in terms indicated above and the assessee gets relief of ₹ 1,51,77,749 i.e., [₹ 1,53,31,060 ( ) ₹ 1,53,311]. Levy of interest u/s 234A, 234B and 234C - Assessee has denied the liability of interest charged under section 234A, 234B and 234C of the Act. Since the income of the assessee is below taxable limit, there is no scope of charging any interest. We need to add here that these types of cases should be dealt with very carefully and the Assessing Officer being an adjudicator and investigator cannot remain a silent spectator. Assessee appeal allowed.
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2024 (10) TMI 1562
Disallowance of contingency expenses - AO rubbished the contention of the assessee that the entire contingency expenditure is accounted in the books of accounts, though the AO categorically admitted that the total cost figure in the CTC report matches the total cost figure in the books of accounts, the cost booked under each head is different in the CTC report and the books of accounts - HELD THAT:- As it happens in this line of business, the business-man makes a budgeted figure of project cost and after few months of execution of the work, the budgeted figures are revised. As it always happens, the actual expenditure is always higher than the budgeted figure and the actual expenditure is recorded in the books of accounts. There is no dispute that the total expenditure recorded in the CTC is reported as accounted expenditure. The entire addition revolves around the contingency expenditure recorded in the CTC report. As mentioned above, the contingency expenditure is mentioned at the time of preparation of the budget but when the actual figures are known, the same are recorded in the books of accounts. Therefore, it cannot be said that that the contingency figure are not recorded in the books of accounts. In fact, the AO himself admitted this fact at para 4 of his order where he has categorically accepted that the total cost figure in the CTC report matches the total cost figure of the books of accounts. Since the figure of contingency has been recorded against the figure of total expenditure incurred, it is illogical to assume that the assessee has booked bogus expenditure and generated cash outflow from it. The impounded material shows the expenditure on mercantile basis and no cash expenditure, therefore, the presumption of the AO that the assessee has generated cash out of bogus expenditure, is without any basis. Thus, the presumption is only in search cases where it is presumed that the contents of such books of account and other documents are true whereas, the appeals under consideration are cases of survey operations where there is no such scope of presumption. This means that in the cases of survey operations, the onus is on the revenue to bring the cogent material evidence on record to show that the assessee has incurred expenditure which are not recorded in the books of accounts. As mentioned elsewhere, in the appeals under consideration, all the expenditure has been found to be recorded in the books of accounts and no error or infirmity has been pointed out by the AO nor by the ld. CIT(A). Even the books of accounts have been accepted and no defect has been pointed out. The allegation that the assessee has not followed the Standard Operating Procedure (SOP) is not relevant as long as the impugned expenditure are found recorded in the regular books of account maintained by the assessee. Though the ld. First Appellate Authority has admitted that the entire expenses cannot be disallowed yet, he himself went on to estimate the disallowance which is again not a proper procedure. Once the expenses have been found to be fully recorded in the books of accounts, the same cannot be disallowed only on the whims and surmises of the revenue authorities. Considering in totality the facts of the case in hand in light of the documentary evidence referred during the course of proceedings, we do not find any merit in the impugned additions. We direct the AO to delete the additions from the captioned appeals.
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2024 (10) TMI 1561
Condonation of delay in filing the appeal before the CIT(A) - sufficient cause for delay - HELD THAT:- Hon ble Apex Court in the case of Collector Land Acquisition vs. Mst. Katiji Ors. [ 1987 (2) TMI 61 - SUPREME COURT] has held that liberal approach should be adopted while dealing with an application praying for condonation of delay. Refusing to condone delay can result in meritorious matter being thrown out at the very threshold and cause of justice being defeated. Pedantic and hyper technical approach should not be adopted while dealing with an application for condonation of delay. As decided in the case of Ram Nath Sao @ Ram Nath Sahu And Others vs Gobardhan Sao and Others [ 2002 (2) TMI 1280 - SUPREME COURT] that the expression sufficient cause within the meaning of Section 5 of the Limitation Act or Order 22 Rule 9 of CPC or any other similar provision should receive a liberal construction so as to advance substantial justice. The courts should not proceed with the tendency of finding fault with cause shown and reject the petition by a slipshod order in over jubilation of disposal derive. Acceptance of explanation furnished should be the rule and refusal, an exception, more so when no negligence or inaction or want of bonafides can be imputed to the defaulting party. Thus, delay in filing of appeal is condoned before the CIT(A). The appeal is restored to the file of CIT(A), for deciding appeal of the assessee on merits after affording reasonable opportunity of hearing/make submissions to the assessee, in accordance with law. Appeal of the assessee is allowed for statistical purpose.
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2024 (10) TMI 1560
Deduction u/s 54F - bringing the amount of Rs. 1 crore, i.e. the amount withdrawn by the assessee from his CGAS account in the succeeding year to tax during the year under consideration - net consideration received by the assessee on transfer of its capital asset, which is not appropriated by him towards the purchase of the new asset made within one year before the date on which the transfer of the original asset took place HELD THAT:- A perusal of Section 54F reveals that though the assessee is entitled to withdraw the unutilized amount in accordance with the CGAS, 1988, but the same would be liable to be assessed in his hand u/s. 45 of the Act during the previous year, in which the period of three years from the date of the transfer of the original asset expires. Although the AR had tried to impress upon us that as the withdrawals made from the CGAS account, 1988 had been carried out by the assessee with the approval of the A.O, and thus, had rightly been offered for tax in the respective years of withdrawals but we are unable to concur with the same. The amount parked by the assessee in the CGAS account, which had not been utilized for the purchase or construction of the new residential house within the prescribed period, has to be brought to tax in the previous year, in which the period of three years from the date of the transfer of the original asset expires. As in the present case before us, the assessee had transferred the capital asset: i.e the unlisted shares and securities of HDIPL and had, inter alia, claimed exemption u/s. 54F that was deposited by him in Capital Gain Account Scheme, 1988, therefore, the period of three years from the date of transfer of the aforesaid original asset expires on 29.07.2018, i.e. during the period relevant to A.Y.2019-20. Accordingly, as per the mandate of the 1st proviso to Section 54F(4) of the Act, the amount that was not utilized by the assessee for the specified purpose, for which, the same was deposited in CGAS, 1988, i.e. for the purchase or construction of a residential house can only be brought to tax in Assessment Year 2019-20. As per our aforesaid deliberations the amount of Rs. 1 crore (supra), i.e. the unutilized amount lying in the assessee s CGAS account, 1988 that was withdrawn by him in the immediately succeeding year, i.e. A.Y.2019-20, as per the mandate of the 1st proviso to Section 54F(4) of the Act could have only be brought to tax in the said latter year. We, thus, are unable to concur with the view taken by the lower authorities who had brought the amount of Rs. 1 crore (supra) to tax as LTCG in the hands of the assessee u/s. 45 of the Act during the year under consideration. Decided in favour of assessee.
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2024 (10) TMI 1559
Rejection of registration u/s 12AB - objects of the Trust were confined to the Chhasath Prajapati Community , thus attracting the provisions of section 13(1)(b) of the Act, which disallows exemption for trusts benefiting a particular community - HELD THAT:- Hon ble Supreme Court in the case of Dawoodi Bohara Jamat [ 2014 (3) TMI 652 - SUPREME COURT ] has categorically held that section 13(1)(b) of the Act is applicable at the stage of assessment for determining exemption under section 11 of the Act, and not at the stage of granting registration u/s 12AB of the Act. This principle was reiterated in the case of Jamiatul Banaat Tankaria vs. CIT(Exemption), Ahmedabad [ 2024 (3) TMI 376 - ITAT AHMEDABAD ] The assessee s has categorically stated that all documents were uploaded online through the official portal as per the notices issued. CIT (Exemption) has not pointed to any specific document that remained unfiled. In the absence of any specific deficiency in documentation being highlighted, we do not find merit in the Department s argument that the assessee failed to comply with the document submission requirement. Upon examination of the Trust's objectives, we find that the Trust is engaged in various educational, social, and economic activities that serve the public at large, not limited to the Chhasath Prajapati Community. These include scholarships, hostel facilities for students, social reform programs, and efforts to uplift the community economically. Therefore, the Trust s activities cannot be said to benefit only a particular religious or caste-based community. The registration u/s 12AB is merely a recognition of the charitable status of the Trust. The application of section 13(1)(b) of the Act would only arise at the stage of assessment when determining exemption under section 11, depending on the actual income and activities of the Trust. CIT (Exemption) erred in rejecting the application for registration under section 12AB - Decided in favour of assessee.
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2024 (10) TMI 1558
LTCG - Exemption u/s 54F - transaction of the flat related to sale and purchase was done in his wife s name and assessee was not holding any property - Income of individual to include income of spouse, minor child, etc - AR stated that the assessee s wife is dependent, and the spouse s income is declared in the husband s return filed under section 139(1) and assessee is the beneficial owner of the property - whether the assessee can declare the income of capital gain of his wife in his return u/s 64? - HELD THAT:- The section 64(1) prevails that the inclusion of the dependent s income u/s 64 of the Act is justified. In other issue the investment of new assets in the name of the wife is fully covered by the order of Simran Bagga [ 2024 (1) TMI 271 - ITAT DELHI] We respectfully follow the order of Simran Bagga (supra). Contravention of section 54F relating to investment of capital gain in two flats not in single flat - As related to investment in two flats, which contravened the provisions of section 54F the said amendment of one house is implemented with effect from 01/04/2015, so the relevant section 54F is not application for the A.Y. 2014-15. AR placed purchase deeds of two flats, wherefrom it is clear that both the flats are adjacent flats and not in the open sky. So, both the units are taken as a single unit which is not contrary to section 54F of the Act. We respectfully relied on the order of D. Ananda Basappa [ 2008 (10) TMI 99 - KARNATAKA HIGH COURT] We find that the assessee is eligible for deduction u/s 54F for purchasing two new flats in the name of his wife. We note that the sale and purchase of the flats are executed in the name of assessee s wife. DR has not pointed out any contrary decision against the proposition laid down above. We find no justification in rejection of claim u/s 54F - addition amount is deleted. Assessee appeal allowed.
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2024 (10) TMI 1557
Assessment of trust - Claim of depreciation of assets - HELD THAT:- AR wants a direction to the AO to allow depreciation as application of income. After analysing the entire facts and circumstances and particular facts of the present case more particularly taking into consideration the documents in the shape of balance sheet, income and expenditure account and depreciation chart, it was found that the huge amount has been spent by the Appellant trust in previous year with effect from financial year 2009-10 to 2011-12, but these documents were neither having signatures of auditors nor chairman or Accountant of appellant trust. Since the issue of claim of depreciation is a factual issue and requires verification and checking of the records which are filed and available with the AO, therefore in the fitness of things, it is appropriate to restore this issue to the file of AO with a direction to verify from the records as to whether such assets have been taken into account while determining the application of such assets in the income earned or not. Accordingly the Appellant trust should be given the benefit as per the provisions of section 11 - As further directed that the AO while doing this check and verification of the records would also grant reasonable opportunity of hearing to the Appellant before taking any decision. Accordingly this ground No. 1 raised by the appellant stands allowed for statistical purposes. Payment of Specified person - There is no provision under the Act which provides that if advance is given to the specified person it would be added to the income. Reliance in this connection is placed on the decision of Vels Institute of Science, Technology Advanced Studies [ 2015 (11) TMI 857 - ITAT CHENNAI] - In this case assessee, a charitable educational institution, was registered u/s 12AA. It intended to establish a medical college. It entered into an agreement with managing trustee for purchase of his land and paid certain amount to him in advance. Subsequently said agreement was cancelled and managing trustee returned principal amount along with interest. Assessee claimed exemption u/s 11. AO denied exemption holding that payment of advance to managing trustee was in excess of market value of land and money was advanced without any adequate security and therefore, there was violation of section 13(1)(c). It was held that since it was nobody s case that the price agreed between the managing trustee and assessee was not actually the agreed price, observation of the AO that the value of the land was much less than what was agreed between the parties cannot stand in the eye of law. When money was advanced to managing trustee in pursuance of agreement for sale and after cancellation of agreement entire principal amount along with interest was returned, it could not be said that money was diverted for interest of managing trustee. Therefore, there was no violation of section 13(1)(c). Hence, in this view of the matter, the Ground No. 2 raised by the assessee stands allowed. Additions on account of interest free advances given to the various persons were confirmed - Where income has, in fact, been received and is subsequently given up in such circumstances that it remains the income of the recipient, even though given up, the tax may be payable. Where, however, the income can be said not to have resulted at all, there is obviously neither accrual nor receipt of income, even though an entry to that, effect might,, incineration circumstances, have been made in the books of, account. The agreements within the previous year replaced the earlier agreements, and altered the rate in such a way as to make the income different from what had been entered in the books of account - A mere book-keeping entry cannot be income, unless income has actually resulted, and in the present case, by the change of the terms the income which accrued and was received consisted of the lesser amounts and not the larger. This was not a. gift by the assessee firm to the manager companies. The reduction was a part of the agreement entered into by the assessee firm to secure a long-term managing agency arrangement for the two companies which it had floated. Therefore considering the entire facts and circumstances as well as discussion made in the above Paras and also taking into consideration the legal preposition.
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Customs
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2024 (10) TMI 1556
Levy of Anti-Dumping Duty on the PVC Suspension Resins - petitioner is an end user of PVC Suspension Resins which is the product under consideration in the investigation initiated - HELD THAT:- It is not in dispute between the parties that respondent No. 3 is in process of the investigation as contemplated under Rules 4, 5 and 6 of the Rules 1995 and the contentions raised by the petitioner is at premature stage which would jeopardize the entire process initiated by the respondent No. 3. We are therefore of the opinion that we would not like to interfere at this stage on merits of the matter. The petition therefore being premature is accordingly dismissed at this stage.
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2024 (10) TMI 1555
Classification as Naphtha under Tariff Item 27101290 or as Natural Gasoline Liquid (NGL) under Tariff Item 27101220 - Department responsibility to discharge burden cast on it to establish their claim for classification of goods - onus cast upon the Revenue to establish that the imported goods were classifiable under TI 2710 1220 of the Customs Tariff Act, 1975 as NGL has not been discharged - whether, even if the imported goods considered as Natural Gasoline Liquid (NGL) as claimed by the revenue, the same falls under the broad description of Naphtha and consequently the clearance of goods under advance authorization which mentioned the imported goods as Naphtha is correct and legal or otherwise. HELD THAT:- It is settled law that in case the department does not discharge the onus cast upon it for its claim of classification of goods the entire proceeding is vitiated. As discussed above the facts of this case, the department did not discharge the onus to prove the claim of the classification of goods as NGL under tariff item 2710 1220 as correct. Therefore, the classification of goods as Naphtha under Tariff item 27101290 as declared by the appellant is held to be correct.
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2024 (10) TMI 1554
Denying exemption under Sr.No.108 (1) of Notification No.23/98-Cus. dated 02.06.1998 - non-submission of end use certificate and where there is no condition stipulated against Sr. No.108 (1) for production of end-use certificate unlike in Sr. No.108 (2) - HELD THAT:- We find that the appellant have availed the exemption Notification No.23/98-Cus Dated 02.06.1998 under Sr. No.108 description Serial No.1. From the above exempted entry at description Sr. No.1 of entry Sr. No. 108, it is found to be unconditional. Accordingly, there is no need of any production of end use certificate. The department has relied upon CBIC s circular No.74/1998-Cus dated 06.10.1998. However, it is a settled law that any condition which is not prescribed in the Notification the same cannot be read in the application of the Notification by issuing a board circular. We are completely agreed with this preposition as notification is a statute enacted by the Parliament which cannot be flouted by mere issuing a circular. Therefore, the board circular No. 74/1998-Cus dated 06.10.1998 is ultra vires to the Notification 23/98-Cus. dated 02.06.1998 in Sr. No.108 which does not prescribes the condition of end use certificate. We are of the clear view that in absence of any condition of end use certificate in the Notification, the same cannot be imposed and for that reason exemption cannot be denied. We set aside the impugned order and allow the appeal.
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2024 (10) TMI 1553
Benefit of exemption under Notification No. 46/2011-Cus. denied by Customs on re-assessment - Refund claim hit by limitation and issue of unjust enrichment not raised in Show Cause Notice - unjust enrichment - HELD THAT:- We find that the Appellant has filed the above said Bills of Entry by claiming the benefit of Notification No. 46/2011-Cus. dated 01.06.2011. While re-assessing the said Bills of Entry in RMS, the benefit of exemption as envisaged in the said Notification was not allowed. This mistake was rectified by the Commissioner (Appeals) in the Order-in-Appeal dated 02.03.2017, as per Section 154 of the Customs Act, 1962. The stay application filed by the department against this order has also been rejected by the Tribunal. Further, we observe that the Appeal filed by the Department against the Order dismissed vide Final Order. Consequent to the Tribunal s Order rejecting the stay against the order dated 02.02.2017 passed by the Commissioner (Appeals), the refund amount of Rs.4,87,208/- was sanctioned and paid to the Appellant on 23.12.2019. We observe that the Assistant Commissioner has sanctioned the refund as per the order dated 02.03.2017 passed by the Commissioner (Appeals), which he is legally bound to implement. Thus, we observe that there is no infirmity in sanctioning the refund by the Assistant Commissioner. Show Cause Notice dated 11.07.2018 was issued to reject the refund claim already sanctioned. On appeal, the Commissioner (Appeals) brought in the unjust enrichment angle and vide the impugned order, directed the adjudicating authority to re-examine the issue and remanded the matter back to the adjudicating authority. We observe that the issue of unjust enrichment was never raised in the Show Cause Notice dated 11.07.2018. Commissioner (Appeals) has gone beyond the scope of the Show Cause Notice and set aside the Order-in-Original and remanded the matter back to the adjudicating authority to re-examine the issue afresh. Assistant Commissioner has sanctioned the refund claim as per the Order-in-Appeal passed by the Ld. Commissioner (Appeals) who has allowed re-assessment within the meaning of Section 154 of the Customs Act, 1962. This would mean that the benefit of Notification No. 46/2011 existing at the time of the Bills of Entry is available to the appellant and hence the excess payment made by them is liable to be refunded. We also observe that the stay application filed by the Department against the order dated 02.03.2017 has been rejected by the CESTAT. Thus, there was no bar in implementation of the order of the Commissioner (Appeals). Thus, we do not find any infirmity in the order passed by the Assistant Commissioner sanctioning the refund claimed by the Appellant. Show Cause Notice was issued to the appellant on 11.07.2018 alleging that the refund claim filed by them on 27.04.2018, on the basis of the Order-in-Appeal dated 02.03.2017 was hit by limitation. The unjust enrichment issue was not raised in the Notice. We find that in the Order-in-Original dated 24.09.2019, the Ld. Assistant Commissioner has examined the issue of unjust enrichment and given a finding that there was no unjust enrichment existing in this case. We observe that the Ld. Commissioner (Appeals) has not given any observation against the finding on the issue of unjust enrichment given by Assistant Commissioner in the said Order-in-Original. Since the Ld. Assistant Commissioner has already examined the issue of unjust enrichment and given a finding on the issue and there is no contrary finding given by the Ld. Commissioner (Appeals) in the impugned order, we are of the view that there is no need to re-examine the issue again by the Assistant Commissioner. Accordingly, we hold that the impugned order passed by the Commissioner (Appeals) is legally not tenable and hence we set aside the same.
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Insolvency & Bankruptcy
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2024 (10) TMI 1552
Dissolution of the Corporate Debtor - direction for conducting a transaction audit - It is submitted that CoC, who resolved to file application for dissolution instead of a liquidation, since neither the CD has the assets, nor there are any amount available to bear the cost of liquidation - HELD THAT:- In the present case, the Adjudicating Authority has not exercised its jurisdiction in allowing the application filed by the CD for dissolution referring to Section 54 of the IBC and Regulation 14 of the Liquidation Regulations. The scheme of the IBC clearly provides that dissolution is a step subsequent to the Corporate Debtor having been completely liquidated. In the present case, the liquidation proceedings have not been undertaken and resorting to Section 54 could not have been taken as per the scheme of the IBC. The facts of the present case indicate that CIRP has been completed without any Plan having been received, inspite of Form- G published twice. The Adjudicating Authority did not pass any order for liquidation, which could have been passed under Section 33, sub-section (1). Thus, the CIRP having been unsuccessful and no liquidation order having been passed, recourse to Section 54, could not have been taken by the RP. In the present case, the RP could have intimated the Registrar of Companies for striking off the name of the Company. In the facts of the present case, where company is not carrying on any business and there are no assets of the Company, dissolution of the Company under Section 54, is a step, which could have been taken as per the statutory scheme of the IBC. This Tribunal s judgment in Shyson Thomas [ 2023 (6) TMI 102 - NATIONAL COMPANY LAW APPELLATE TRIBUNAL , CHENNAI ] was a case where Adjudicating Authority exercising its jurisdiction has directed for dissolution by allowing the application - In the present case, the Adjudicating Authority had rejected the application, relying on the provisions of Section 54 of the IBC and Regulations 14 of the Liquidation Regulations. CoC has decided not to make any contribution towards the liquidation process and liquidation, hence, was not directed. In the present case, CoC consisted of sole Financial Creditor, who had initiated the CIRP against the CD. When the entity, who has initiated the CIRP is not ready to proceed any further and CIRP period having already come to an end, no further steps were required in the CIRP of the Corporate Debtor and RP could have closed the matter by intimating the Registrar of Companies for striking off the name of Company from the Register of the Companies. The impugned order dated 11.06.2024 directing for carrying out transaction audit, is set aside - Appeal disposed off.
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2024 (10) TMI 1551
Handing over of physical possession of the land - Resolution Professional could not place on record the evidence to show that physical possession of the land in question was handed over to him - sufficient materials on record to come to the conclusion that the Resolution Professional/ Corporate Debtor is in possession of area admeasuring 10.81 acres i.e. land in question - possession of subject land in which development rights was claimed by the corporate debtor - adjudication by a Civil Court - exclusion from the CIRP of the Corporate Debtor as prayed by owners - whether the Resolution Professional is in possession or actual possession of the land could have been incidence? HELD THAT:- The Development Agreement as amended contemplated in the group housing project 50% shares to the owners and 50% shares to the developer. 50% shares which came to the developer share was 10.81 acres on which project Canary Greens was constructed by the corporate debtor which project was taken possession after initiation of the CIRP by the IRP and thereafter by the Resolution Professional. The Sole Arbitrator in its proceedings dated 12.10.2010 has already noted that the possession has been given to the developer of the said land. Corporate Debtor having commenced the project Canary Greens on the subject land, the possession of the corporate debtor of the project could not have been doubted. The definition under Section 3(27) of the Property is an inclusive definition which obviously includes the Development Rights which was obtained by the Developers from the Owners by Development Agreement dated 03.03.2007 were subsequently assigned to the Corporate Debtor by an Agreement dated 30.07.2010. The Hon ble Supreme Court has clearly laid down in the case of Victory Iron Works Ltd. Vs. Jitendra Lohia Anr. [ 2023 (3) TMI 699 - SUPREME COURT ] that Development Rights are Rights which can be taken control by the RP. Hon ble Supreme Court in the above case had occasion to consider provisions of Sections 18, 25 3(27) of the IBC. Hon ble Supreme Court has also examined the jurisdiction of NCLT and NCLAT in cases to grant Orders protecting possession of the Corporate Debtor at instance of RP. It was held by the Hon ble Supreme Court that Development Rights making in favour of the Corporate Debtor constitute Property. The materials on record fully prove that on the land 10.81 acres, the Project Canary Green was constructed which Project was the Project of the Corporate Debtor. Corporate Debtor having Development Right in subject land RP was entitled to have possession and take possession. Thus, the observations of the Adjudicating Authority that the RP was not in possession of the land in question is erroneous and without considering the relevant materials on the record which fully proves that it was Corporate Debtor who was in possession of the Project land and the Project. The observation of the Adjudicating Authority in Order dated 05.12.2023 that the RP could not place on record the evidence to show that physical possession of land in question was handed over to him is unsustainable - There are sufficient materials on record to come to conclusion that RP/Corporate Debtor is in possession of area admeasuring 10.81 acres, i.e., land in question - Adjudicating Authority was competent to decide the question of possession of subject land in which Development Rights was claimed by the Corporate Debtor and subject question was not required to be relegated to be adjudicated by the Civil Court - The subject land i.e.,10.81 acres was not required to be excluded from the CIRP of the Corporate Debtor as prayed by the Owners. Application allowed.
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PMLA
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2024 (10) TMI 1550
Money Laundering - predicate offence - delay in trial proceedings - hamper to right to life and liberty of the applicants, who have been in custody since 24 months and 25 months respectively - applicability of Section 45 of the PMLA - HELD THAT:- Bail is the rule and jail is the exception. This principle is nothing but a crystallisation of the constitutional mandate enshrined in Article 21, which says that that no person shall be deprived of his life or personal liberty except according to the procedure established by law. Section 45 of the PMLA while imposing additional conditions to be met for granting bail, does not create an absolute prohibition on the grant of bail. When there is no possibility of trial being concluded in a reasonable time and the accused is incarcerated for a long time, depending on the nature of allegations, the conditions under Section 45 of the PMLA would have to give way to the constitutional mandate of Article 21. What is a reasonable period for completion of trial would have to be seen in light of the minimum and maximum sentences provided for the offence, whether there are any stringent conditions which have been provided, etc. It would also have to be seen whether the delay in trial is attributable to the accused. The issue of long incarceration and right of speedy trial also cropped up in MANISH SISODIA VERSUS CENTRAL BUREAU OF INVESTIGATION [ 2023 (11) TMI 63 - SUPREME COURT] wherein it has been held by the Supreme Court that the right to bail in cases of delay in trial, coupled with long period of incarceration would have to be read into the Section 439 CrPC as well as Section 45 of PMLA while interpreting the said provisions. PREM PRAKASH VERSUS UNION OF INDIA THROUGH THE DIRECTORATE OF ENFORCEMENT [ 2024 (8) TMI 1412 - SUPREME COURT] is another recent decision where it has been reiterated that the fundamental right enshrined under Article 21 cannot be arbitrarily subjugated to the statutory bar in Section 45 of the Act and the constitutional mandate being the higher law, the right to speedy trial must be ensured and if the trial is being delayed for reasons not attributable to the accused, his incarceration should not be prolonged on that account. The prosecution has named 10 accused persons and cited 108 witnesses. There are 5172 pages of documents which need to be analysed. Moreover, it is noted that the Trial is still at the stage of arguments on charge. In addition, this Court has also been informed that the Presiding Officer of the Trial Court hearing the matter on charge has demitted office on 30.09.2024 and a replacement has not yet been appointed to take over the said Court. There is also likelihood of supplementary challan being filed. It is thus observed that the delay at present cannot be said to be attributable to the present applicants - In a situation such as the present case, where there are multiple accused persons, thousands of pages of evidence to assess, scores of witnesses to be examined and the trial is not expected to end anytime in the near future and the delay is not attributable to the accused, keeping the accused in custody by using Section 45 PMLA a tool for incarceration or as a shackle is not permissible. Liberty of an accused cannot be curtailed by Section 45 without taking all other germane considerations into account. As held in the Catena of judgements discussed hereinabove, Constitutional Courts have the power to grant bails on the grounds of violation of Part III of the Constitution and Section 45 does not act as an hindrance to the same. The sacrosanct right to liberty and fair trial is to be protected even in cases of stringent provisions present in special legislations - No evidence has been led to show that the present applicants are a flight risk. In fact, records would show that both the applicants have joined investigation on multiple occasions. Both the applicants have been released once on interim bail and during that period no incident has been alleged by the respondent to have occurred wherein the applicants have tried to tamper with evidence or influence witnesses. Considering the totality of the facts and circumstances, the fact that the main accused is out on bail, the period of custody undergone, likelihood of supplementary challan being filed and that the trial is yet to commence, keeping in mind the import of the Catena of decisions of Supreme Court discussed hereinabove, it is directed that both the applicants be released on regular bail subject to them furnishing respective personal bonds in the sum of Rs. 1,00,000/- with one surety of the like amount each to the satisfaction of the concerned Jail Superintendent/concerned Court/Duty J.M./link J.M. and subject to the further fulfilment of conditions imposed - bail application allowed.
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Service Tax
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2024 (10) TMI 1549
Service tax on Merchant Discount Rate (MDR) and interchange fee - As per revenue Acquiring bank should have paid service tax on the Merchant Discount Rate [ MDR ] minus the interchange fee, and the issuing bank should have paid service tax on the interchange fee - use of the word and in conjuncture - HELD THAT:- We are of the view that the judgment and reasoning given by S. Ravindra Bhat, J. is acceptable and it is in accordance with the provisions of Clause (iii) of Section 65 (33a) of the Finance Act, 1994 S. Ravindra Bhat, J. rightly observes that as per Section 65 (33a) of the Act, seven distinct heads of credit card services were sought to be taxed, the idea being to broaden the coverage of the species of services into taxation net. Clause (iii) thereof applies to service by any person, which includes service by the issuing bank and the acquiring bank. The use of the word and in conjuncture is indicative of the legislative intent. MDR is charged/levied by the acquiring bank at the first point in time and subsumes both the acquiring bank fee and the interchange fee of the issuing bank, as well as the platform fee. It is the sum total of the three. The aforesaid charge occurs first in point of time and deduction and payment of service tax at this stage is beneficial to the Revenue. It is not the case of the Revenue that payment by the acquiring bank to the issuing bank, known as interchange fee, is separately chargeable, in addition to the service tax on the MDR. We wonder whether the Revenue would have accepted the bifurcation as argued by them in case the acquiring bank and the issuing bank had taken the stand which is now taken by them. While interpreting a tax provision, one must keep in mind that the legislature ennobles the ease of collection of tax and payment of tax. These principles, especially when there is no loss of revenue, can be taken into consideration for interpreting a provision in case of doubt or debate. Entire data and details are available with the Service Tax Department and could have been easily ascertained before issuance of the show cause notice. Interestingly, the show cause notice proceeds on the basis that, regardless of the service tax paid by the acquiring bank on the full MDR, the issuing bank would be liable to pay service tax on the proportion of its share in the MDR, which is the interchange fee. We find that the entire amount of the service tax payable on the MDR has been paid to the Government and there is no loss of revenue. Recording the aforesaid, the Reference and appeals are disposed of, holding that service tax is not separately payable on the interchange fee, as service tax has been paid on the MDR.
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2024 (10) TMI 1548
Levy of service tax - bowling alley income - to be included in the Negative List under section 66D(j) of the Finance Act or not - scope of amusement facility - As decided by CESTAT [ 2024 (4) TMI 35 - CESTAT NEW DELHI] the income received by the appellant from bowling alley would be covered under section 66D(j) of the Finance Act and, therefore, would not be leviable to service tax - HELD THAT:- After having perused the impugned judgment, we find that in the facts of the case, the view taken by the Tribunal is correct. Hence, there is no reason to interfere in the Civil Appeal. Accordingly, the appeal is accordingly dismissed.
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2024 (10) TMI 1547
Refund of service tax paid under the reverse charge mechanism on the transportation of raw material rock phosphate - entitlement to exemption notification no. 3/2013 [S.No.21(e)] claimed - appellant had self-assessed service tax and filed returns which have not been modified through any appeal proceedings and appellant directly filed refund claims which can be sanctioned only if the assessments are modified - HELD THAT:- The settled legal position is that the refund proceedings are in the nature of execution proceedings and cannot be used to modify the assessment already made. Just as in an execution proceeding the decree cannot be modified, in a refund proceeding, the assessment cannot be modified as held by the Supreme Court in ITC Limited. [ 2019 (9) TMI 802 - SUPREME COURT] Also In BT (India) Pvt. Ltd, [ 2023 (11) TMI 478 - DELHI HIGH COURT] held that ITC Ltd case would apply to service tax refunds also. This case is identical to BT (India) Pvt. Ltd.[supra] inasmuch as the question is whether refund of service tax paid can be sanctioned or denied so as to modify the self-assessments already made and it has been answered in the negative by the Delhi High Court. The only difference between this case and that of BT (India) Pvt. Ltd. is that the assessee would have been entitled to refund and in this case, the appellant would not be entitled to refund if the refund is processed as per the assessments. But that is immaterial. In view of the judgment of ITC Ltd and BT (India) Pvt. Ltd. [supra] it is held that since the appellant had not assailed the self-assessments and as per the assessments the appellant is not entitled to any refund, the appellant would not be entitled to refund and it has been correctly rejected. Appeal dismissed.
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2024 (10) TMI 1546
Liability of the appellant under mandap-keeper service - invocation of extended period of limitation - it is the case of the Revenue that the appellant had not only made available the food and beverages, but had also made available lights, fans, their own staff used in rendering catering service to the guests, etc. and therefore, the charges for sale of food was inclusive of these service elements - extended period of limitation - suppression of facts or not - interest - penalties - HELD THAT:- N/N. 19/97 issued by the government whereby the appointed day was notified, followed by the issuance of a Trade Notice No.9/97 dated 01.07.1997, which stated that the scope of the said Notice was very wide to include within its scope, places like Kalyan mandap, marriage halls, banquet halls, conference halls, etc., and hotels and restaurants providing any such facilities would also be included in the coverage of service tax. Wide range of services are included in the definition of taxable services as far as mandap-keeper is concerned. The said definition includes services provided in relation to use of mandap in any manner and includes the facilities provided to the client in relation to such use and also services rendered as a caterer. In fact, making available a premises for a period of few hours for the specific purpose of being utilized as a mandap, whether with or without other services would itself be a service and cannot be classified as any other kind of legal concept - U/s 65(66) of the Finance Act, 1994, Mandap means any immovable property as defined in section 3 of the Transfer of Property act, 1882 and includes any furniture, fixture, light fittings, and flour covering therein, let out for consideration for organizing any official, social or business function - the Commissioner (Original Authority) was correct in confirming the demand under Mandap-Keeper Service on the appellant. Extended period of limitation - suppression of facts or not - interestt - penalties - HELD THAT:- The reliance placed on the decision of Apex court in Commissioner of Service Tax, Mumbai Vs. M/s. UFO Moviez India Ltd [ 2021 (1) TMI 930 - SC ORDER] by the appellant is apt, wherein the Hon ble court has held that suppression means failure to disclose full information with the intent to evade payment of duty - But here, in the case on hand, suppression cannot be alleged since the bonafides insofar as remittance of sales tax are not doubted. Hence, the demand confirmed which stands upheld shall be limited to the normal period alone, since there is no case of suppression whatsoever, that too, to evade payment of duty - The interest charged u/s 75 of the Act ibid also stands confirmed to the normal period alone - penalties imposed under sections 77 and 78 of the Act ibid on the appellant set aside. Appeal allowed in part.
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2024 (10) TMI 1545
Service tax demand and interest - demand of service tax on the amount towards provident fund - Imposition of penalties under Sections 76, 77, and 78 of the Finance Act, 1994 - Invocation of the extended period of limitation under Section 73(1) of the Finance Act, 1994 - HELD THAT:- As the appellant was well aware that he was providing taxable services and short paid the service tax, even after issuing invoices indicating the services tax payable and collecting the same from the service recipient. They were not filing the ST-3 returns on time in the manner as specified in law. They have suppressed the information with intend to evade payment of taxes. Accordingly, the demand by invoking the extended period of limitation and penalty imposed cannot be disputed with. As it is evident that appellant is not even consistent in his own submissions in these proceedings. While before adjudicating authority he has specifically asserted that he do not wish to contest the show cause notice on merits but only on quantification by claiming certain deductions from the taxable value determined by the revenue in show cause notice, his stand before the appellate authority is contrary to his own submissions and is challenging the rate applicable at different period of time. He has not substantiated his claim towards the application of different rates for the different period of demand. Appellant authority having found that said claim has not been substantiated rejected those submissions. We do not find any merits in the challenge made by the appellant to the order of the First Appellate authority.
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2024 (10) TMI 1544
Service tax on the bond amounts secured by them from their employees - incident of recovering amount (notice pay from the employees) is covered under category of the declared service - department is of the view that as per Clause (e) of the section 66E of the Finance Act, 1994 this fact is covered by the category of Agreeing to an obligation to refrain from an act, or to tolerate an act or a situation or to do an act. HELD THAT:- We have heard both the sides, we find that the issue it hand is no longer res integra as the matter has already been decided by this Tribunal in case of Rajasthan Rajya Vidhyut Prasaran Nigam Limited [ 2022 (1) TMI 909 - CESTAT NEW DELHI] employee who is the service provider and the service provided by him in the course of employment is excluded from the definition of service. Where the employer recovers any amount, the service provider will be the employer and his services are not excluded from the definition of service. Therefore, a distinction needs to be made on this count. On a specific query from the bench, he fairly submits that there are no case laws to support this argument nor is there any case law contrary to the judgment in the GE T D [ 2019 (12) TMI 1566 - MADRAS HIGH COURT] In view of our finding that compensation for failure under a cannot is NOT consideration for service under the contract and also following the law laid down by Madras High Court in GE T D that Notice pay in lieu of termination, however, does not give rise to the rendition of service either by the employer or the employee, the impugned order upholding confirmation of a demand of service tax on the notice pay received/recovered by the appellant from its employees for premature resignation cannot be sustained and needs to be set aside.
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Central Excise
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2024 (10) TMI 1543
Condonation of delay of 282 days in filing the special leave petition - sufficient cause for delay or not - Seeking refund of amount paid under threat or duress in pursuance of an investigation - it was held by High Court that 'Though the original issuance of the show-cause notice may be in terms of the directions of the writ Court, any further contemplation of proceeding with the show-cause notice, would be without any authority, in view of the subsequent order passed.' - HELD THAT:- There is a delay of 282 days in filing the special leave petition for which we do not find any plausible explanation in the averments made in the application seeking condonation of delay. The special leave petition is dismissed on the ground of delay.
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2024 (10) TMI 1542
Interpretation of Rule 6 of the Cenvat Credit Rules 2004 thereby equating the automobile cess under a different enactment to be part of excise duty - HELD THAT:- Rule 6 of the CENVAT Credit Rules 2004 inter alia provides that CENVAT Credit shall not be allowed on such quantity of input as is used in or in relation to the manufacture of the exempted goods or for provisions of exempted services. In M/s Mahindra and Mahindra Ltd [ 2019 (12) TMI 230 - BOMBAY HIGH COURT ], the controversy was whether auto cess and education cess could be regarded as duties of excise and based upon the same, the manufactured goods or the services provided could be regarded as exempted goods or exempted services - In M/s Mahindra and Mahindra Ltd, the Coordinate Bench held that having regard to the nature of the various duties or cesses, which are in addition to the duty of excise leviable under the Act or additional duty of excise leviable under Section 3 of the Additional Duties of Excise (Goods of Special Importance) Act 1957 which are nothing but levies of excise - The Court held that once it is seen that these cesses and duties are also excise duties and, on that basis, are included in the CENVAT credit scheme, as indicated by Rule 3 itself, the fact that these are referred to as cesses or duties loses its significance altogether. This was hardly determinative for construing the expression duty of excise . Thus, it was held that where cesses were paid on goods or services, such goods or services could not be regarded as exempted goods or services. Incidentally, Unicorn Industries [ 2019 (12) TMI 286 - SUPREME COURT ] was not even relied upon before the Tribunal, possibly realising the controversy in Unicorn Industries was not the same as the controversy involved before the CESTAT in the present case. There, the assessee insisted that there was no requirement to pay any cess or other duties like cess. Here, the Respondent has paid the cesses. Accordingly, we find no error in the impugned order made by the CESTAT, which, as noted earlier, is entirely based on the decision of this Court in M/s Mahindra and Mahindra Ltd. None of the substantial questions of law as urged arise in this appeal - appeal dismissed.
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2024 (10) TMI 1541
Entitlement for the benefit of N/N. 20/2007 dated 25th April, 2007 which allow exemption to a new unit for a period of ten years - factual issues not addressed properly - violation of principles of natural justice - HELD THAT:- The Tribunal in setting aside the orders of two adjudicating authorities, i.e. the order-in-original and the order of the Commissioner (Appeals), did not address itself properly to the factual issues which needed a detailed and threadbare determination - Prima facie it has not considered some vital and material evidence and has acted upon irrelevant materials to hold in favour of the respondent. This is the the highest Appellate authority to interfere with the order of the Tribunal only if there is a substantial question of law involved. No doubt as stated above, a substantial question of law is involved. But it would be in the fitness of things if this factual determination is made by the learned Tribunal. The impugned order of the Tribunal dated 31st March, 2023 set aside - entire matter remanded to CESTAT to consider the case de novo upon hearing the parties and decide the same by a reasoned order within three months from the date of communication of this order - appeal disposed off by way of remand.
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2024 (10) TMI 1540
CENVAT Credit - inputs/capital goods - dumpers falling under Chapter 87 of the Central Excise Tariff Act, 1985 - Extended period of limitation - HELD THAT:- It is not in dispute that the appellant had accounted the said dumpers under the head Fixed Assets in their balance sheet and have claimed depreciation on the same, thus declaring the dumpers as capital goods and hence, they cannot be construed as inputs under the Cenvat Credit Rules, 2004. The dumpers which are classifiable under Chapter 87 of the Central Excise Tariff Act, 1985 are clearly excluded from the definition of Capital Goods . Therefore, appellant is not eligible for the benefit of cenvat credit on the dumpers which are used in the mining area away from the factory premises either as inputs or capital goods. Whether the appellant is eligible for the benefit of cenvat credit on the dumpers as Capital Goods ? - HELD THAT:- In view of the definition of the Capital Goods , the appellant is clearly not eligible for the benefit of the cenvat credit treating the dumpers as Capital Goods . The decisions of M/S. ADITYA CEMENT VERSUS CCE, JAIPUR-II [ 2016 (9) TMI 1127 - CESTAT NEW DELHI] and BHARATHI CEMENT CORPORATION PVT LTD. VERSUS COMMISSIONER OF CENTRAL TAX, TIRUPATI GST [ 2022 (9) TMI 850 - CESTAT HYDERABAD] is not relevant in view of the fact that the appellant himself has considered the dumpers as capital goods and they have also admittedly claimed depreciation on these assets. The decision in the case of VIKRAM CEMENT VERSUS CCE, INDORE [ 2006 (2) TMI 1 - SUPREME COURT] is also not applicable since the mines where the dumpers are used are not captive mines. Thus, the dumpers are not eligible for cenvat credit neither as inputs nor as capital goods. Extended period of limitation - HELD THAT:- The original authority in the impugned order has only stated that the appellant after realising that they were not eligible for credit on dumpers as capital goods, they availed cenvat credit on the same declaring them as inputs and this itself is a deliberate act with an intent to avail irregular cenvat credit. The Commissioner (Appeals) in the impugned order has not given any finding with regard to limitation. Neither the show cause notice nor the impugned orders have specified any factors to confirm suppression or misstatement of facts to invoke the extended period of limitation - unless there are specific allegations or averments for wilful mis-statement or suppression of facts, the demand cannot be sustained for the extended period. Therefore, the entire demand being beyond the normal period the same is set aside. Appeal allowed.
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2024 (10) TMI 1539
Process amounting to manufature - undertaking several activities on bought out items - levy of excise duty on the activities performed on bought-out items - HELD THAT:- The customers get a complete finished product in un-assembled/ dis-assembled form under the brand name KOHLER which has a different identity, end use, nomenclature different from the individual parts going into the finished product with the names of EOLIA SHOWER ONLY TRIM , HEALTH FAUCET W/WHITE SDSPRAY, M HOSE and INLINE STOP VALVE TRIM or other similar products falling in these group categories. The process undertaken by the appellant falls within the expression incidental and ancillary to the manufacture of final products and amounts to manufacture within the scope of Section 2(f) of the Central Excise Act, 1944. As regards BOTTLE TRAP FLOOR DRAIN and similar items, the appellant has claimed that PVD process undertaken in the appellant s factory by which parts are cleaned, preheated and coated with zirconium nitride through Vacuum Chamber with the help of specific amount of gases and as a result of these process the colour of parts get changed to yellow alike the process of gold plating, Brand name i.e. KOHLER is then embossed/laser marked on these items dos not amount to manufacture as PVD coating constitutes merely makes products rust-free and this process does not change any function of the product except colour does not bring into existence a new product. While applying the ratio laid down by the Hon ble Apex Court in UNION OF INDIA VERSUS JG. GLASS INDUSTRIES LTD. [ 1997 (12) TMI 110 - SUPREME COURT ], it is found that the process of PVD is not merely a colour changing or making the product rust-free. Without undertaking the process, the articles in dispute cannot be used as they will be highly corrosive and rust prone being always in contact with the water and will have practically no shelf life. The process of PVD is not applied merely to enhance the visual appeal but is necessary to make the product worth of its use. The process clearly falls within the definition of manufacture under Section 2(f) of the Central excise Act being incidental and ancillary to the manufacture of the finished goods. The appeal is partly dismissed and partly allowed.
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2024 (10) TMI 1538
Refund claim - goods supplied to Mega Power Projects exempt from payment of Central Excise Duty - Department has rejected the refund claim of the appellant observing that the appellant have failed to fulfill the conditions has provided under Sr. No. 28 of exemption N/N. 31/2010-CE dated 28th July, 2010 - HELD THAT:- It is found from the record of the appeal, that the appellant has supplied EOT cranes to M/s. Larsen and Toubro under the invoice reference dated 18th November, 2010. It s matter of record that the EOT cranes sold by the appellant were meant for the Amrawati Power Projects. The perusal of the documents make it clear that the goods were meant for setting above Mega Power Project and the necessary undertaking as required under condition no. 28 of the exemption Notification no. 31/2010 dated 28th July, 2010 has been complied with. The appellant have complied with condition no. 28 of the exemption Notification and they are entitled for refund of the Central Excise Duty. Reliance also placed upon the Hon ble Supreme Court Decision in case of the M/S BONANZA ENGINEERING CHEMICAL PVT LTD VERSUS COMMISSIONER OF CENTRAL EXCISE [ 2012 (3) TMI 69 - SUPREME COURT ] where it was held that ' merely because the assessee, may be, by mistake pays duty on the goods which are exempted from such payment, does not mean that the goods would become goods liable for duty under the Act. Secondly, merely because the assessee has not claimed any refund on the duty paid by him would not come in the way of claiming benefit of the Notification No. 175/86-C.E., dated 01.03.1986.' The impugned order-in-appeal is without any merit and is set aside - appeal allowed.
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Indian Laws
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2024 (10) TMI 1537
Cheating - Seeking quashing of FIR - Offence under Sections 420/406/506/120B of the Indian Penal Code, 1860 - According to the Complainant/Respondent No. 2, in the present case, he was induced by the accused to part with a considerable sum of money on, inter alia, the dishonest/false pretext of return (12-15%) besides assuring the repayment of principal amount. - whether the FIR under question can be allowed to be continue or deserves to be quashed in view of the fact that a similar complaint which was filed by the Complainant/Respondent No. 2 was dismissed as withdrawn? - HELD THAT:- The Hon ble Supreme Court in Lalita Kumari vs Govt. of U.P. Ors., [ 2013 (11) TMI 1520 - SUPREME COURT ], held that the registration of FIR is mandatory under Section 154 of the Cr.P.C, if the information discloses a commission of cognizable offence. In the present case, it is not the case of the Petitioners that the learned Magistrate had taken cognizance when the application under Section 156 (3) of the Cr.P.C. was dismissed as withdrawn. It is pertinent to note that no observations were made by the learned Metropolitan Magistrate on the merits of the case - There is no bar under the Cr.P.C. for registration of an FIR while a complaint is pending before the Metropolitan Magistrate. In fact, the Code provides for a procedure to be followed when there is a complaint and a police investigation in respect of the same offence. In Supinder Singh [ 1997 (8) TMI 545 - PUNJAB AND HARYANA HIGH COURT] , the Hon ble Punjab and Haryana High Court was dealing with a situation where the Provident Fund Inspector had filed a complaint which was withdrawn and, subsequently, filed a second complaint on the same cause of action before learned Chief Judicial Magistrate, which was held to be not maintainable. Admittedly, Petitioner No. 2 does not dispute his signature and thumb impression on loan agreement as well as the promissory note but takes a stand that the said documents were got signed by Respondent No. 2 which were blank - The stand of Petitioner No. 2, that he had signed the blank promissory note as well as cheques is difficult to comprehend, in view of the fact, that he is an educated business man and well-versed with the functioning of monetary transactions in ordinary course of the business that he was pursuing. Therefore, the said stand cannot be a bonafide claim. The facts and circumstances of the case do not warrant exercise of jurisdiction under Article 226 of the Constitution of India for quashing of FIR under Sections 420/406/506/120B of the IPC registered at P.S. Chittaranjan Park and the consequent chargesheet against Petitioner No. 2 pending before the Court of competent jurisdiction. It is further clarified that since Petitioner No. 1 was not charge-sheeted, therefore, no observation has been made with respect to him. Petition dismissed.
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2024 (10) TMI 1536
Dishonour of Cheque - discharge of legal liability or not - rebuttal of presumption under Section 139 of the N.I. Act - corroboration of statements - Jurisdiction and scope of revisional court under Section 397 of the Cr.P.C. - HELD THAT:- It was laid down by the Hon ble Supreme Court in MALKEET SINGH GILL VERSUS THE STATE OF CHHATTISGARH [ 2022 (7) TMI 1455 - SUPREME COURT ] that the revisional court does not exercise an appellate jurisdiction and it can only rectify the patent defect, errors of jurisdiction or the law - The present revision has to be decided as per the parameters laid down by the Hon ble Supreme Court. The cheque was dishonoured by the bank of the accused on 23.01.2018. The cheque was issued on 21.10.2017 and was to be presented before the drawee bank within three months excluding the date of drawing of the cheque. The cheque was to be presented before the drawee bank on or before 21.01.2018 but it was presented on 23.01.2018 after the lapse of the statutory period of validity of the cheque. Thus, it was rightly dishonoured with an endorsement outdated/state cheque. In the present case, the learned Trial Court noticed the date of presentation of the cheque before the bank of the complainant but failed to notice that presentation of the cheque before the bank of the complainant was not material and the presentation before the bank of the accused was necessary within three months to confer a cause of action upon the complainant. The learned Trial Court also failed to appreciate the significance of the memo of dishonour, in which the reason for dishonour was mentioned as out dated/state and the fact that such a memo does not confer a cause of action to file complaint under Section 138 of the N.I.Act. The learned Appellate Court failed to notice both these aspects. Hence, the judgments and order passed by the learned Courts below are not sustainable. The present appeal is allowed and the judgments and order passed by the learned Courts below are ordered to be set aside. The complaint is dismissed not maintainable. The accused is acquitted for the commission of an offence punishable under Section 138 of N.I. Act. The fine/compensation amount be refunded to the petitioner/accused after the expiry the period of appeal - Appeal allowed.
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2024 (10) TMI 1535
Rejection of the petitioner's financial bid due to past unsatisfactory performance and non-deposit of statutory dues - exercise of power under judicial review - challenge to decision-making process by the tendering authority - HELD THAT:- On bare reading of the communication made by the EPF Organization to the petitioner, it is made clear that the petitioner was advised to facilitate the finding of e-nomination by all the employees and also advised to deposit EPF and allied dues to be paid under Section-14B and 7Q of the Employees Provident Funds and Miscellaneous Provisions Act, 1952. Such instructions were issued, as the petitioner had not deposited the statutory dues and was lacking in its responsibility to comply with the statutory requirements. As a consequence thereof, communication was made to the petitioner vide Annexure-1 dated 06.10.2023 assigning reason as to why its bid was not accepted, even though it was L1 bidder in the process of bidding, keeping in view clause-6.10 of the RFP. It may be noted that in exercise of power of judicial review in respect of contracts entered into on behalf of the State or instrumentality of the State, such as Corporation, the Court prima facie concerns whether there has been any infirmity in the decision making process. In that case, the Court can examine whether the decision making process was reasonable, rationale not arbitrary and not violative of Article-14 of the Constitution of India. In ERUSIAN EQUIPMENT CHEMICALS LTD. VERSUS STATE OF WEST BENGAL ANR. [ 1974 (11) TMI 89 - SUPREME COURT ], the Apex Court held ' When the Government is trading with the public, the democratic form of Government demands equality and absence of arbitrariness and discrimination in such transactions . The activities of the Government have a public element and, therefore, there should be fairness and equality. The State need not enter into any contract with anyone, but if it does so, it must do so fairly without discrimination and without unfair procedure.' In RAMANA DAYARAM SHETTY VERSUS INTERNATIONAL AIRPORT AUTHORITY OF INDIA [ 1979 (5) TMI 144 - SUPREME COURT ], the Apex Court held ' In contractual sphere as in all other State actions, the State and all its instrumentalities have to conform to Article 14 of the Constitution of which non-arbitrariness is a significant facet. There is no unfettered discretion in public law: A public authority possesses powers only to use them for public good. This imposes the duty to act fairly and to adopt a procedure which is fair play in action .' The apex Court also noted that there are inherent limitations in the exercise of power of judicial review in contractual matter. As such, it was observed that the duty to act fairly will vary in extent, depending upon the nature of cases, to which the said principle is sought to be applied. It was further held that the State has the right to refuse the lowest or any other tender, provided it tries to get the best person or the best quotation, and the power to choose is not exercised for any collateral purpose or in infringement of Article 14. In MASTER MARINE SERVICES PVT. LTD. VERSUS METCALFE HODGKINSON PVT. LTD. [ 2005 (4) TMI 579 - SUPREME COURT ], the apex Court held that the principles of judicial review would apply to the exercise of contractual powers by Government bodies in order to prevent arbitrariness or favourtism. However, there are inherent limitations in exercise of that power of judicial review. In AFCONS INFRASTRUCTURE LTD. VERSUS NAGPUR METRO RAIL CORPORATION LTD. ANR. [ 2016 (9) TMI 1292 - SUPREME COURT ], the apex Court held that the constitutional courts are concerned with the decision making process. A decision if challenged (the decision having been arrived at through a valid process), the constitutional Courts can interfere if the decision is perverse. However, the constitutional Courts are expected to exercise restraint in interfering with the administrative decision and ought not substitute its view for that of the administrative authority. In view of the law laid down by the apex Court, so far as the power of the Court to interfere with the conditions of tender in exercise of judicial review is concerned, there is no iota of doubt that when there is arbitrariness and unreasonableness in the matter of decision making process by the tendering authority, the Court can interfere. But, here is a case where in adherence to the tender conditions, the tendering authority has exercised its power, more particularly, clause-6.10 which gives power to the tendering authority to reject any or all the bids at any time solely based on the past unsatisfactory performance by the bidders. On the basis of the materials available, the tender committee came to a definite conclusion that past performance of the petitioner was unsatisfactory and, therefore, even if it quoted lowest price, the same cannot be accepted. Thus, the bid submitted by the petitioner has been rejected on the ground of non-satisfactory performance in the past relying upon two documents, which have been issued by the RTO, Gajapati and RTO, Nuapada and also due to non-compliance of the requirement by depositing statutory dues. This Court is of the considered view that rejection of the bid of the petitioner, even though lowest one, is well justified in view of clause-6.10 of the RFP. Therefore, there is no error in the decision making process in rejecting the bid of the petitioner so as to warrant interference of this Court in exercise of the power under judicial review - the writ petition merits no consideration and the same is hereby dismissed.
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