TMI Tax Updates - e-Newsletter
December 2, 2022

Case Laws in this Newsletter:

GST Income Tax Customs Insolvency & Bankruptcy FEMA PMLA Service Tax Central Excise CST, VAT & Sales Tax

Articles

1. RECENT DEVELOPMENTS IN GST

   By: Dr. Sanjiv Agarwal

2. GST authorities lacks jurisdiction to examine correctness of credit transitioned from erstwhile tax regime

   By: Bimal jain

News

1. ₹1,45,867 crore gross GST revenue collected for November 2022, records increase of 11% Year-on-Year

2. Exchange Rate Notification No. 101/2022 - Customs (N.T.)

3. Workshop on Private Investment in Manufacturing, Housing and Real Estate, and Services in the run-up to the 2nd Conference of Chief Secretaries

4. National Single Window System facilitates over 44000 approvals since launch; over 28 thousand applications under process

5. Financial Benchmarks in India: A Coming of Age (Speech delivered by Shri T. Rabi Sankar, Deputy Governor, Reserve Bank of India - November 28, 2022 - at a seminar organised by Financial Benchmarks India Private Limited (FBIL) in Mumbai)

6. India and Australia exchange written notifications; Ind-AUS ECTA to enter into force on 29 December 2022

Notifications

Central Excise

1. 41/2022 - dated 1-12-2022 - CE

Prescribe rates of Special Additional Excise Duty for exports of petrol and diesel - reduce the SAED on Diesel - Seeks to further amend No. 04/2022-Central Excise, dated the 30th June, 2022.

2. 40/2022 - dated 1-12-2022 - CE

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

GST - States

3. 19/2022 – State Tax - dated 18-11-2022 - Jharkhand SGST

Jharkhand Goods and Services Tax (Second Amendment) Rules, 2022

4. 18/2022 – State Tax - dated 18-11-2022 - Jharkhand SGST

Seeks to bring in force provisions of sections 2 to 19, except of section 12 and section 13, of the Jharkhand Goods and Services Tax (Amendment) Act, 2022

5. 17/2022 – State Tax - dated 18-11-2022 - Jharkhand SGST

Amendment in Notification No. 13/2020 – State Tax, dated the 25th June, 2020

6. F.12(15)FD/TAX/2022-77 - dated 30-11-2022 - Rajasthan SGST

Rajasthan Goods and Services Tax (Fourth Amendment) Rules, 2022

7. 1008/XI-2-22-9(47)/17-T.C.201-U.P. Act-1-2017-Order-(254)-2022 - dated 17-11-2022 - Uttar Pradesh SGST

Seek to notify the provision of section 2 to section 15, except clause(C) of section 12 and section 13 of the Uttar Pradesh Goods and Services (Amendment) Act,2022

8. 1007/XI-2-22-9(47)/17-T.C.200-U.P. Act-1-2017-Order-(253)-2022 - dated 17-11-2022 - Uttar Pradesh SGST

Seek to notify the provision of clause(c) of section 12 and section 13 of the Uttar Pradesh Goods and Services (Amendment) Act,2022

Income Tax

9. 126/2022 - dated 30-11-2022 - IT

Specified income arising from any international sporting event held in India u/s 10(39) of IT Act 1961 - Few International sporting event, persons and specified income arising from the National supporters notified.

Circulars / Instructions / Orders

SEBI

1. SEBI/HO/DDHS/DDHS-RACPOD2/P/CIR/2022/168 - dated 1-12-2022

Extension of timeline for implementation of Standardized industry classification by CRAs

2. SEBI/HO/MRD/MRD-PoD-3/P/CIR/2022/166 - dated 30-11-2022

Inclusion of Equity Exchange Traded Funds as list of eligible securities under Margin Trading Facility

3. SEBI/HO/DDHS/DDHS_Div1/P/CIR/2022/167 - dated 30-11-2022

Review of timelines for listing of securities issued on a private placement basis

DGFT

4. 39/2015-2020 - dated 30-11-2022

Extension of validity of Pre-Shipment Inspection Agency (PSIAs)

Highlights / Catch Notes

GST

• High Court Directs Portal Reopening for GST TRAN-1 Correction; Petitioner Allowed to Revise u/r 120A.

  Case-Laws - HC : Transitional Credit - rectification of inadvertent of mistake its consultant or accept the physical copy of the Form GST TRAN-1 - the respondents No.1 & 2 may instruct the respondent No.5 to open the portal so far as the petitioner is concerned for once in terms of Rule 120A permitting the petitioner to revise the declaration and thereafter permit him to submit the same and complete the filing - HC
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• Attachment Notices Invalid for Lack of Basis; Statement in Inquiry Cannot Replace Formal Liability Determination u/s 70.

  Case-Laws - HC : Recovery of dues - Validity of attachment notices - The impugned notice has no legs to stand. The respondent relies on the fact that there was a statement made by the petitioner in the course of an enquiry conducted by the Intelligence Officer under Section 70 of the Act. However, a statement recorded cannot substitute a determination of liability under an order of assessment or any other order passed under the applicable provisions under the Act. - HC
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• GST on Paper-Based Corrugated Sheets Set at 6% CGST and SGST, Totaling 12% IGST.

  Case-Laws - AAR : Classification of goods - rate of GST - paper based Corrugated Sheets - The rate of tax on supply of corrugated paper sheets is 6% under CGST and 6% under SGST respectively. (IGST @12%) - AAR
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Income Tax

• PCIT Rightly Exercised Jurisdiction u/s 263 Due to AO's Inadequate Probe into Bogus Purchase Allegations.

  Case-Laws - HC : Revision u/s 263 - Estimation of bogus purchases - it is incumbent upon the AO to inquire into the matter and take the proceedings to the logical end. Having not done so, PCIT was fully justified in exercising jurisdiction u/s 263 of the Act - HC
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• High Court Nullifies Income Tax Notice Due to Error; Orders New Notice with Evidence u/s 148A(b) in Two Weeks.

  Case-Laws - HC : Reopening of assessment - notice issued u/s 148A(b) - Mistake in notice issued - The impugned order passed u/s 148A(d) and the impugned notice issued under Section 148 of the Act are set aside and the AO is directed to issue an amended notice under Section 148A(b) of the Act along with the incriminating material in its possession to the assessee within two weeks. - HC
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• Penalty for Cash Loan u/s 271D Overturned Due to Lack of Evidence of Loan or Deposit Requirement.

  Case-Laws - AT : Penalty levied u/s. 271D - assessee had taken loan from his brother and his mother in cash for the purpose of purchase of residential property - There is nothing on record to show that the amount was taken as a loan or deposit by the assessee from his mother/brother and also there is nothing on record to establish that the assessee was under an obligation to repay that the same (with our without interest) - provisions of section 269SS and 271D cannot be invoked - AT
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• Revision of Closing Stock Valuation u/s 263: AO's Order Valid Without Detailed Documentation for Each Issue.

  Case-Laws - AT : Revision u/s 263 - Valuation of closing stock - Just because, the AO does not write detailed assessment order in respect of each of the issues and each of the view he has taken and the examination he had taken, it cannot be said that the order passed by the AO is without enquiry. - AT
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• Expenditure Classified as Personal: Sponsorship, Social Events, and Gifts Deemed Non-Business by Revenue Authorities.

  Case-Laws - AT : Nature of expenditure - Personal or business expenses - As rightly pointed out by the AO, the immediate beneficiary of the sponsorship was the hospital and not the assessee. Similarly musical program organized for fellow colleagues is nothing but a social event which though helps in promoting the assessee but not only on his professional front but also personal front. This fact cannot be denied. So also the gifts given on marriages and diwali which have been rightly pointed out by the Revenue authorities as being incurred out of social obligations and conventions.- AT
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• Madras High Court Rules No Penalty u/s 271(1)(c) for Debatable Interest Income Classification Issue.

  Case-Laws - AT : Penalty u/s.271(1)(c) - Nature of interest income - capital receipt or revenue receipt - This being a highly debatable issue and once there is a debate as assessee’s present case, Hon’ble Madras High Court has admitted the substantial question of law against the order of Tribunal in quantum, we are of the view that assessee is not liable for penalty u/s.271(1)(c) - AT
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• Exemption u/s 10(23C)(iiiab) granted for education society wholly funded by Punjab government. No change in circumstances.

  Case-Laws - AT : Disallowance of exemption claimed u/s 10(23C)(iiiab) - imparting education - there is no change in the facts and circumstances of the case as regard retention of revenues by the assessee society as grant in aid by the Government of Punjab and the assessee society thus continue to remain wholly funded by the Government of Punjab and the assessee is thus held eligible for exemption under section 10(23C)(iiiab) - AT
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• Assessing Officer Disallows 3% Excess Interest u/s 40(A)(2)(b); Assessee Defends as Standard Industry Practice.

  Case-Laws - AT : Disallowance of interest expenditure u/s 40(A)(2)(b) - AO disallowed 3% excess interest - the assessee is justified in claiming that the bank rate of interest is a universal rate of industry and can be said to be fair, subject to the adjustments on account of the variations between the terms like security-requirement by bank, levy of charges, fulfillment of formalities etc. Therefore, 3% margin on account of these factors cannot be said to be excessive or unreasonable. - AT
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Customs

• High Court Finds Customs Broker License Revocation Excessive; Supports CESTAT's Decision on Partial Compliance with 2013 Regulations.

  Case-Laws - HC : Revocation of Customs Broker License - Respondent (CB) discharged a part of its obligation under the CBLR, 2013, although not in its entirety, we feel that the order with regard to revocation of the Customs Broker Licence would have been excessive in the facts and circumstances of the case and the issue has been rightly dealt with by the CESTAT. - HC
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• Appellant Challenges Town Seizure Over Alleged Smuggling; Customs Jurisdiction and Natural Justice Principles in Question.

  Case-Laws - AT : Smuggling - Town Seizure - appellant could not produce documentary evidence or otherwise showing lawful import, acquisition, possession in respect of the goods - The Customs officers can exercise the jurisdiction under the provisions of SWM Act and the Rules thereunder, only in the Customs area - the impugned order is bad and suffers from the vice of violation of principles of natural justice - Revenue has not been able to establish the smuggled nature of the goods. - AT
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• Appellant Penalized for Unauthorized Shipping Bill Alterations u/ss 114(3) and 114AA; Penalty Confirmed.

  Case-Laws - AT : Levy of penalty under Section 114(3) and 114AA - improper export of goods - the appellant have resorted to unauthorised modification /alteration in the shipping bill after the same was passed by the proper officer of the Customs, which amounts violation of provisions of Section 114AA - levy of penalty confirmed - AT
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FEMA

• High Court Dismisses Appeals: Petitioner Must Use Section 37A(5) FEMA Act Before Approaching Under Article 226.

  Case-Laws - HC : Maintainability of appeal before High court - hierarchy of forums - violation of the provisions of Section 4 of FEMA - Since the petitioner department can very well file an appeal under Section 37A(5) of the FEMA Act before the Appellate Tribunal, both these writ petitions cannot be proceeded further by this Court to decide the issue on merits by invoking the extraordinary power under Article 226 of the Constitution of India. - HC
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IBC

• NCLT Erred in Dismissing CIRP Application: Emails Showed No Pre-Existing Dispute, Only Business Discussions.

  Case-Laws - AT : Initiation of CIRP - existence of pre-existing dispute or not - The emails relied upon the Adjudicating Authority are not directed to raise a pre-existing dispute rather the said emails are exchanged by the parties regarding the improvement in the operation and sales and has nothing to do with the goods which are now alleged to be substandard or defective. - NCLT wrongly rejected the application - AT
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PMLA

• High Court Denies Bail in Bank of India Money Laundering Case; Questions Loan Taken by Private Individuals Related to Petitioner.

  Case-Laws - HC : Seeking grant of Regular bail - Money Laundering - commission of fraud with the Bank of India It is strange that when the petitioner was having the company why the loan in question was not taken in the name of the said company whereas the private persons have been involved who are alleged to be the employee and close relatives of the petitioner. - bail application dismissed. - HC
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Service Tax

• CENVAT Credit Recovery: Rule 9 Oversight in Document Verification Leads to Decision Error in Credit Allowance.

  Case-Laws - AT : Recovery of wrongly availed CENVAT Credit - Rule 9 of CCR - if the documents as submitted by the appellants contain all such particulars as are mentioned in the invoices or payment received, then also the Cenvat credit is to be allowed. The Adjudicating authority below has miserably failed to consider the said proviso - AT
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Central Excise

• Settlement Commission Order Void if Conditions Unmet; Case Returns to Statutory Authority; Petitioners See No Advantage.

  Case-Laws - HC : Validity of order passed by Settlement Commission - Unless the twin conditions mentioned therein are fulfilled, the Settlement Commission cannot move further in the matter. The Settlement Commission is, necessarily, then required to remit the matter to the concerned statutory authority - in this case, the petitioners have got practically no benefit in approaching the Settlement Commission, as the quantum of liability which was indicated in the aforementioned show cause notice(s) is practically what has been the thrust on them via impugned orders. - HC
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• Court Rules on Excise Duties Recovery from Former Landowner for Manufactured Goods, Not Plant and Machinery.

  Case-Laws - HC : Recovery of excise dues payable by the erstwhile owner of the land and property - Dues of central excise became payable on the manufacturing of excisable items by the erstwhile owner. Therefore, the excise duties were in respect of those items which were produced and not the plant and machinery which were used for the purpose of manufacturing. - HC
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• Supreme Court rulings are binding on all Indian courts, requiring adherence to judicial discipline and established legal precedents.

  Case-Laws - AT : The law declared by the Hon'ble Supreme Court shall be binding on all Courts within the territory of India and since the Commissioner is not above the Courts therefore it binds him as well. Judicial discipline and propriety demands that the Adjudicating Authority or the first Appellant Authority should follow the binding decisions of the Hon'ble Supreme Court/High Court and of course of the Tribunal and should refrain from making comments which are uncalled for. - AT
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• Documents Rejected Without Authenticity Check Violates Natural Justice in Central Excise Case, Highlights Procedural Error.

  Case-Laws - AT : Compliance with the actual user condition - Once, its authenticity is proved then the said documents must be considered for a fair adjudication. In the present case, the adjudicating authority without ensuring the authenticity of the documents rejected the same, therefore, same is in gross violation of principles of natural justice. - AT
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Case Laws:

• GST

• 2022 (12) TMI 43
  Seeking grant of Regular Bail - wrongful availment of input tax credit - non-existent suppliers - no receipt of goods - offence punishable under Section 132(1)(b)(c)(i)(3)(5) of the CGST Act, 2017 - HELD THAT:- Having regard to the facts and circumstances of the case and while noticing that the petitioner has been behind bars for a substantial period of about 9 months and that conclusion of trial is likely to consume time inasmuch as a large number of prosecution witnesses have been cited and as on date only 2 out of the cited 37 prosecution witnesses have been examined in pre-charge evidence, further detention of the petitioner will not serve any useful purpose. As such, without commenting anything as regards merits, the petition is accepted and the petitioner is ordered to be released on regular bail on his furnishing bail bonds/surety bonds to the satisfaction of learned trial Court/Chief Judicial Magistrate/Duty Magistrate concerned. Application allowed.

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• 2022 (12) TMI 42
  Seeking direction to respondent authorities to reset/ reopen the GST portal filing the GST TRAN-1 form for the petitioner - Transitional Credit - rectification of inadvertent of mistake its consultant or accept the physical copy of the Form GST TRAN-1 - HELD THAT:- Undoubtedly the petition became entitled for submitting of his Form Tran-1 and Tran-2 in terms of the order of the Supreme Court in case of Union of India Vs. Filco Trade Centre [ 2022 (9) TMI 514 - SC ORDER ]. It is also an admitted factual position that the period for submission of the form Tran-1 and Tran-2 or portal is open up till 30.11.2022. The petitioner having availed the said benefit and having attempted to submit his form Tran-1 and Tran-2 and where certain inadvertence took place. Under the said circumstances it cannot be said that the provision under Rule 120A would not be applicable. In the case of the petitioner or any other similarly placed person. In the instant case the circular dated 09.09.2022 is primarily a clarification instructions and the said clarificatory instructions cannot have an overriding effect over the Act or the Rules. When Rule 120A provides for revising of the declaration in form GST Tran-1 once, only because the portal has been opened as a one time measure by itself cannot be construed that the Rule 120A cannot be made applicable when the period for submission of Form Tran-1 is still open in terms of the order of the Supreme Court even as on date. The Supreme Court also has nowhere held that the applicability of Rule 120A would not be available to those persons who are to submit their Form Tran-1 and Tran-2 in terms of its order. This court therefore is of the opinion that taking into consideration the Rule 120A, it is ordered that the respondents No.1 2 may instruct the respondent No.5 to open the portal so far as the petitioner is concerned for once in terms of Rule 120A permitting the petitioner to revise the declaration and thereafter permit him to submit the same and complete the filing - the respondents No.1,2 and 5 are further directed to ensure that all necessary steps are taken as far as possible before the time limit provided by the Supreme Court i.e. by 30.11.2022 if not at the earliest. Petition disposed off.

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• 2022 (12) TMI 41
  Recovery of dues - Validity of attachment notices - direction to bank to withhold the amount of upto a sum of Rs.74,52,943/- and pay the same forthwith to the Government - statement recorded can be a substitute of determination of liability under an order of assessment or any other order passed under the applicable provisions under the Act, or not - HELD THAT:- It is an admitted position in this case that there has been no order of assessment or any other order passed under the applicable provisions making a determination of the aforesaid amount as being due from the petitioner. Neither has the petitioner been assessed under Sections 73 or 74, nor has there been any order passed reversing the Input Tax Credit that is claimed by the petitioner. The impugned notice has no legs to stand. The respondent relies on the fact that there was a statement made by the petitioner in the course of an enquiry conducted by the Intelligence Officer under Section 70 of the Act. However, a statement recorded cannot substitute a determination of liability under an order of assessment or any other order passed under the applicable provisions under the Act. This Court was concerned with a similar factual and legal position in the case of M/S. V.N. MEHTA COMPANY VERSUS THE ASSISTANT COMMISSIONER, THE SUPERINTENDENT OF GST CENTRAL EXCISE, THE STATE TAX OFFICER, THE MANAGER [ 2019 (11) TMI 766 - MADRAS HIGH COURT] , and that Writ Petiton came to be allowed, this Court holding that the impugned proceedings were not maintainable under law, so too in the present case. The Impugned Notice dated 27.12.2019 is set aside in light of there being no statutory santion for the issuance of the same in terms of Section 83 of the Act. Petition allowed.

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• 2022 (12) TMI 40
  Classification of goods - rate of GST - paper based Corrugated Sheets - HELD THAT:- On a careful reading of the entries and submissions made by AR at the time personal hearing and also on verifying the sample sheet the paper based corrugated sheet is falls under Heading 4808. The rate of tax on supply of corrugated paper sheets is 6% under CGST and 6% under SGST respectively.

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• Income Tax

• 2022 (12) TMI 39
  Revision u/s 263 - Estimation of bogus purchases - HELD THAT:- Since a common order passed by the learned Tribunal had been reversed by this Court [ 2022 (7) TMI 1352 - CALCUTTA HIGH COURT] wherein as held that it was the factual position in the case on hand then it is incumbent upon the AO to inquire into the matter and take the proceedings to the logical end. Having not done so, PCIT was fully justified in exercising jurisdiction u/s 263 of the Act - the said decision will apply to the cases on hand as well. For the above reasons, the appeals filed by the revenue are allowed and the order passed by the learned Tribunal is set aside.

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• 2022 (12) TMI 38
  Reopening of assessment - notice issued u/s 148A(b) - Mistake in notice issued - HELD THAT:- AO is personally present in Court today. He admits that the impugned order passed under Section 148A(d) of the Act is riddled with mistakes. He further admits that in the notice issued u/s 148A(b) details of the transactions allegedly carried out by the petitioner were not correct. He states that the transactions were clarified by the ITO (Inv), Unit-7, Delhi in its e-mail dated 14th July, 2022, which he had incorporated in the order passed under Section 148A(d) of the Act. The impugned order passed u/s 148A(d) and the impugned notice issued under Section 148 of the Act are set aside and the AO is directed to issue an amended notice under Section 148A(b) of the Act along with the incriminating material in its possession to the assessee within two weeks. The assessee is given liberty to file a reply to the amended notice within four weeks. AO is, thereafter, directed to decide the matter afresh within a further period of four weeks in accordance with law.

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• 2022 (12) TMI 37
  Reopening of assessment - Allegation of non disposal of objections - as submitted objections have not as yet been disposed of, the petition is premature - HELD THAT:- According to learned Senior Advocate Mr. Hemani, it is not unknown to this Court that pending the petition, objections can be directed to be disposed of as it is a group of the matters where there is hardly any possibility of the respondent taking any other stand while disposing of objections. This was resisted by the other side. We noticed that in today s date, this Court has disposed of two of the matters being Special Civil Application [ 2022 (11) TMI 1269 - GUJARAT HIGH COURT] and [ 2022 (11) TMI 1268 - GUJARAT HIGH COURT] wherein the assessment made is nil and they were the part of the very group, therefore, nothing can be presumed in advance and the stage of disposing of the objections will need to be made available to the respondent authority. Petition being prematured, this Court chooses not to entertain it at this stage. Let the disposal on the strength of the objections raised by the petitioner be made by the authority concerned within two weeks from the date of receipt of copy of this order, on availing opportunity in accordance with law. If any adverse order is passed, no effect be given to the same by the Revenue for two weeks.

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• 2022 (12) TMI 36
  Penalty levied u/s. 271D - contravention of provisions of section 269SS - assessee had taken loan from his brother and his mother in cash for the purpose of purchase of residential property - amount of loan or deposit so taken or accepted in cash - HELD THAT:- In the case of Smt. Meera Devi Kumawat [ 2021 (10) TMI 967 - ITAT JAIPUR] where assessee received substantial amount of cash from her husband for purchase of plot and construction of residential house on it, since repayment of said amount was not mandatory and there was no element of interest, and pooling of family funds was done by assessee due to family requirement and as she did not have any known sources of funds, no penalty could be levied u/s 271D for violation of section 269SS. In view of the decision of the jurisdictional Gujarat High Court in the case of Dr. Rajaram L. Akhani [ 2016 (6) TMI 1051 - GUJARAT HIGH COURT] and Smt. Meera Devi Kumawat [ 2021 (10) TMI 967 - ITAT JAIPUR] and other case laws cited above, as applicable to the facts of the case, in our view, receipt by the assessee from his mother and brother is concerned, in our view the provisions of section 269SS / 271D of the Act do not stand attracted. There is nothing on record to show that the amount was taken as a loan or deposit by the assessee from his mother/brother and also there is nothing on record to establish that the assessee was under an obligation to repay that the same (with our without interest) and therefore in view of the judicial precedents cited above, in our view provisions of section 269SS and 271D cannot be invoked for the amount - Accordingly, in the instant facts, penalty under section 271D is not liable to be levied. Appeal of the assessee is allowed.

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• 2022 (12) TMI 35
  Revision u/s 263 by CIT - revisionary action over dropping-off of penalty proceedings initiated u/s 271(1)(c) - HELD THAT:- AO after carrying out an inquiry with respect to eligibility of appellants claim, basis of claim and compliance relating thereto (if any) has then culminated the penal proceedings taking one of the plausible view in the light of settled legal position in dropping-off the proceedings initiated u/s 271(1)(c) whereas in a revisionary proceedings PCIT yet again conducted an inquiry into the claim of the appellant based on the like material and sitting on the same fence displaced with the views of Ld. AO and directed for de-nova proceeding by pressing into service the applicability of explanation 5A to section 271(1) which ostensibly is impermissible under a law following the ration laid in down in CIT Vs Gabriel India Ltd. [ 1993 (4) TMI 55 - BOMBAY HIGH COURT] As it is a well settled law that, an inquiry and/or fresh determination can be directed by the revisionary authority only after coming to the conclusion that the finding of the AO is erroneous and prejudicial to the interests of the Revenue on the basis of evidential material and without doing so, the authority turns toothless to disturb the completed proceedings, hence for the reason in our considered opinion, the conclusion drawn by the Ld. PCIT is untenable in law, ergo finding no infirmity with the order dropping the penalty, we quash the revisionary order. Appeal of the appellant assessee is allowed.

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• 2022 (12) TMI 34
  Deduction u/s 80P - claim dismissed due to non-filing the return on or before the due date of filing the return - claim in return although filed late on account of reasons beyond the control of assessee - HELD THAT:- We find no infirmity in the impugned order confirming the disallowance of deduction claimed u/s. 80-P falling under Chapter VIA - A perusal of the copy of the application submitted with the office of the ld. Pr. CIT shows the same to be for condonation of delay in filing the return for the current year, and received by the said office on November 9, 2022. The same is in terms of the cited Circular and, therefore, is to be disposed by the ld. Pr. CIT within the stipulated period. As the assessee s application for condonation of delay in filing it s return is pending disposal as on date by the competent authority, we have little hesitation in accepting the assessee s plea for restoring the matter back to be decided in accordance with law, i.e., on merits, in case the delay in filing the return is condoned, else the assessment as made stands confirmed. We have in principle no hesitation in accepting the assessee s prayer, at the same time, we find no reason to set aside the assessment which is in accordance with law. We only consider it proper to restore the matter to the file of the first appellate authority for the purpose, i.e., to decide the issue of deduction u/s. 80-P on merits in the event of condonation of the delay in the furnishing of the return. It may do so by calling for a remand report in the matter from the AO, again, after hearing the assessee, or decide the matter itself after hearing both the sides before it. This shall also obviate the time limitation to which the assessment order would be otherwise subject.

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• 2022 (12) TMI 33
  Validity of assessment - jurisdiction of the authority to act as the AO - Jt./Adl. CIT heading the Ranges - authorised officers u/s. 120(4)(b) - HELD THAT:- The jurisdiction of the authority to act as the AO in a given case cannot be questioned in the appellate proceedings under the Act in view of the clear mandate of law per sec. 124, requiring all such issues to be decided through the administrative route. The assessee s legal plea questioning the territorial jurisdiction of the Addl. CIT to act as it s AO is, in view of the foregoing, without any legal force. We may before parting also clarify, inasmuch the assessee s Ground makes reference to the additional ground before the first appellate authority, that same has been rightly dismissed by him for want of authorisation, which being a part of the appeal memo, could be verified only by the appellant. He has, nevertheless, disposed of the assessee said Gd. on merits, discussed hereinbefore, being in pari materia to it s Gd. 1 before him - though we have upheld his findings, finding the assessee s plea as without substance, we clarify the clear position of law of the same as being not a subject matter of an appeal under the Act, and not liable to be resolved through the appellate procedure under the Act. No notice u/s. 143(2) stands issued by the AO, i.e., Addl. CIT, Chhindwara, after 30/11/2006, i.e., the date of order u/s. 120(4)(b) by the CIT-1, Jabalpur, authorising him to act as an AO - True, there is no issue of notice u/s. 143(2) for AY 2004-05 on or after 30/11/2006. How could, one wonders, that invalidate the notice u/s. 143(2) dated 17/3/2005 by the Asst. CIT, Circle Chhindwara, i.e., the incumbent AO, duly served on the assessee on 18/3/2005; the said notice being also within time and, thus, a valid notice seeking to assume jurisdiction to frame an assessment u/s. 143(3), and which has been by the incumbent AO on 26/12/2006, again noted by the ld. CIT(A) - Though the assessee s Ground speaks of notice u/s. 142(1) as well, the same is not a jurisdictional notice and, therefore, it s relevance in challenge to the validity of the assessment is neither understood nor explained, being also not before the ld. CIT(A), nor covered in the assessee s submissions before him. Notice u/s. 142(1) is clearly toward obtaining information deemed relevant by the assessing authority from the assessee. The second function of the said notice is to cause furnishing of a return of income where the same has not been furnished u/s. 139, and which is clearly not the case. In sum, the Ground is without merit and, accordingly, dismissed. Addition toward shortage in soybean seed account - The goods are bought at pre-determined rates fixed by the buyers (oil extraction units), on whose behalf goods are, though shown as bought and sold, bought by the assessee for a pre-determined addhat (commission). The goods are accordingly despatched from the supplier s premises direct to that of the buyer (plant owners), whereat the same are weighed and debit notes for difference/s in weight, if any, allowing for a tolerance, raised. Debit notes were also verified by the AO to find them to have been raised by the buyers (toward shortage, moisture content, damage seeds etc.) on the assessee on a regular basis, i.e., where the parameters exceeded the defined tolerance limits. Occasionally, where the assessee was able to secure a better bargain, so that its purchase rate is below its sale rate, it also benefits, i.e., apart from commission, by way of trading profit. The addition is, thus, well founded with no rebuttal at any stage and, accordingly, confirmed. Addition on account of debit notes raised on the assessee by it s buyers as found debited in the assessee s accounts on 01/4/2003, i.e., the first day of the relevant previous year - There is no evidence whatsoever that any settlement has been, as claimed, arrived at between the parties, much less during the current year, i.e., on the first day of the accounting year, on which the debit notes were entered in the accounts at full amount thereof. As the books for the previous year relating to AY 2003-04 have not been closed on 01/4/2003, information as on 01/4/2003, to the extent it relates to conditions obtaining as on 31/3/2003, would need to be taken into account for the purpose of the estimate as on 31/03/2003. This would also make it incumbent on the assessee to justify, in addition to what had transpired on 01/4/2003, its claim in full, so that an expenditure which, as on 01/4/2003, i.e., the date on which the estimate on the basis of the available information was to be made, was estimated at nil, was finally determined in full at the impugned sum of Rs. 5.04 lacs on 01/4/2003 itself, representing the total amount of debit notes-in-hand as on 31/03/2003. The assessee s claim is, clearly, without any basis on facts, as indeed in law. We therefore uphold the disallowance as confirmed by the ld. CIT(A). Disallowance of expenditure - vast difference in the rate on which hamali charges are claimed as paid (Rs. 5.08 per bag) and that by another party in the trade (rs. 0.30 0.35 per bag) - HELD THAT:- It is pertinent to note that the assessee had in fact reported a net income of Rs. 13,352 under this head for the immediately preceding year. Further, the very fact that the assessee has received compensation at an average of Rs. 3.50 per bag for the year and, further, been allowed expenditure @ 0.85 per bag, implies an acceptance of expenditure at Rs. 4.53 per bag, which is the relevant rate, and not Rs. 0.85 per bag, stated as allowed by the AO. This also explains marginal income under this head for the preceding year, the reimbursement exceeding the expenditure by some paisa per bag. We find no reason for interference. We decide accordingly. Loss on ginned cotton account - HELD THAT:- The loss, on the basis of an average sale rate of 5976 per qtl., qua the sale to NIPL, works to Rs. 2,84,931. Subject, therefore, to the confirmation of our working as correct, we confirm the addition at this sum. The assessee gets part relief. Disallowance of interest calculated @15% p.a.loss disallowed for AY 2004-05 and personal investment/s - Firstly, interest on loss to the extent of Rs. 5.04 lacs has been disallowed on the ground that the same does not relate to AY 2004-05, but to the immediately preceding year. That would not though impact the interest liability in its respect. The proportionate interest thereon would be Rs. 75,600. Two, the period of personal investment/s made during the year (Rs. 17.73 lacs) is not specified, so that the same stands presumably made during the relevant previous year, and not at the beginning thereof, as implied by the AO s working. Interest thereon, at an average, assuming it being spread uniformly over the year, would be at one-half that computed by him, i.e., Rs. 1,30,233. The assessee, accordingly, gets a total relief for Rs. 2,05,833. We decide accordingly. Entry tax stands disallowed u/s. 43B on it not being paid up to the date of filing the return - No evidence toward it s payment by the due date of filing the return for the year, i.e., 31/10/2005, has been brought on record. Disallowance, since confirmed, is therefore upheld. The basis for disallowance is of it being penalty under commercial tax, sales tax and entry tax. The law in the matter is well-settled, and the same cannot be an incident of business, to be accordingly allowed as a business deduction u/s. 37(1). Disallowance, confirmed on that basis, is again upheld for the same reason; the assessee not bringing any material to substantiate its claim of the same being not penalty, and compensatory in nature. We decide accordingly.

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• 2022 (12) TMI 32
  Deduction u/s. 80- IA - Deductions in respect of profits and gains from industrial undertakings or enterprises engaged in infrastructure development, etc.- quantum of deduction as apparent, two components, i.e., the sales (revenue) and the cost of sales - HELD THAT:- Integral to the concept of accrual of income is the concept of prudence and conservatism, the fundamental accounting assumptions which would preclude accounting as income anything beyond that is reasonably certain for realisation. Surely, any price beyond the cost that the sugar division would otherwise, i.e., but for its purchase from the power division, have to incur, cannot be said to have its basis in economic reality - an actual receipt at the proposed rate (of Rs. 6.28 per unit), where so, would stand to substitute this rate, which thus in any case gets based on actuals. This would also meet the assessee s charge, assuming so, that the market price, in view of the controlled market, does not actually represent an equilibrium of demand and supply forces. Second component of the profit is cost of sales . As the sale is to be adopted on arm s length basis , i.e., as two independent entities would transact, the cost would also include both direct and indirect costs. The principal raw material, bagasse, is stated in the Notes to the Accounts, to be purchased at Rs. 35 per Qtl., i.e., the prevailing market price, which, where so, merits acceptance. The administration (indirect) cost is stated to the proportioned on sale basis, which is again reasonable, though would require to be modified with reference to the sale value of power (to sugar division) as finally adopted. Further, as it appears, no separate books of account have been maintained for the two businesses, with Shri Bardia informing that the old turbine was regarded as a part of sugarcane division, and depreciation thereon allocated thereto which, again needless to add, would be with reference to the assets employed with the two divisions, allocating the depreciation of common assets on some reasonable basis. We, accordingly, allowing the assessee s plea in principle, i.e., that the power division constitutes an eligible business u/s. 80IA(1), on the profit of which therefore deduction thereunder is exigible, restore the matter for determination of the quantum of deduction, on which there has been no examination and, consequently, findings by both the Revenue authorities, back to the file of the AO. The matter, in fact admits of no dispute in principle, with the assessee itself per its Notes to the Accounts clarifying that the inter-unit transfers have been recorded at prevailing market prices, so that all that survives is the verification of it s claims. It is open for the assessee (or for that matter the Revenue) to make out a case inconsistent or in disagreement, wholly or partly, with what stands stated by us toward the same, of course meeting the law as explained herein, and in which case it shall be incumbent on the AO to consider and adjudicate the same, besides being obliged to do so in accordance with law by issue definite finding/s of fact and observing the principles of natural justice.

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• 2022 (12) TMI 31
  Revision u/s 263 - Valuation of closing stock - HELD THAT:- On perusal of reply given by the assessee in respect of query in respect of closing stock shown shows that the method of valuation is very much available in the papers submitted before the AO. Thus, it cannot be said that the AO has not examined the method of valuation. Just because, the AO does not write detailed assessment order in respect of each of the issues and each of the view he has taken and the examination he had taken, it cannot be said that the order passed by the AO is without enquiry. It is the duty of the assessee to place all the details as called for by the AO in the course of scrutiny assessment before the AO. The law does not prescribe that the assessee must point out defect in its case also to the AO. AO is expected to and it is presume to have done all the examination that is required to be done when the details are before him. Variation in the purchases and sales - Purchase and sale, clearly shows the purchase include the purchase of consumables. The same is also inclusive of entry tax and the same has been brought out in the return filed in Form E-3, which is also before the AO. On perusal of the order of the Pr. CIT shows that he has referred to this issue, but has not given any specific findings. This clearly shows that the details were before the Assessing Officer and the fact that no addition has been made on this account shows that the AO has found the reply of the assessee to be reasonable and satisfactory. Cash deposits during the Demonetisation period which is identical to chart extracted by the Pr. CIT of the order u/s.263 clearly shows that the closing cash in hand as on 9.11.2016 is Rs.49,03,323.00. The chart clearly shows that this closing cash in hand is nothing but cash withdrawals from the bank account of the assessee. What the assessee has deposited is the amount of Rs.44.25 lakhs is nothing but cash withdrawn from the bank account. This being so, the chart itself is an explanation in respect of cash deposited in the bank account. Clearly, the AO has examined this issue and has not made any addition thereon. This being so, we are of the view that the issue has been considered by the AO in detail and the revision proposed by the Pr. CIT is only on presumptions and same is unsustainable. Consequently, the order passed by the Pr. CIT u/s.263 is found to be unsustainable and same stands quashed. Appeal of the assessee stands allowed.

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• 2022 (12) TMI 30
  Deduction u/s 80P(2)(a)(i) - interest income received by the assessee on investments made with co-operative banks - HELD THAT:- Tribunal in the case of M/s.Vasavamba Cooperative Society Ltd. [ 2021 (8) TMI 706 - ITAT BANGALORE] after considering the judicial pronouncements on the issue had held that interest income earned out of investments made from surplus funds would be taxable under the head `income from other sources and would not be eligible for deduction u/s 80P(2)(a)(i) of the I.T.Act. It was further held by the Tribunal insofar as deduction u/s 80P(2)(d) of the I.T.Act is concerned, only those interest received from investments with co-operative societies alone would be entitled to deduction. Thus we make it clear that interest income received out of investments with cooperative societies is to be allowed as deduction. Assessee s claim that if interest income is to be assessed income from other sources, necessarily, the cost incurred for earning such interest income should be allowed as deduction u/s 57 - Assessee has not raised the plea before the Income Tax Authorities that it has to be given deduction u/s 57 of the I.T.Act, in respect of expenditure for earning the interest income. However, inspite of such plea not being raised before the lower authorities, we are of the view that since the fundamental principle under Income-tax Act being that only net income has to be taxed (i.e., gross receipt minus allowable expenditure), this plea of the assessee has to be necessarily entertained, especially in the light of the judgment of Totagars Sale Co-operative Society Limited [ 2015 (4) TMI 829 - KARNATAKA HIGH COURT] . Accordingly, the issue of deduction u/s 57 of the I.T.Act is restored to the files of the A.O. The A.O. is directed to examine whether assessee has incurred any expenditure for earning interest income, which is assessed under the head `income from other sources . If so, the same shall be allowed as deduction u/s 57 of the I.T.Act. The assessee is directed to co-operate with the department and furnish the necessary evidence for expeditious disposal

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• 2022 (12) TMI 29
  Disallowance u/s 40A(3) - purchase of sugarcane in cash - assessee made purchases from farmers of their agricultural produce - As argued AO grossly erred in law and on facts for applying provisions of Section 40A(3) read with Rule 5DD(j) - HELD THAT:- In the light of specific exception provided under Rule 6DD(e) in respect of agricultural produce, since the assessee made purchases of sugarcane, which is essentially an agricultural produce, coupled with the fact that Revenue has earlier accepted this claim of the assessee, we therefore, do not see any infirmity into the impugned order. Same is hereby sustained. This ground of Revenue s appeal is dismissed. Addition u/s 68 - assessee in this case has failed to provide the genuineness of the transaction and creditworthiness of the lender from whom loans were received - CIT-A deleted the addition - HELD THAT:- CIT(Appeals) has categorically recorded that the amount of unsecured loan during the relevant financial year was received in the earlier financial year and was disclosed in the relevant balance-sheet as such. The ground raised by the Revenue thus lacks merit and is dismissed.

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• 2022 (12) TMI 28
  Deduction u/s 80IA - profits and gains derived from telecommunication service in AY 2005-06 for the first time - assessee started providing telecommunication services before 01/04/1995 or thereafter - admission of additional evidences - DR submitted that to be eligible to claim the benefit of deduction, the primary requirement of section is that the undertaking starts providing telecommunication services on or after 01/04/1995 and documents on record suggest that the assessee had started services prior to 01/05/1995, hence, the assessee is not eligible to claim benefit of deduction u/s. 80IA(4) - One of the objection raised by the Department is that the assessee has not maintained separate books of account HELD THAT:- The Circular clarifies that the condition introduced by the Finance (No.2) Act, 2004 will not apply to undertakings which have started providing telecommunication services prior to 01-4-2004. Documents on record clearly show that the assessee started providing telecommunication services after 01/4/1995 but before 01/4/2004. Thus, even if the assessee s undertaking is formed after merger/reconstruction, still the assessee would be eligible for deduction u/s.80IA of the Act in the light of CBDT circular There is no infirmity in the order of CIT(A) in coming to the conclusion that the assessee had started telecommunication services after 01/04/1995 and the assessee is eligible for deduction u/s. 80IA(4) of the Act. Additional Evidences - HELD THAT:- This case has travelled between Assessing Officer and the Appellate Authorities four times over a period of decade. Four times the assessment order has been passed. The issue that was considered time and again in assessment proceedings and the Appellate proceedings was the assessee s eligibility to claim deduction u/s. 80IA with reference to assessee s date of start of telecommunication services. Sufficient time was available to the Department to furnish these evidences. For the reasons best known to the Department these additional evidences which are factual and were very much in existence even during at the time of passing first assessment order for AY 2005-06 were not relied upon by the Department. Dehors, belated filing of these additional evidences, even if these additional documents are admitted, it would not make any material difference.As sale of pagers during FY 1994-95 has already been admitted by the assessee and the same has been reflected in the books of account. - the Revenue s application for admitting additional evidences at this belated stage is rejected. Whether interest income and miscellaneous income earned by the assessee would be eligible for deduction u/s. 80IA? - We find that similar issue had come up before the Tribunal in the case of BSNL[ 2015 (12) TMI 1531 - ITAT DELHI] in terms of non- obstinate clause used in section 80IA(2A), deduction for telecommunication services is available in respect of profits of eligible business and is not restricted to profits derived from eligible business as mentioned in section 80IA(1) - The aforesaid findings of the Tribunal were affirmed by the Hon ble Delhi High Court [ 2016 (8) TMI 270 - DELHI HIGH COURT] - As observe that the DRP in directions dated 21/09/2017 for assessment year 2013-14 has observed that no SLP has been filed against the decision of Hon ble Delhi High Court by the Revenue and allowed assessee s claim of deduction u/s. 80IA of the Act in respect of other incomes. Respectfully following the decision of BSNL we direct the Assessing Officer to allow the benefit of deduction u/s. 80IA of the Act +in respect of interest Income as well as miscellaneous income. Ground No.2 of the assessee s appeal is thus allowed. Charging of interest u/s. 234B is mandatory and consequential. We deem it appropriate to restore this issue back to the file of AO for charging interest in accordance with the provisions of section 234B - Ground No.3 of the appeal is thus, allowed for statistical purpose.

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• 2022 (12) TMI 27
  Nature of expenditure - professional development expenditure/gifts given - Personal or business expenses - Expenditure on publicity of the Hospital - expenses incurred by the assessee, a doctor by profession, on organizing musical programme for his professional colleagues, sponsoring garba event organized in the society where he resided and gifts given to fellow doctors on the occasion of marriage or diwali - contention of the assessee that this expenditure was incurred for promoting and publicizing his professional network, that the gifts had been given to doctors who were in the professional circle associated with the assessee - HELD THAT:- In the present case, we agree with the authorities below that these expenses are in the nature of personal expenses. They cannot be said to be incurred wholly and exclusively for the profession of the assessee. Organizing musical parties for fellow colleagues or garba event in the society where the assessee resides or for that matter giving gifts on marriages of fellow colleagues is done primarily out of social obligations or practices and predominantly for personal reasons. As rightly pointed out by the AO the Garba event was organized for the benefit of persons limited to those residing in his society. It was a religious programme conducted in the assesses society which he had sponsored as a resident of the society. The sole purpose for incurring the expense was not for the purpose of his profession but also on account of the fact that being a resident of the society he felt obliged to contribute towards the programme. As rightly pointed out by the AO, the immediate beneficiary of the sponsorship was the hospital and not the assessee. Similarly musical program organized for fellow colleagues is nothing but a social event which though helps in promoting the assessee but not only on his professional front but also personal front. This fact cannot be denied. So also the gifts given on marriages and diwali which have been rightly pointed out by the Revenue authorities as being incurred out of social obligations and conventions. All these expenses, cannot be said to have been incurred wholly and exclusively for the profession of the assessee so as to qualify for deduction u/s 37(1) - Decided against assessee. Expenditure incurred on advertisement - HELD THAT:- These expenses were incurred for advertising in the members directory of the society where he resided and for sponsoring a musical event in a medical college, the nature of expenditure we find is similar to that dealt with by us with regard to professional development expenses in ground no 2 above in our order. Our decision rendered therein will apply to the impugned advertisement expenses also. Accordingly, we hold that the advertisement expenses incurred by the assessee are personal in nature and not incurred wholly and exclusively for the purpose of profession of the assessee and hence not allowable as per section 37(1). Even otherwise as rightly pointed out by the CIT(A) and the Ld.DR before us, advertising is an unethical act as per guidelines of the controlling body of medical professionals. For this reason also the expenses incurred on carrying out such unethical activities cannot be allowed as deduction. Decided against assessee. Disallowance of expenses pertaining to telephone and vehicle expenditure - assessee himself disallowed these expenses suo moto, being 10% of telephone and 20% of car petrol and repair - HELD THAT:- The tax audit auditors in their report furnished as per section 44AB 0f the Act, had certified this fact alongwith stating that no personal expenses were debited by the assessee in its Books. The auditors had also stated that the assessee had one car used for personal purposes which expenses were not claimed by it. AO however went on to disallow 20% of the entire expenses incurred on telephone and car including depreciation claimed thereon, without any basis and without giving any reason as to why he found the assesses explanation of personal expenses included in its claim as not correct. We therefore hold that the disallowance of telephone and car expenses was wholly unjustified and not in accordance with law. - Decided in favour of assessee.

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• 2022 (12) TMI 26
  Validity of Reopening of assessment u/s 147 - failure to issue the statutory notice u/s 143(2) - HELD THAT:- AR was able to produce the order sheet entry recorded by the AO during the assessment proceedings which also does not contain any information about the issuance of notice under the provisions of section 143(2) of the Act. The copy of the order sheet entry maintained by the AO during the assessment proceedings is available on record. At this juncture, it is also significant to note that the Department was able to maintain the order sheet entry of such old record thus it can be inferred that the records were not misplaced by the Department in the case of the assessee. However, such records were not containing the copy of the notice issued under section 143(2) of the Act. Thus we hold that the mandatory notice was not issued under section 143(2) of the Act by the Revenue and accordingly the proceedings against the assessee under the provisions of section 143(3) read with section 147 of the Act are not sustainable. Thus, we hold that the assessment framed under section 143(3) read with section 147 of the Act is void-ab-initio. Hence the ground of appeal of the assessee is allowed.

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• 2022 (12) TMI 25
  Penalty u/s.271(1)(c) - Nature of interest income - capital receipt or revenue receipt - interest income claimed by assessee, on the pre-commencement of business period, as capital receipt as against assessed by AO as revenue receipt - AO levied penalty @ 200% - CIT-A restricted it to 100% - HELD THAT:- It is an admitted fact that the assessee has filed complete particulars of income before the AO and nothing was concealed. As in the present case, the assessee has disclosed all the facts relating to the transaction of loans obtained from banks and the details of bank account and the details of interest earned but treated the same as capital in nature, in view of the decisions of Bokaro Steels Ltd.[ 1998 (12) TMI 4 - SUPREME COURT] and Karnal Cooperative Sugar Mills Ltd.[ 1999 (4) TMI 7 - SC ORDER] - It means that there is a debate available whether idle funds kept temporarily during the intermittent period between the set-up of business and actual start of the business, the interest income earned is capital or revenue. The assessee only claimed the same as capital in nature and not disclosed as revenue income on which taxes to be paid. The assessee has made complete disclosure of facts and only issue is whether the interest received on idle funds lying with banks in the shape of fixed deposits is a capital receipt or revenue receipt. This, being a highly debatable issue, the assessee is exigible to penalty u/s.271(1)(c) of the Act, for furnishing of inaccurate particulars of income. This being a highly debatable issue and once there is a debate as assessee s present case, Hon ble Madras High Court has admitted the substantial question of law against the order of Tribunal in quantum, we are of the view that assessee is not liable for penalty u/s.271(1)(c) - Hence, we delete the penalty levied by AO completely in both the assessment years and allow both the appeals of assessee.

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• 2022 (12) TMI 24
  Revision u/s 263 - Entitlement to deduction u/s.80P(2)(d) - Interest earned by Co-Operative society from Co-Operative Bank - whether the Assessment Order is erroneous or not? - HELD THAT:- AO has taken a possible view on the issue of allowability of deduction u/s 80P(2)(d) of the Act after studying the respective ledger accounts. AO had called for the respective ledger accounts which are categorically mentioned in the assessment order. To arrive at the figure of the Interest earned one just needs to study the ledger accounts. Before the AO, the fact that the assessee has earned Interest Income from Co-operative bank was on record and easy to understand from the ledger accounts. CIT has also relied on the same ledger accounts to arrive at a different conclusion. It is a fact that the issue of deductibility of Interest earned by Co-Operative society from Co-Operative Bank has been held in favour of assessee by Hon ble Karnataka High Court [ 2017 (1) TMI 1100 - KARNATAKA HIGH COURT] , ITAT Chennai [ 2022 (5) TMI 1481 - ITAT CHENNAI] and ITAT Surat [ 2021 (5) TMI 446 - ITAT SURAT] Therefore, the AO has adopted a view which was one legally possible view. Therefore, in these facts and circumstances of the case as held by Hon ble SC in the case of Amitabh Bachchan [ 2016 (5) TMI 493 - SUPREME COURT] and Hon ble High Court [ 2008 (8) TMI 913 - BOMBAY HIGH COURT] when two views are possible and AO adopts one view, the Assessment cannot be said to be erroneous. Therefore, the Pr.CIT has no power to invoke jurisdiction u/s.263 in such circumstances where the Assessment Order is not erroneous. Appeal of the Assessee is Allowed.

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• 2022 (12) TMI 23
  Disallowance of exemption claimed u/s 10(23C)(iiiab) - assessee society is registered under the Societies Registration Act and is engaged in imparting education and running an institute by the name of Baba Hira Singh Bhattal Institute of Engineering and Technology, Lehragaga since 2004-05 - condition as to whether the assessee is wholly or substantially financed by the Government? - HELD THAT:- There is no limit specified on the quantum of revenues generated by the institute, the period during which such revenues are generated and the period for which the revenues are allowed to be retained by the institute. Therefore, irrespective of quantum of revenues which the institute generate in respective financial years, the revenues so generated belongs to the Consolidated fund of the Government and which continue to remain permitted to be retained by the institute. The Coordinate Bench has therefore taking into consideration the aforesaid contents of the said letter has decided the matter for all the years starting from A.Y 2006-07 to A.Y 2012-13 and for the year under consideration, we therefore donot see any basis to deviate from the decision of the Coordinate Bench as undisputedly, for the year under consideration, there is no change in the facts and circumstances of the case as regard retention of revenues by the assessee society as grant in aid by the Government of Punjab and the assessee society thus continue to remain wholly funded by the Government of Punjab and the assessee is thus held eligible for exemption under section 10(23C)(iiiab) of the Act. Appeal of assessee allowed.

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• 2022 (12) TMI 22
  Disallowance of expenditure on account of sales-commission - Expenditure on business purposes only - CIT- A deleted the addition - HELD THAT:- Both sides fairly agree that the issue is directly covered by the decision of ITAT, Indore Bench in assessee s own case for AY 2011-12 [ 2016 (1) TMI 1490 - ITAT INDORE] and AY 2012-13 2018 (7) TMI 2288 - ITAT INDORE] upheld by Hon ble High Court of Madhya Pradesh in [ 2018 (4) TMI 1578 - MADHYA PRADESH HIGH COURT] a copy of the judgement is also filed. As the issue is squarely covered, we do not find any reason to deviate from the consistent view being taken and also upheld by the higher forum i.e. Hon ble High Court. We are, therefore, inclined to uphold the action of Ld. CIT(A) in this regard and dismiss Ground No. 1 of the revenue. Disallowance u/s 14A - assessee made investment in shares of companies from which exempted-dividend was earned - AO has worked out the amount of disallowance in terms of Rule 8D, which consists of two components, viz. (i) interest-component, and (ii) standard disallowance for other expenses - CIT(A) scaled down the quantum of disallowance by deleting interest-portion - HELD THAT:- ITAT in assessee s own case in preceding AY 2012- 13 [ 2018 (7) TMI 2288 - ITAT INDORE] is directly favouring the claim of assessee that no disallowance is required to be made for interest-component. Ld. DR fairly agreed to this submission of Ld. AR. Dismiss Ground No. 2 of the revenue. Disallowance of interest expenditure u/s 40(A)(2)(b) - AO disallowed 3% excess interest - HELD THAT:- AO has simply made a blanket comparison of the interest rate of 15% paid to specified persons against 12% interest-payment to other persons and came to a straight-forward conclusion that interest-payment is excessive. We feel that such a blanket comparison without going into the fair market rate or the legitimate needs of business or the benefit derived by assessee therefrom is not sufficient for section 40A(2). Section 40A(2)(b) is a disallowance provision, therefore a heavy burden lies on the head of Ld. AO to prove the existence of required parameters and then only he can make a disallowance. Having failed to do so, in our view, the disallowance made by AO is not in accordance with the requirement of section 40A(2). Alternatively, the assessee is justified in claiming that the bank rate of interest is a universal rate of industry and can be said to be fair, subject to the adjustments on account of the variations between the terms like security-requirement by bank, levy of charges, fulfillment of formalities etc. Therefore, 3% margin on account of these factors cannot be said to be excessive or unreasonable. We are satisfied that 15% interest-rate paid by assessee on unsecured loans taken from relative cannot be said to be unreasonable. In view of these reasoning, we do not find adequate reason for the disallowance made by Ld. AO. Accordingly, we are inclined to delete the disallowance.

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• Customs

• 2022 (12) TMI 21
  Revocation of Customs Broker License - Forfeiture of security deposit - penalty - doctrine of proportionality - whether punishment is disproportionate even though the charges under Regulation 11(a), 11(d), 11(e) and 11(n) were proved? - mis-declaration of the value of the imported goods - HELD THAT:- The mis-declaration as regards the value of the goods was also made good by the beneficiary importer. The stand of the respondent before the authorities below consistently had been that it had verified the credentials of the IEC holder from the website of the DGFT and that the KYC documents were accordingly scrutinized as per its obligations in terms of the CBLR, 2013. It was also the stand of the respondent that the CBLR, 2013 did not envisage a physical verification of the antecedents of the importer as the Customs Broker is located in Mumbai and an importer may be situate elsewhere in the Country. In the present case, since the authorities below have all held that there was failure on the part of the respondent to follow the KYC norms and since the respondent is not in appeal against the order of the CESTAT, the only issue that is required to be considered is whether the order passed by CESTAT to the extent it set aside the order of the Adjudicating Authority for revocation of the Customs Broker licence of the respondent on the grounds of proportionality is sustainable or not? - The doctrine of proportionality is a well recognized concept of judicial review which Courts invoke to test the punishments imposed which are disproportionate to the alleged misconduct. Considering the fact that the respondent had, in fact, discharged a part of its obligation under the CBLR, 2013, although not in its entirety, we feel that the order with regard to revocation of the Customs Broker Licence would have been excessive in the facts and circumstances of the case and the issue has been rightly dealt with by the CESTAT. Appeal dismissed.

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• 2022 (12) TMI 20
  Jurisdiction - power of proper officer to issue SCN - Smuggling - gold biscuits seized from a blue coloured Hyundai car without registration number - Indian currency - rucksacks - bags and various other documents - HELD THAT:- In terms of Notification No.26/2022 dated 31.03.2022, CBIT has assigned and declared the Deputy Commissioner or Assistant Commissioner of Customs and officers above them in rank, to be officers in relation to the various functions as specified in Column No.3 of the said Notification No.26/2022. In terms of Notification No.26/2022, the Deputy Commissioner or Assistant Commissioner have been assigned to be the proper officers to issue Notices under the second proviso of Section 124 of the 1962 Act. As such, in terms of Notification No.26/2022, even a Joint Director, DRI, who is above the rank of Deputy Commissioner or Assistant Commissioner of Customs is a proper officer to issue a Notice under the second proviso to Section 124 of the 1962 Act. There is nothing in the Notification No.26/2022 showing that there is a bar on the Joint Director, DRI for issuing a Notice under Section 124 of the 1962 Act. In fact, Section 124 of the 1962 Act provides that no order, confiscating any goods or imposing any penalty on any person, shall be made under Chapter XIV of the 1962 Act, unless the owner of the goods or such person is given a notice in writing, with prior approval of the officer of Customs not below the rank of Assistant Commissioner of Customs, informing him of the ground which it is proposes to confiscate the goods or to impose the penalty. It clearly shows that there is no bar on the Joint Director, DRI to issue a notice under Section 124 of the 1962 Act. In terms of the prayer made by the learned Senior Counsel for the petitioner, the petitioner is given the liberty to file his reply to the show-cause notice dated 23.09.2022 before the Joint Director, DRI, Guwahati, who shall thereafter transmit the same to the Adjudicating Authority under the 1962 Act. The petitioner is given 2 (two) weeks time to submit his reply to the show cause notice, which should be counted from today. Petition dismissed.

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• 2022 (12) TMI 19
  Smuggling - Town Seizure - contravention of the various restrictions/prohibitions imposed on the import - seized goods were found not bearing the declaration including MRP as required in General Notes to the Foreign Trade Policy, under which Customs Act read with SWM Act and the Rules - prohibited goods or not - onus to prove - violation of principles of natural justice - HELD THAT:- Admittedly, it is a case of town seizure. It is further found that the appellant/assessee have led sufficient evidence that he has purchased the goods from the open market in India and is not the importer. Further, they have led the evidence by producing some documents available with them and also gave name of the parties, who were either traders or importers or manufacturers in India, who had supplied the goods. Further, all such suppliers/importers have corroborated the statement of the appellant/assessee, as to have supplied the goods. Further, admittedly, the documents available with the appellant in support of the goods lying with the appellant in shops/godown were resumed by Revenue officers of DRI on 19.12.2007 about a month before the search by the Customs (Preventive). Thus, as the documents were lying with the Department, the appellant could not produce all the documents in support of his contention. The Court below have erred in not referring to the resumed records lying with them. The goods being not notified goods under Section 123 of the Act, it was onus on the Revenue to establish the smuggled nature of the goods, which the Revenue have miserably failed. Not a single evidence was produced by Revenue in support of allegation of smuggling save and except bald allegation. The allegation made by Revenue as regards violation of the provisions of the SWM Act read with the Rules is bad and wholly without jurisdiction. As in the facts of the present case, the jurisdiction to inspect, search and seize the goods in the open market, was with the Director appointed under the SWM Act. The Customs officers can exercise the jurisdiction under the provisions of SWM Act and the Rules thereunder, only in the Customs area - the impugned order is bad and suffers from the vice of violation of principles of natural justice - Revenue has not been able to establish the smuggled nature of the goods. Appeal allowed - decided in favor of appellant.

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• 2022 (12) TMI 18
  Levy of penalty under Section 114(3) and 114AA - confiscation of goods - improper export of goods - appellant contested the show cause notice inter-alia stating that the country of destination and port of despatch also changed as per the buyer s request - bar on export of readymade garments to UAE for availment of duty drawback or not - HELD THAT:- Admittedly the goods were not available for confiscation, hence the order of confiscation is bad and accordingly order of confiscation is set aside. Further, in the facts and circumstances of the case, the order of confiscation being set aside, the penalty under Section 114(iii) is also set aside, as this penalty is not imposable in absence of confiscation. So far penalty under Section 114AA is concerned, it is found that the appellant have resorted to unauthorised modification /alteration in the shipping bill after the same was passed by the proper officer of the Customs, which amounts violation of provisions of Section 114AA - in view of the facts and circumstances, upholding the penalty under this Section the penalty is reduced to Rs.2,00,000/-. Appeal allowed in part.

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• 2022 (12) TMI 17
  Review decision for recovery of the dues in view of order of liquidation - HELD THAT:- This Tribunal in the case of Ultratech Nathdwara [ 2022 (10) TMI 936 - CESTAT AHMEDABAD] in the identical situation has held that This tribunal being creature under the Customs Act, even though the Insolvency and Bankruptcy Code have over riding effect over all the other acts in absence of any explicit provision under the Customs/Central Excise Act, this tribunal cannot decide finally whether the adjudged amount can be recovered by the department or otherwise. These appeals have become infructuous, therefore, the appeals are disposed off as infructuous without deciding any merit of the case. Aggrieved persons are given liberty to approach this Tribunal with appropriate application if at all anyone wants to pursue this appeal on merit. Appeal disposed off.

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• Insolvency & Bankruptcy

• 2022 (12) TMI 16
  Maintainability of petition - initiation of CIRP - Corporate Debtor failed to make repayment of its dues - Appellant is a related party in terms of Section 5(24)(j) of I B Code - existence of pre-existing dispute or not - HELD THAT:- The judgment relied upon by the Respondent in the Zoom Communications Pvt. Ltd. [ 2022 (5) TMI 1480 - NATIONAL COMPANY LAW TRIBUNAL, NEW DELHI ] is not at all applicable because it deals with the sham transaction between the parties which was not allowed for the initiation of CIRP whereas no findings have been recorded in the present case. Pre-existing dispute - HELD THAT:- The Adjudicating Authority has further erred in not looking to the fact that in the reply to the pre-trial notice, the Respondent did not raise any issue regarding the goods being substandard which issue came to be raised only when the demand notice was issued before filing the application and was an afterthought objection, not made out from the record. The emails relied upon the Adjudicating Authority are not directed to raise a pre-existing dispute rather the said emails are exchanged by the parties regarding the improvement in the operation and sales and has nothing to do with the goods which are now alleged to be substandard or defective. Argument of the Respondent that the Appellant has invoked the arbitration in the pre-trial notice is also neither here nor there in view of the fact that firstly, Section 21 of the Act would apply only to the Arbitral proceedings in India as has been held by the Delhi High Court in the case of Raffles Design International India Pvt. Ltd. [ 2016 (10) TMI 1353 - DELHI HIGH COURT] and secondly, it was the arbitration court in the St. Petersburg which is akin to Civil/Commercial Court having three tiers. Thus, there is an error of appreciation of facts and evidence on the part of the Adjudicating Authority in dismissing the application filed by the Appellant - appeal allowed.

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• FEMA

• 2022 (12) TMI 15
  Maintainability of appeal before High court - hierarchy of forums provided for the parties to redress their grievances - violation of the provisions of Section 4 of FEMA - shares as well as some immovable properties of the alleged contravener were attached - petioner driven to go before the Tribunal by invoking Section 37A(5) of the FEMA Act - HELD THAT:- The parties aggrieved against the order to be passed by the Tribunal can very well invoke the further appeal provision under Section 35 of the FEMA Act to prefer an appeal to the High Court. Therefore, instead of filing a second appeal, the petitioner has taken the route of filing the appeal by way of these two writ petitions, which is not acceptable. Thus, the very remedy available to both the parties to go before the Appellate Tribunal would be unnecessarily lost, which would go against the very scheme of the Act, under which, the order to be passed by the Authorized Officer has to be approved by the Competent Authority and the order of the Competent Authority has to be evaluated by the Tribunal under Section 37A(5) of the FEMA Act, as against which, the aggrieved person can prefer an appeal before the High Court. This kind of hierarchy of forums provided for the parties to redress their grievances cannot be permitted to be omitted, which would result in loss of chance to the other party to invoke the appeal remedy before the other forum. This Court has no hesitation to hold that, since the Tribunal has been functioning with the Chairman from 26.09.2022, the petitioner can prefer an appeal before the Tribunal against the impugned orders and in this regard, this Court feels that some reasonable time, i.e., 45 days, can be granted to the petitioner department to prefer an appeal before the Tribunal. The learned Senior Counsel appearing for the contravener, on instructions, given an undertaking before this Court that, the alleged contravener would not encumber or meddle with the subject properties of the attachment orders, which are impugned herein. Order - Since the petitioner department can very well file an appeal under Section 37A(5) of the FEMA Act before the Appellate Tribunal, both these writ petitions cannot be proceeded further by this Court to decide the issue on merits by invoking the extraordinary power under Article 226 of the Constitution of India. The petitioner department is granted liberty to prefer an appeal before the Tribunal under Section 37A(5) of the FEMA Act, within a period of 45 days from the date of receipt of a copy of this order, where it is open to the petitioner to seek for any interim order. Till such time, i.e, till the petitioner approaches the Tribunal, there shall be an interim protection to the effect that the alleged contravener shall not exploit the movable and immovable properties which are attached in the impugned orders

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• PMLA

• 2022 (12) TMI 14
  Money Laundering - seeking pre-arrest bail - predicate offence - illegally raising iron/manganese ores of a higher value than what has been declared from the Ulliburu Mining Lease area - illegally raising mineral from areas adjacent minor mining lease areas and selling such minerals to his own concern thereby causing huge loss of revenue to the State exchequer - provisions contained in Section 45 of the PMLA Act, 2002 complied with or not - HELD THAT:- On a conspectus of the background facts of the case as well as upon a close scrutiny of the materials placed before this Court for consideration by either side and futher taking into consideration the affidavits filed by the learned counsel for the Opp. Party as well the written note of submissions, this Court, at the outset, would like to observe that it is the settled position of law that except where there are specific provisions in the PMLA that provides an alternative procedure, the provisions and procedure of CrPC shall apply to the cases registered and tried under the PMLA. Given the mandate of Articles 21 and 22 of the Constitution of India, the powers under the PMLA in relation to the offences under the PMLA, have to be governed by the CrPC, if not expressly provided for alternatively in the PMLA. This is expressly recognized and acknowledged by Section 65 PMLA. Therefore, there exists absolutely no doubt with regard to the applicability of the procedural law in the case of the present nature. The Petitioner in the case at hand has been charged under Sections 4 of the PML Act which provides for a maximum punishment of seven years. Section 13 (1) (c) (d) of the Prevention of Corruption Act which provides for the maximum punishment of seven years and under Sections 120 B, 379,409, 411 and 420 of the IPC. A perusal of Section 2(y) of the PML Act provides for the scheduled offences thereunder and Paragraph 1 relates to offences under the IPC which are scheduled offences within the meaning of the PML Act. Section 409 of the IPC does not figure as a scheduled offence under the schedule to the act. Therefore, all the other offences including the offences under the IPC have a maximum punishment of up to 7 years imprisonment. The Petitioner in the present enforcement case has never been formally arrested by the Enforcement Directorate but has been remanded to their custody for the purposes of investigation. In the said context, the argument advanced before this court by Mr. Agarwal, learned counsel for the E.D. has substance in it. Therefore, it appears to this court that most likely the Enforcement Directorate officials have chosen to not exercise their discretionary power to formally arrest the Petitioner, probably because they did not feel the need to do so. Furthermore, since lodging of the ECIR to till date, the E.D. officials never bothered to formally arrest the petitioner and while the petitioner was in custody in connection with the vigilance case, he was taken on remand for interrogation by E.D. officials. After investigation was concluded, probably the necessity of arrest was never felt by E.D. The Petitioner had cooperated with investigation and had recorded his statement before the Enforcement Directorate which had led the Enforcement Directorate to state that they no longer require the custody of the Petitioner for the purposes of investigation On considering the surrounding facts and circumstances of the present case as well as the fact that the petitioner was in custody for almost 6 years in connection with the vigilance case which forms part of scheduled offence for the present case under PML Act and the fact that the custodial interrogation of the petitioner is over and the E.D. s statement before court that custody of the petitioner is no more required and above all the fact that the petitioner was not formally arrested by the E.D. in the present case since the institution of the case by registering the ECIR further considering the factual background of this case - Furthermore, the mining operation as well as the mining laws, in the meanwhile, has undergone a drastic change, therefore, prima facie there exists no possibilities of such offences being repeated in the future. This Court, considers this the present case to be a deserving case for exercising it s discretion under Section 438 CrPC and to grant anticipatory bail to the present Petitioner and accordingly it is directed that the petitioner be released on bail in the event of his arrest by the E.D. officials in connection with Complaint Case (PMLA) No. 40 of 2018 pending before the Ld. Special Judge, Special Court, Bhubaneswar, Khurdha subject to such terms and conditions as the arresting officer would deem fit and proper in the facts and circumstances of the present case. Anticipatory bail application allowed.

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• 2022 (12) TMI 13
  Seeking grant of Regular bail - Money Laundering - scheduled offences - commission of fraud with the Bank of India - alleged offence under section 3 read with section 70 of the Prevention of Money Laundering Act, 2002 (PMLA) and punishable under section 4 of the PMLA - twin conditions of section 45 of PMLA fulfilled or not - HELD THAT:- Admittedly the petitioner is Director of five companies namely, M/s Dwarikadhish Udyog Pvt. Ltd., Sriram Comtrade Pvt. Ltd., represented through Gyan Prakash Sarawgi (petitioner), M/s Global Traders (proprietorship firm), Badri Kedar Udyog Pvt. Ltd. and Sunbeam Dealers Pvt. Ltd., represented through Amit Sarawgi and the C.B.I. has registered the case and subsequently the E.D. has c o me into the picture and registered the ECIR complaint against the petitioner and others. In the investigation it has come that the petitioner has taken loan in the name of Vikash Khetawat, Amit Sarawgi and Abhishek Agarwal and others - It is strange that when the petitioner was having the company why the loan in question was not taken in the name of the said company whereas the private persons have been involved who are alleged to be the employee and close relatives of the petitioner. However, this fact has been disputed by the learned counsel appearing on behalf of the petitioner and has submitted that the loan in question was taken in the name of the company itself. There is no doubt as has been discussed by the Hon ble Supreme Court in the case of P. CHIDAMBARAM VERSUS DIRECTORATE OF ENFORCEMENT [ 2019 (12) TMI 186 - SUPREME COURT] , that even in economic offences the bail is a rule, however, the Court before granting the bail is required to come to the definite conditions and look into the graveness of the nature of the crime. Requirement to comply with twin conditions of section 45 of PMLA - HELD THAT:- Admittedly the petitioner is not under the age of sixteen years or is a woman or is sick or infirm and the proviso thereof speaks that if the money is below Rs.One crore the rigor can be relaxed. In the case in hand, there is allegation of Rs.77 crores of diversion of the loan amount - In the case of ROHIT TANDON VERSUS THE ENFORCEMENT DIRECTORATE [ 2017 (11) TMI 779 - SUPREME COURT] , it is said that economic offence is said to be white collar crime/ the economic offenders are having deep rooted conspiracies and involving huge loss of public funds needs to be viewed seriously and considered as grave offences affecting the economy of the country as a whole It is a white collar crime which is done in a well planned manner and they are grievous in nature and against the society. The Court is not inclined to grant regular bail to the petitioner - bail application dismissed.

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• 2022 (12) TMI 1
  Seeking grant of bail - money laundering - proceeds of crime - twin conditions under Section 45 of the PMLA - HELD THAT:- Since the observations in the impugned order of the High Court are confined to the question as to whether the respondent was entitled to the grant of bail, we clarify that these observations shall be construed only for that purpose. In other words, the observations shall not affect the merits of the trial or be pressed in any other collateral proceedings. SLP dismissed.

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• Service Tax

• 2022 (12) TMI 12
  Levy of service tax - Business Auxiliary Service or not - discount given by M/s. Maruti Suzuki India Ltd. to the appellant in connection with sale of vehicles which was further sold by the appellant on principal to principal basis - service charges or not - HELD THAT:- The fact is not under dispute that the appellant being a dealer purchase the vehicles from M/s. Maruti Suzuki India Ltd. and subsequently sell the same to various customers. The transaction between M/s. Maruti Suzuki India Ltd. and the dealer and subsequently sale transaction between the dealer and the customs are purely on principal to principal basis. The vehicle manufacturer M/s. Maruti Suzuki India Ltd. on the basis of yearly performance of sale grants the discount to the dealer, this discount is nothing but a discount in the sale value of the vehicle sold throughout the year therefore, these sales discount in the course of transaction of sale and purchase of the vehicles hence, the same cannot be considered as service for levy of service tax. From the judgment in M/S. ROHAN MOTORS LIMITED VERSUS COMMISSIONER OF CENTRAL EXCISE, DEHRADUN [ 2020 (12) TMI 1014 - CESTAT NEW DELHI] which has considered other decisions also, it was categorically held in the identical situation, the amount received as discount/incentive from the vehicle manufacturer by the appellant being the dealer is not liable to service tax. Appeal allowed - decided in favor of appellant.

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• 2022 (12) TMI 11
  Levy of service tax - respondent have discharged excise duty on their total sale value including the erection, installation and commissioning of such machinery for the period July-2003 to March-2008 - HELD THAT:- There is no dispute that the respondent is a manufacturer of textile machinery and as per the contract they have supplied the goods along with Erection, Commissioning and Installation at the buyer s site. On the entire activity, right from the manufacturing upto the commissioning of machinery at buyer s site, the total value is towards the sale of goods. There is no bifurcation of the value in sale of goods and service of Erection, Installation and Commissioning. In such position the entire value of the goods has to be taken as sale value, consequently, no service value is involved separately. In the identical set of transaction, this tribunal has consistently taken a view that when there is a manufacturing and sale of the goods on a particular sale price which involves incidental service such as in the present case, no service tax can be demanded once the entire value is towards sale and has suffered the central excise duty. Reliance can be placed in the cases of COMMR. OF C. EX., VAPI VERSUS ALIDHARA TEXTOOL ENGINEERS PVT. LTD. [ 2009 (1) TMI 129 - CESTAT AHMEDABAD] and COMMR. OF C. EX., VAPI VERSUS ALIDHARA TEXTOOL ENGINEERS PVT. LTD. [ 2009 (1) TMI 129 - CESTAT AHMEDABAD] - From the above judgments, it is settled that where the entire value of the goods is towards sale of the goods and subjected to excise duty/customs duty no part of the same can be said to have been collected towards any service. Therefore, involving the same set of facts, in the present case where the entire value has suffered excise duty and the buyer is under obligation to not only manufacture and supply the machinery but also to carry out activity of erection, commissioning and installation of the said machinery, the service tax cannot be demanded. Classification of the service - erection, installation and commissioning service or works contract service? - taxability - HELD THAT:- The show cause notices have proposed the demand under erection, installation and commissioning service. We have decided that the service tax is not payable on the erection, installation and commissioning of service in the facts of the present case as the entire value has suffered excise duty and on this ground service tax is not payable. Therefore, we are not dealing with the second issue about classification of the service that whether the service tax is payable under erection, installation and commissioning service or works contract service. The respondent is not liable to pay service tax in the given transaction of the present case therefore, the revenue s appeal is not sustainable - Appeal of Revenue dismissed.

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• 2022 (12) TMI 10
  Recovery of wrongly availed CENVAT Credit - want of requisite documents - requirement of duty paying documents as per Rule 9 of CCR - period from October 2014 to June, 2017 - non deposit of mandatory amount - extended period of limitation - suppression of facts or not - HELD THAT:- From paragraph 12 of Order-in-Original, it is abundantly clear that duly verified copies of payment vouchers and official bills generated for payment of telephonic bills and RSRTC subsidy bill for the period in question were duly provided by the appellant to the Adjudicating Authority. The authority has also acknowledged the same. The Original Authority has recorded that since the record was voluminous that the appellant was required to submit month-wise of Cenvat credit availed details from October, 2014 to June 2017 ( the period in question) pointing out the specific documents for the respective entry with respect to the amount in question. The said detail was also provided by the appellant to the Adjudicating Authority. Not only this, those documents were also got checked and verified by the Jurisdictional RO. The demand has been confirmed based on the verification report of the said Jurisdictional RO. He has reported that the documents were not prescribed in terms of provision of Rule 9(1) of Cenvat Credit Rules, 2004 and Rule 11 of Central Excise Rules, 2002, as the month-wise bifurcation was not provided. This reason, to my opinion, is not the requirement of Rule 9(1) of Cenvat Credit Rules. The Rule requires invoices with such details as mentioned in the Rule. There is no denial that requisite details were available in the documents provided. Also as per the Verifying officer the amount calculated is Rs.1,42,193/- instead of Rs.1,81,911/-. The said requisite documents were provided at the initial stage of adjudication itself. Otherwise also proviso to Rule 9 shows that if the documents as submitted by the appellants contain all such particulars as are mentioned in the invoices or payment received, then also the Cenvat credit is to be allowed. The Adjudicating authority below has miserably failed to consider the said proviso - documents having all requisite particulars were duly been given to the Original Adjudicating Authority itself. The Authority was rather facilitated by the Counsel with the precise information out of the voluminous record with respect to the period in question. Denying the Cenvat credit based on such documents is therefore, held to be wrong and unreasonable. Non deposit of mandatory amount i.e. 7.5% of the demand confirmed at the time of filing of appeal before the Commissioner (Appeals) - HELD THAT:- While filing this appeal before Tribunal 10% of the amount of demand confirmed has been deposited by the appellant. The Challan date 8.06.2022 for an amount of Rs. 18,192/- is perused on record. In terms of Section 35F of Central Excise Act, 1944, 10% of the amount confirmed has to be deposited in total till filing the appeal before this Tribunal. That is to say amount equal to 7.5% of the demand confirmed is to be filed before the Commissioner (Appeals) and remaining 2.5% of the demand confirmed is to be deposited prior to filing the appeal before this Tribunal. As already held above entire 10% of the amount of duty confirmed against the appellant stands already deposited and also that the Commissioner (Appeals) has decided the appeal on merits as well, there remains no need of remanding back the matter to Commissioner (Appeals). The findings of Commissioner (Appeals) are no more sustainable on the preliminary issue of lack of mandatory pre-deposit and findings on merits have already been held as wrong. Extended period of limitation - suppression of facts or not - HELD THAT:- The appellants had provided all the requisite documents before the Departmental Authorities there remains no evidence to prove the alleged suppression. It is not the case of the department that service tax was not paid by the appellants. Mere allegation of documents to be improper cannot be the admissible evidence to prove that there was an intent to evade tax liability. Otherwise also, the appellant is a public utility authority, i.e. Government organisation. No motive rests with the appellant to have any intent to evade their liability which otherwise stand duly discharged - all documents with requisite details were made available. Accordingly, the Show Cause Notice itself is barred by time. Appeal allowed - decided in favor of appellant.

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• 2022 (12) TMI 9
  Levy of Service tax - Security Charges - issue involved is pending before the Hon ble Supreme Court wherein the order of the Tribunal has been stayed - HELD THAT:- This Tribunal in the matter of THE SECURITY GUARDS BOARD FOR BRIHAN MUMBAI THANE DIST. VERSUS COMMISSIONER OF SERVICE TAX-VII, MUMBAI [ 2018 (4) TMI 480 - CESTAT MUMBAI ] observed that the issue involved is pending before the Hon ble Supreme Court wherein the order of the Tribunal has been stayed and remanded the matter to the Adjudicating Authority for passing a fresh order after the outcome of the decision of the Hon ble Supreme Court. In view of the decision of this Tribunal as well as the fact that the identical issue is pending consideration before the Hon ble Supreme Court in which the order of Tribunal has been suspended by Hon ble Supreme Court, I also feel it appropriate to remand the matter back to the Adjudicating Authority for deciding the issue afresh after the final decision of the Hon ble Supreme Court in the pending Civil Appeal. Appeal is allowed by way of remand.

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• Central Excise

• 2022 (12) TMI 8
  Validity of order passed by Settlement Commission - it is alleged that the petitioners have not made full and true disclosure and have not cooperated in the proceedings conducted by it - HELD THAT:- Although, Mr Singla s stand is that the provisions of Section 32F(5) of Central Excise Act 1944 will come to the aid of the respondents/revenue, that position is not correct. Once the Settlement Commission comes to a conclusion that there has been no true and fair disclosure of facts and the manner in which the liability has been derived, the Settlement Commission cannot then proceed to adjudicate the liability. This emerges upon a plain reading of Section 32E of Central Excise Act, 1944. Unless the twin conditions mentioned therein are fulfilled, the Settlement Commission cannot move further in the matter. The Settlement Commission is, necessarily, then required to remit the matter to the concerned statutory authority - in this case, the petitioners have got practically no benefit in approaching the Settlement Commission, as the quantum of liability which was indicated in the aforementioned show cause notice(s) is practically what has been the thrust on them via impugned orders. The impugned orders cannot be sustained - the matter is remitted to the concerned statutory authority for initiation of next steps, if any, as per the law.

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• 2022 (12) TMI 7
  Recovery of excise dues payable by the erstwhile owner of the land and property - restraint on petitioner from alienating the land in any manner - HELD THAT:- Supreme Court in Macson Marbles (P) Ltd. v. Union of India [ 2003 (11) TMI 71 - SUPREME COURT ] and Union of India v. SICOM Limited [ 2008 (12) TMI 53 - SUPREME COURT] held that as far as dues of central excise are concerned, those are neither related to plant and machinery nor to the land and building. Thus, it did not arise out of the said properties. Dues of central excise became payable on the manufacturing of excisable items by the erstwhile owner. Therefore, the excise duties were in respect of those items which were produced and not the plant and machinery which were used for the purpose of manufacturing. This decision has been followed by this Court in Gopal Agarwal v. Commissioner of Customs and Central Excise, Hyderabad, [ 2015 (2) TMI 607 - ANDHRA PRADESH HIGH COURT ]. While setting aside similar notice, this Court had however left it open to the excise authorities to take any other steps permissible in law for recovery of the arrears of excise duty. Petition allowed.

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• 2022 (12) TMI 6
  CENVAT Credit - exempt goods - pressmud, bagasse and boiler ash, generated during the manufacturing of sugar/molasses - common inputs used in manufacture of both taxable as well as exempt goods - non-maintenance of separate records - Rule 6(3) of Cenvat Credit Rules, 2004 vide notification dated 01.03.2015 - HELD THAT:- The Hon ble Supreme Court in the matter of DSCL Sugar Ltd. [ 2015 (10) TMI 566 - SUPREME COURT] while considering the amended definition of excisable goods and manufacture has laid down that that pressmud is agricultural waste of sugarcane and the waste residue of agricultural products during the process of manufacture of goods cannot be said to be result of any process. There is no manufacturing process involved in pressmud s production. Bagasse, pressmud and boiler ash are not goods but merely a waste or by-product therefore Rule 6 of the Cenvat Rules shall have no application in the such cases as they are bound to come into existence during the crushing of the sugarcane and are an unavoidable agricultural waste. The amendment dated 01.03.2015 in Rule 6 ibid has been wrongly relied upon by the authorities below in confirming the demand. As per Rule 6 ibid as amended, non-excisable goods which are manufactured by the manufacturer in his factory will get covered under it and pressmud/ bagasse/boiler ash will not be covered under the said Rule despite being non-excisable goods since it emerges as agricultural waste or residue and are not manufactured goods - The Hon ble Supreme Court in the matter of DSCL Sugar Ltd. [ 2015 (10) TMI 566 - SUPREME COURT] has laid down that bagasse being an agricultural waste or residue, there could be no manufacturing activity. The aforesaid decision squarely applies on the facts of the instant appeals and apart from bagasse, since pressmud and boiler ash are also emerged as waste, the same also cannot be held to be excisable. The principles of judicial discipline require that the orders of the higher appellate authorities and in particular the judgment/orders of the Hon ble Supreme Court should be followed unreservedly by the subordinate authorities. Constitution of India is above all the statutes in our country and its Article 141 specifically provides that the law declared by the Hon ble Supreme Court shall be binding on all Courts within the territory of India and since the Commissioner is not above the Courts therefore it binds him as well. Judicial discipline and propriety demands that the Adjudicating Authority or the first Appellant Authority should follow the binding decisions of the Hon ble Supreme Court/High Court and of course of the Tribunal and should refrain from making comments which are uncalled for. Provisions of Rule 6(3) ibid are applicable only when a manufacturer is engaged in the manufacture of any final product which is chargeable to duty as well as any other final product which is exempted from whole of duty or chargeable Nil rate of duty using Cenvat inputs. But here the manufacturer i.e. appellant here is not manufacturing bagasse or pressmud or boiler ash. These are by-products only and merely emerge as waste or residue while manufacturing sugar and molasses from sugar cane. None of the by-products falls within the definition of manufacture and in its absence nothing can be demanded from the appellant. It is not the case anywhere that after the amendment on 1.3.2015 by-products/ waste/residue have been included in the definition of manufacture and therefore the provisions of amended Rule 6(3) or Rule 6(2) ibid has no application and resultantly the demand raised by the revenue cannot sustain. Appeal allowed - decided in favor of appellant.

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• 2022 (12) TMI 5
  Compliance with the actual user condition - whether the furnace oil supplied by M/s Nayara Energy Limited was received M/s Essar Shipping Limited and used in their four vessels as claimed by the appellant or otherwise and consequently, the actual user condition is complied with or otherwise? - violation of principles of natural justice. HELD THAT:- It is found that the case involved mainly the facts that whether the goods supplied by M/s Nayara Energy Limited was received and consumed in the vessels of M/s Essar Shipping Limited. The appellant have submitted various documents which prima facie show that the goods have been delivered to all the four vessels i.e. MV Badri Prasad, MV Mahavir Prasad, MV Chandi Prasad and MV Anassa. The adjudicating authority has discarded all the documents submitted by the appellant during the adjudicating process on the ground that these documents were produced first time before the adjudicating authority and same were not available during the investigation of the case. Even the documents evidencing the payment transaction against the supply of goods was also not considered by the adjudicating authority on the flimsy ground that the same were not signed. In this fact, it is not necessary that all the documents which are allowed to be relied upon for defense of the noticee must be made available during the investigation of the case. Once, its authenticity is proved then the said documents must be considered for a fair adjudication. In the present case, the adjudicating authority without ensuring the authenticity of the documents rejected the same, therefore, same is in gross violation of principles of natural justice. Payment transaction against the supplies made by M/s Nayara Energy Limited to M/s Essar Shipping Limited - statements of payment particulars submitted by the appellant was rejected only on the ground that the said document was not signed - HELD THAT:- It is surprising that it is not the statement alone which evidence the payment transaction but the same has to be verified from the books of accounts of the appellant. The adjudicating authority before rejecting such evidence must have verified the books of accounts to check the correctness of the payment transaction between supplier M/s Nayara Energy Limited and purchaser of goods M/s M/s Essar Shipping Limited. By not doing so, the adjudicating authority again violated the principles of natural justice - the matter needs to be reconsidered by the adjudicating authority, after considering all the documents submitted by the appellant whether the same was available at the time of investigation or produced during the adjudication. The adjudicating authority is free to check the correctness and authenticity of the documents produced by the appellants. The matter is remanded to the adjudicating authority for passing a fresh order after observance of principles of natural justice - appeal allowed by way of remand.

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• 2022 (12) TMI 4
  Reversal of proportionate credit attributed to exempted goods - whether the assessee is required to pay 10% in terms of Rule 6(3)(a) of Cenvat Credit Rules, 2004, prevailing at the relevant period January 2006 to March 2006? - HELD THAT:- It is observed that the Adjudicating Authority has taken congnizance of the Tribunal s remand order which recorded that the issue stand decided by the Larger Bench of the Tribunal in the case of NICHOLAS PIRAMEL (I) LTD. VERSUS COMMISSIONER OF CENTRAL EXCISE, THANE-I [ 2008 (8) TMI 97 - CESTAT MUMBAI] . However, the learned Commissioner also observed that controversy involved was the similar to the controversy in the case of COMMISSIONER OF CENTRAL EXCISE, AHMEDABAD-II VERSUS MAIZE PRODUCTS [ 2008 (8) TMI 365 - HIGH COURT OF GUJARAT AT AHMEDABAD] wherein the Hon ble High Court of Gujarat has dismissed the department s appeal. Subsequently, the High Court order COMMISSIONER OF C. EX., AHMEDABAD-II VERSUS ANIL PRODUCTS LTD. [ 2010 (7) TMI 444 - GUJARAT HIGH COURT] in the case of Maize Products was challenged before the Hon ble Supreme Court and the Hon ble Supreme Court in COMMR. OF CEN. EXC. -II, AHMEDABAD VERSUS M/S. MAIZE PRODUCTS [ 2009 (11) TMI 1024 - SC ORDER] dismissed the Revenue s appeal. The ruling laid-down in the case of M.s, Maize Products will be prevalent over the judgment of M/s Nicholas Piramal (I) Limited passed by Hon ble Bombay High Court. Moreover, this Tribunal being under the jurisdiction of Hon ble Gujarat High Court, judgment of M/s. Maize Products is more relevant and binding than any other judgment - there are no infirmity in the order of learned Commissioner - appeal of Revenue dismissed.

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• CST, VAT & Sales Tax

• 2022 (12) TMI 3
  Price escalation clause - Remand of the case for re-examining the issue concerning labour and service charges and amount allegedly received as hire charges by the Assessee for the year 1996-97 - deductions towards labour and service charges can be limited to 34% in the 1st year of the project work which is to be completed within a period of five years or not - whether petitioner in execution of works contract has received any amount towards hire charges? HELD THAT:- As rightly pointed out by learned counsel appearing for the Petitioner, the above percentages were indicative of the escalation that was permissible on these items in terms of the agreement and did not reflect on the actual expenditure incurred on the ground of labour and services. On the other hand, the books of account produced by the Petitioner-Assessee were accepted as such both by the STO as well as the ACST. They examined the books of account thoroughly and found that the amounts were properly accounted for. In fact, the STO also noted that the Assessee had produced Labour payment register, vouchers, Cash book, muster rolls and copies of the trial balance (audited) for the year 1996-97. With both the STO and the ACST having accepted the books of account produced by the Assessee without any reservation, there was no occasion for the Tribunal to have limited the labour and service charges to 34%. Hire charges purportedly received by the Assessee - HELD THAT:- The fact remains that no material whatsoever was produced by the Department to substantiate even prima facie that the Assessee had received that amount. In fact, the Tribunal notes that the Assessee disputed having ever received such an amount. There was accordingly no occasion again for the Tribunal to have remanded this issue to the STO for determination - decided in favour of the Petitioner-Assessee and against the Department. Revision petition allowed.

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• 2022 (12) TMI 2
  Validity of assessment order - turnover from sale of wind mill - period 2014-15 - opportunity of hearing was granted but was unavailed by the petitioner - principles of natural justice - HELD THAT:- The opportunity granted under notice dated 30.07.2019, which is admittedly, the only notice issued to the petitioner prior to finalizing of assessment, does not conform to proper procedure - The respondent calls upon the petitioner to file a written objection to the proposal, which has been done by the petitioner. The notice also states that, if any personal hearing is required , the petitioner may avail the same at 11.00 a.m at any date before the filing of objection. A personal hearing must be afforded specifying the date and time of hearing. That apart, such hearing must be pursuant to the receipt of objections in order that both parties may be fully aware of their respective stands. It is only in such circumstances that a personal hearing can be said to be effective. The impugned order to the extent, to which it has not been assailed in appeal, is set aside, subject to the condition that the petitioner appear before the authority on 24.11.2022. If the petitioner does not avail this opportunity, it is made clear that the benefit of this order will be unavailable to it and the impugned order will stand revived. Petition disposed off.

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