TMI Tax Updates - e-Newsletter
December 6, 2024

Case Laws in this Newsletter:

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

TMI Short Notes

1. Faceless Assessment: Decoding the Exemptions for International Tax Charges

  Income Tax:

2. Interpreting Rule 86A: Safeguarding Taxpayers' Rights in ITC Blocking

  GST:

3. Writ Jurisdiction Not a Shortcut to Bypass Tax Adjudication Process, Rules Court: Judicial Discipline to be followed

  GST:

Articles

1. DEDUCTIONS UNDER SECTION 80TTA AND 80TTB OF INCOME TAX ACT, 1961

   By: DR.MARIAPPAN GOVINDARAJAN

2. Top Mistakes to Avoid While Making an Income Tax Payment

   By: Ishita Ramani

3. RECENT DEVELOPMENTS IN GST

   By: Dr. Sanjiv Agarwal

4. Cream is classifiable under HSN 1517 90 90, attracting GST @ 5%

   By: Bimal jain

News

1. Advisory on mandatory Sequential Filing of GSTR-7 Returns as per Notification No. 17/2024

2. Government of India and ADB sign $50 million loan for climate-adaptative water harvesting project in Meghalaya

3. MSMEs integral to industrial growth, willing to earmark land at a concession to develop businesses in industrial townships: Shri Piyush Goyal

4. Russian President Putin praises PM Modi's "India-First" Policy and "Make in India" Initiative at VTB Russia Calling Investment Forum in Moscow

5. Boilers Bill, 2024 moved in Rajya Sabha

6. Interns embark on their internship journey across 34 States and UTs of India under the Pradhan Mantri Internship Scheme

7. Department of Financial Services (DFS) organises ‘Coordination Meeting on Vigilance matters of Public Sector Banks (PSBs)’ to enhance inter-departmental cooperation and expedite investigation in bank fraud-related cases, in New Delhi.

8. Revenue Secretary Shri Sanjay Malhotra inaugurates 67th Foundation Day of the Directorate of Revenue Intelligence in New Delhi

Notifications

Customs

1. 26/2024 - dated 4-12-2024 - ADD

Seeks to impose Anti-Dumping Duty on imports of "Textured Tempered Coated and Uncoated Glass " falling under Tariff headings 7003, 7005, 7007, 7016, 7020 and 8541 originating in or exported from China PR or Vietnam for a period of 6 Months.

GST - States

2. 04/2024 - State Tax (Rate) - dated 30-11-2024 - Telangana SGST

Amendment in Notification No. 12/2017- State Tax (Rate), issued in G.O. Ms No. 110, Revenue (CT-II) Department, Dt.29.06.2017

3. 03/2024 - State Tax (Rate) - dated 30-11-2024 - Telangana SGST

Amendment in Notification No. 2/2017-State Tax (Rate), issued in G.O. Ms No. 110, Revenue (CT-II) Department, Dt. 29-06-2017

4. 02/2024 - State Tax (Rate) - dated 30-11-2024 - Telangana SGST

Amendment in Notification No. 1/2017-StateTax (Rate), issued in G.O Ms No.110, Revenue(CT.II) Department, Dt: 29.06.2017

5. G.O.Ms.No. 127 - dated 29-11-2024 - Telangana SGST

The Telangana Goods and Services Tax (Amendment) Act, 2024 (Act No. 4 of 2024) – Appointed date for notifying the provisions of sections 2 to 24 of the Act

6. G.O.Ms.No. 126 - dated 29-11-2024 - Telangana SGST

The Telangana Goods and Services Tax Act, 2017 – Special procedure to be followed by the electronic commerce operators in respect of supplies of goods through them by composition taxpayers

Circulars / Instructions / Orders

SEBI

1. SEBI/HO/CFD/CFD-TPD-1/P/CIR/2024/170 - dated 5-12-2024

Repository of documents relied upon by Merchant Bankers during due diligence process in Public issues

Highlights / Catch Notes

GST

• Court Upholds Mandatory TRAN-1 Filing for Excise Credit, Dismisses Petition for Missing Deadline Under CGST Act 2017.

  Case-Laws - HC : The High Court dismissed the writ petition. The petitioner, being a registered person not liable for registration before the appointed day of 01.07.2017, sought entitlement to transitional credit of excise duty through Credit Transfer Document by filing TRAN-3 without submitting TRAN-1 declaration within the stipulated time u/r 117 of the Central Goods and Services Tax Rules, 2017. The Court held that the requirement of submitting TRAN-1 declaration is not merely procedural but substantive and mandatory u/s 140(3) of the CGST Act, 2017. The time limit prescribed for making the declaration is a statutory mandate, and the Rule Making Authority had to prescribe it consistently with the eligibility conditions in the law. Submission of TRAN-1 is not a mere formality but enables smooth availment of input tax credit by binding the claimant to solemnly declare eligibility. The Court rejected the argument that Rule 117 is merely directory, stating that such a provision in a fiscal statute providing time limit to avail credit is not only substantive but also mandatory.
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Income Tax

• Tax exemption denied for investing sale proceeds in two separate flats, 'a residential house' means single unit.

  Case-Laws - HC : The High Court held that the phrase 'a residential house' in Section 54F of the Income Tax Act should be interpreted strictly to mean a single residential unit. The assessee was not entitled to claim exemption u/s 54F for investing in two separate flats located on different floors and at diagonally opposite ends, despite being in the same tower. The word 'a' denotes singular and not plural. The intent of the legislature was to grant exemption for investment in one residential house, not multiple residential units. However, the Court clarified that in certain cases where floors or houses are constructed to be used as one singular unit, they may qualify as 'a residential house' u/s 54F.
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• Court Questions Government on Interest Burden from Delayed Tax Refunds, Seeks Accountability for Officials.

  Case-Laws - HC : The High Court expressed concern over the unwarranted burden on the Government of India due to payment of interest on delayed refunds of eligible amounts to assessees. The court directed respondents to file an affidavit after taking instructions from CBDT, confirming the approach to be followed by officials to avoid burdening the public exchequer with interest payments. The court emphasized the need for rules or mechanisms to fix accountability on officers whose actions increase the burden on the government. The court recognized that delayed refunds not only burden the exchequer but also deprive assessees of funds, causing prejudice to both revenue and assessees. The court sought a statement from respondents regarding the total interest payable to the petitioner for appropriate orders.
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• Court Upholds Validity of Reopened Assessments, Citing Non-Genuine Transactions by Controlled Firms.

  Case-Laws - HC : The High Court held that the reopening of assessment u/s 147 did not violate the provisions of Section 148A. The respondents provided the petitioners an opportunity of being heard as specified in the order. The court found that the impugned orders mentioned the non-genuine accommodation entries made by Shri Ashok Kumar Gupta through various firms controlled by him, including M/s Kalki Trading Company and M/s Swastik Traders. The petitioners admitted transactions with these firms, involving the purchase and sale of commodities on the same day, indicating paper transactions. The court opined that the impugned orders u/s 148A(d) did not violate Section 148A, and the transactions being bogus, the petitioners' contentions regarding sale and not purchase lost their effect. The impugned orders did not fall within the exceptions settled by the Supreme Court in Godrej Sara Lee case.
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• Court Upholds Reopening of Tax Assessment Due to Suspected Income Escape in Garment Export Transactions.

  Case-Laws - HC : The High Court dismissed the assessee's petition challenging the reopening of assessment u/s 147. The Assessing Officer had reasons to believe that the assessee's income had escaped assessment due to the lack of credibility of certain suppliers from whom purchases were made for export of garments. One of the suppliers, Balaji Enterprises, was found non-existent at its principal place of business during the investigation. The assessee failed to produce material establishing the credibility of Balaji Enterprises or Dev Sales Corporation. The court held that at the stage of issuing notice u/s 148, the Assessing Officer is only required to have reasons to assume income has escaped assessment, and the reopening process u/s 148A was duly followed. The court found no grounds to interfere with the impugned order and notice issued u/s 148.
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• Court Invalidates Tax Reassessment Due to Officer's Vague and Unsupported Reasons, Upholding Assessee's Position.

  Case-Laws - HC : The High Court held that the reasons recorded by the Assessing Officer for reopening the assessment u/s 147 were vague, based on borrowed satisfaction without application of mind, and lacked a nexus with the material available. The allegation of availing accommodation entries was not substantiated with prima facie evidence or opinion regarding escapement of income. The court found non-application of mind by the Assessing Officer, particularly regarding the alleged accommodation entry from Mahavir Sales Corporation, which the assessee had denied. Relying on precedents, the court reiterated that the Assessing Officer must confine to the recorded reasons for reopening and cannot refer to other facts or inferences. Consequently, the reopening of assessment was held invalid, and the decision was in favor of the assessee.
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• High Court Affirms Reassessment and 6% Addition on Bogus Purchases.

  Case-Laws - HC : The High Court upheld the validity of reassessment u/s 153C and rejected the contention of reopening assessment u/s 147. The Assessing Officer relied on the material seized during the search for making additions in the assessees' hands. The Court affirmed the estimation of income on bogus purchases by the Tribunal at 6%, as it concurred with the reasoned decision of the fact-finding authorities. Consistent with similar cases involving accommodation entries, the 6% addition on estimated purchases maintained.
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• Court Dismisses Challenges to Tax Assessments; Clarifies Limitation Period for Assessment Orders Under Income Tax Act.

  Case-Laws - HC : The High Court dismissed the writ petitions challenging the validity of assessment u/s 153C and notices issued u/s 153B of the Income Tax Act. The court held that the starting point of limitation for passing the assessment order u/s 153B is the date when the seized books of account, documents, or assets were handed over to the Assessing Officer having jurisdiction over such person. The previous notices issued to the four transferor companies were void and irrelevant. The limitation period commenced from the date when the incriminating material was handed over to the jurisdictional Assessing Officer, even if time was consumed in centralizing the material. The court found no reason to interfere with the impugned orders and notices issued by the Department.
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• Taxpayer wins court battle for Form 10IC filing, allowed fresh application for reduced 22% tax rate.

  Case-Laws - HC : The High Court allowed the petition and permitted the petitioner to obtain Form 10IC for the Assessment Year 2021 and make a fresh application. The court relied on Wipro Limited [2022 (7) TMI 560 - Supreme Court] and held that the respondent was required to consider the facts of the case by permitting the petitioner to file a fresh Form 10IC and condoning the delay in filing such Form u/s 119(2)(b) of the Act. The provisions of Section 119(2)(b) are meant for redressal of grievances and hardships caused to the petitioner. The petitioner had adopted the option for taxation u/s 115BAA of the Act, which grants relief to companies by enabling them to pay a reduced tax rate of 22% subject to certain conditions.
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• Tax Authorities Directed to Grant Complete Waiver of Interest Under Direct Tax Vivad Se Vishwas Act.

  Case-Laws - HC : The High Court allowed the petition and directed the tax authorities to accept the petitioner's Forms 1 and 2 under the Direct Tax Vivad Se Vishwas Act and issue a fresh Certificate in Form 3 within four weeks, granting waiver of the entire interest amount determined in the assessment orders. The Court held that no distinction has been made between waiver of interest on disputed taxes and interest on tax not in dispute u/s 3 of the Act. The tax authorities had erroneously calculated interest by not granting complete waiver, which was contrary to the provisions of the Act. The petitioner undertook to withdraw pending appeals/rectification applications expeditiously.
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• Disproportionate property investment triggers income tax reassessment, but assessee's explanation partly accepted.

  Case-Laws - AT : The Income Tax Appellate Tribunal held that the Assessing Officer had rightly formed a 'reason to believe' and not merely a 'reason to suspect' regarding escapement of income based on the assessee's investment in property being disproportionate to their disclosed income. The approval u/s 151(2) for reopening assessment was properly granted after due application of mind by the Principal Commissioner. However, the Tribunal directed deletion of the addition made u/s 69 regarding unexplained investment, as the assessee had duly explained their share of the investment, while leaving the issue of unsecured loan and jewellery amount received by the assessee's wife to be examined separately.
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• Tribunal Rules Each Non-Compliance Notice Under Sec 142(1) Needs Separate Penalty; Single Notice Invalidates Penalty.

  Case-Laws - AT : The Income Tax Appellate Tribunal (ITAT) held that every non-compliance with a notice u/s 142(1) gives a separate cause of action for levying penalty u/s 271(1)(b). There must be a specific initiation and issuance of notice u/s 271(1)(b) for each non-compliance, and the assessee must be put on notice. Initiating penalty proceedings and levying penalty u/s 271(1)(b) for non-compliance with a notice u/s 142(1) is incorrect. The Assessing Officer (AO) issued only one notice u/s 271(1)(b), which the assessee claimed was never received, and the AO imposed an ex-parte penalty u/s 271(1)(b), breaching principles of natural justice. The Commissioner of Income Tax (Appeals) [CIT(A)] did not verify the assessee's contentions and explanations regarding non-compliance with notices u/s 271(1)(b) and dismissed the appeal without calling for records or specifying the non-compliance upheld. The ITAT accepted the assessee's contentions and deleted the penalty, considering the reasonable explanation for not attending the AO's hearing and the provisions of Sections 273B and 271(1)(b).
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• Income Tax Appeal: Disputed Addition Can't Be Dismissed For Non-Filing of Return or Advance Tax.

  Case-Laws - AT : The Income Tax Appellate Tribunal held that an appeal cannot be dismissed solely on the ground of non-filing of return or non-payment of advance tax when the entire addition made by the Assessing Officer is under dispute. The Tribunal directed the Commissioner of Income Tax (Appeals) to admit the assessee's appeal and adjudicate it on merits after providing an opportunity to both parties. The Tribunal observed that when the entire addition is disputed, there is no admitted income and consequently no advance tax liability arises on such disputed income. Furthermore, the proviso to Section 249(4)(b) empowers the Commissioner (Appeals) to exempt the assessee from the operation of the clause for good and sufficient reasons recorded in writing.
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• Interest paid on loans from group entities not liable for TDS deduction as it was reimbursement, not lending business income.

  Case-Laws - AT : The Income Tax Appellate Tribunal held that the assessee was not an "assessee in default" for non-deduction of tax deducted at source (TDS) u/s 194A on interest paid on loans from group entities. The payments were in the nature of reimbursement and not liable for TDS deduction. The assessee borrowed funds from banks through its group entities and reimbursed the interest cost to them. Since the group entities were not in the lending business and the assessee enjoyed the credit facility through them, the interest payment was a reimbursement. Consequently, the assessee was under no statutory obligation to deduct TDS u/s 194A, and the interest payable for failure to deduct TDS u/s 201(1A) did not arise.
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• Undisclosed income must be offset by undisclosed losses from seized material: Tax Tribunal.

  Case-Laws - AT : The Income Tax Appellate Tribunal held that when the assessing officer considered undisclosed income based on seized material, they ought to have also considered undisclosed losses from the same material and allowed set-off. Failing to do so constituted a mistake apparent from record u/s 254(2). The Tribunal directed the assessing officer to allow set-off of undisclosed losses of the immediately preceding year against the undisclosed income for the impugned year, following principles of equity, justice and interpreting seized material as a whole.
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• Tribunal upholds deletion of share premium addition, rejects Revenue's appeals on transfer pricing & post-search inquiries.

  Case-Laws - AT : Additions u/s 56(1) on account of share premium received by the assessee through allotment of shares to non-resident companies. The Tribunal observed that the transfer pricing adjustment made in the import price of equipment purchased from an associated enterprise was deleted in the earlier year, rendering the addition u/s 56(1) unsustainable. Furthermore, for assessments u/ss 153A/153C, post-search inquiries cannot form the basis, and the Assessing Officer cannot substitute their judgment over business decisions. Section 56(1) cannot be invoked to tax share premium, which is a capital receipt, as upheld by the Supreme Court and CBDT instructions. Consequently, the Tribunal dismissed the Revenue's appeal for both assessment years.
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• Tribunal Invalidates Tax Notices Due to Lack of Incriminating Evidence Against Third Party; Deletes Unabated Additions.

  Case-Laws - AT : The Appellate Tribunal held that the Assessing Officer (AO) did not satisfy the condition precedent before issuing a notice u/s 153C of the Income Tax Act against the appellant, who was a third party not subjected to search. The satisfaction note prepared by the AO did not meet the legal requirements as the seized material did not pertain to or contain anything incriminating against the appellant. Consequently, the assumption of jurisdiction u/s 153C for the assessment years 2014-15 and 2016-17 was held to be bad in law, rendering the consequent assessment orders null and void. Regarding additions made in the unabated assessment years, the Tribunal relied on Supreme Court decisions to hold that in unabated assessments u/s 153C, additions are permissible only if based on incriminating material found during the search. Since no such material existed against the appellant, the additions made u/s 56(2)(vii)(b) were directed to be deleted for the assessment years 2014-15 and 2016-17.
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Customs

• Temporary anti-dumping duty on tempered glass imports from China, Vietnam to protect local industry.

  Notifications : The Ministry of Finance imposed a provisional anti-dumping duty on imports of "Textured Tempered Coated and Uncoated Glass" falling under specific tariff headings originating from China PR or Vietnam for six months. The duty amount varies from $565 to $677 per metric ton based on the country of origin, country of export, and producer. A residual duty rate applies to any other producers not specifically listed. The duty aims to address dumping and resultant injury to the domestic industry.
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• Gold Bars Confiscated Due to Lack of Proof; Tribunal Reduces Penalties for Appellants Under Customs Act 1962.

  Case-Laws - AT : Confiscation of smuggled gold bars/biscuits u/ss 111(b), 111(d), and 111(f) of the Customs Act, 1962. The appellants failed to establish the licit procurement of the foreign-marked gold with 99.90% purity, a notified item u/s 123, thereby not discharging their burden of proving ownership. While the gold cannot be released due to unestablished ownership, the Tribunal reduced the penalties imposed on the appellants considering the roles played and the nature of the offense, deeming the initial penalties excessive compared to the gold's value. The penalty reductions were: Appellant 1 from Rs. 6,25,000 to Rs. 3,50,000, Appellant 2 from Rs. 6,50,000 to Rs. 4,00,000, and Appellant 3 from Rs. 5,80,000 to Rs. 2,00,000 u/s 112 of the Customs Act, 1962.
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• Demurrage Charges Excluded from Assessable Value for Customs Duty: CESTAT Rules in Favor of Importer.

  Case-Laws - AT : The issue pertained to the inclusion of demurrage charges in the assessable value for payment of customs duty under the Customs Valuation (Determination of Value of Imported Goods) Rules, 2007. The Tribunal relied on the decision of the Orissa High Court in the case of Tata Steel Ltd. and Others v. Union of India and Others, wherein the High Court held that demurrage charges are not included as part of the cost envisaged by the legislation for determining the assessable value. Consequently, the Tribunal ruled that demurrage charges cannot be included in the assessable value for payment of customs duty.
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• Tribunal overturns anti-dumping duty levy, remands case for reassessment adhering to legal framework.

  Case-Laws - AT : The Tribunal held that the first appellate authority erred in affirming the re-assessment and levy of anti-dumping duty (ADD) u/s 9A of the Customs Tariff Act, 1975, without any material on record to determine whether the re-assessment conformed to the framework of the notification. The Tribunal found that the first appellate authority lacked jurisdiction to adjudicate on the merits of the assessment by the original authority. The absence of the importer's consent for alteration of the assessment and the lack of scrutiny of the entry u/s 46 of the Customs Act invalidated the impugned orders ab initio.
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SEZ

• Area of Special Economic Zone expanded to 588+ hectares with added land parcels.

  Notifications : The total area of the Special Economic Zone (SEZ) for Multi-product SEZ at Gopalpur, District Ganjam, in the State of Odisha has been increased to 588.6514 hectares after addition of certain land parcels. Specific land parcels from various villages have been included, with their respective survey numbers and areas mentioned in precise legal terminology. All parties involved have been anonymized.
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Benami Property

• Demonetized cash held by proxies deemed benami property of beneficial owner.

  Case-Laws - AT : Benami Transactions - The Tribunal held that the demonetized currency notes recovered from third parties were benami properties held on behalf of Appellant, the beneficial owner. Initially, the Appellant claimed the cash did not belong to him, but later admitted it was his income declared under the Pradhan Mantri Garib Kalyan Yojana, 2016. The Tribunal rejected Appellant's arguments that the demonetized notes had no fair market value, the findings were contrary to records, and the cash was held in fiduciary capacity. The Tribunal upheld the Adjudicating Authority's order attaching the demonetized currency as Appellant's benami property.
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IBC

• Irrevocable bank guarantee invocation allowed during IBC moratorium, claim revision required.

  Case-Laws - AT : The NCLAT held that the moratorium u/s 14 of the IBC shall not impede the invocation of an irrevocable bank guarantee, which is an independent and separate contract between the parties. If the bank guarantee is invoked and any amount is received by Respondent No. 1, their claim has to be revised as intimated by the IRP. The Appellate Tribunal found no error committed by the Adjudicating Authority in allowing the application filed by the Respondent and dismissed the appeal.
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PMLA

• Mutual Fund authorized for Aadhaar authentication to comply with anti-money laundering laws.

  Notifications : The Central Government authorized Aditya Birla Sun Life Mutual Fund to perform Aadhaar authentication under the Aadhaar Act for the purposes of section 11A of the Prevention of Money-laundering Act, 2002. This authorization was granted after being satisfied that the reporting entity shall comply with the privacy and security standards under the Aadhaar Act, and upon consultation with the Unique Identification Authority of India and the Securities and Exchange Board of India as the appropriate regulator.
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VAT

• Dismissal of petition against tax assessment for wrongful ITC claims due to implausible surrender date.

  Case-Laws - HC : The High Court dismissed the challenge to the assessment order regarding wrongful availing of input tax credit. The court found the petitioner's claim of surrendering registration under TNVAT Act and CST Act on 25.12.2014 implausible, as it was a holiday and an acknowledgment would not have been issued on that date. The court directed the respondents to verify from which IP address the transactions were made for filing returns in the petitioner's name during the disputed period, facilitating wrongful availing of input tax credit and passing it to unscrupulous dealers.
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• Court Nullifies Orders Against Deceased Director's Estate; Emphasizes Unjustified Corporate Veil Lifting Violations.

  Case-Laws - HC : The High Court allowed the petition and quashed the impugned recovery proceedings, recovery certificate order, and attachment order issued by the authorities to recover outstanding dues from the estate of a deceased director of the company M/s Oren Kitchen Appliances Pvt. Ltd. The Court held that the recovery proceedings were initiated after the director's death, without providing an opportunity of hearing as required under the relevant provisions. Additionally, the Court relied on the legal position that the corporate veil cannot be lifted lightly, and no specific order fastening personal liability on the directors had been passed by the authorities. Consequently, the recovery actions against the deceased director's estate were held unsustainable and quashed.
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Service Tax

• Pre-deposits via electronic cash ledger valid under Finance & Excise Acts.

  Case-Laws - HC : The High Court held that the pre-deposits made by the petitioners through their electronic cash ledger were valid u/s 83 of the Finance Act, 1994, read with Section 35 of the Central Excise Act, 1944. The Court followed the decision in RELIANCE INFRASTRUCTURE LIMITED VERSUS THE UNION OF INDIA AND ORS. and directed the appellate authority to accept the pre-deposits as valid and dispose of the petitioners' appeal on merits in accordance with the law. The petition was allowed.
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Central Excise

• Appellants granted right to cross-examine witnesses in excise duty cases, CESTAT remands for fresh decision.

  Case-Laws - AT : The Customs, Excise and Service Tax Appellate Tribunal (CESTAT) set aside the impugned order and remanded the cases back to the adjudicating authority. The appellants were granted the opportunity for cross-examination of material witnesses relied upon by the revenue authorities. This was based on the principle of natural justice, following precedents that denial of cross-examination violates fair procedure u/s 9D of the Central Excise Act. The adjudicating authority must allow cross-examination and follow due process for a fresh decision. The appellants were directed to cooperate for speedy disposal.
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Case Laws:

• GST

• 2024 (12) TMI 266
  Entitlement to transitional credit of excise duty made through Credit Transfer Document - filing TRAN-3 without insisting on submission of TRAN-1 declaration within the time stipulated under Rule 117 of the Central Goods and Services Tax Rules, 2017 - the petitioner s argument is that the requirement of submission of TRAN-1 declaration, as provided under Rule 117 of the CGST Rules, 2017, is not a substantive or mandatory provision, but merely processual or directory, violation of which cannot lead to rejection of claim - HELD THAT:- The petitioner, admittedly being registered person, who was not liable to be registered under the existing laws just before the appointed day i.e. 01.07.2017, could claim input tax credit for eligible duties in respect of inputs held in stock and inputs contained in semi finished or finished goods held in stock on the appointed day - it is relevant to notice that substantive provision contained in sub-section (3) of Section 140 of the CGST Act, 2017, clearly mandates that entitlement to take credit of eligible duties would be available within such time and in such manner, as may be prescribed, subject to conditions as laid down. Rule 117 of the CGST Rules, 2017 requires the registered person entitled to take credit of input tax under Section 140 of the CGST Act, 2017, to submit declaration electronically in Form GST TRAN-1, duly signed, on the common portal specifying therein, separately, the amount of input tax credit of eligible duties and taxes, as defined in Explanation 2 to section 140, to which he is entitled under the provisions of the said section - the prescription of time limit is not merely a provision of Rule framed by the Rule Making Authority in exercise of rule making power conferred on it under the CGST Act, 2017, but is also a statutory mandate, as contained in sub-section (3) of Section 140 of the CGST Act, 2017, that such claim has to be made within the prescribed time and in such manner, as may be prescribed. Therefore, the Rule Making Authority had no option but to prescribe the time limit for making appropriate declaration consistent with the eligibility conditions contained in the law itself. In the case of Jayam Co. Vs. Assistant Commissioner Anr. [ 2016 (9) TMI 408 - SUPREME COURT] , it was authoritatively laid down that when a concession is given by the statute, the Legislature has power to make the provision stating the form and the manner in which such concession is to be allowed. There was no right, inherent or otherwise, vested with the dealer to claim the benefit of input tax credit except in accordance with the provisions of law. The submission that provision under Rule 117 of the CGST Rules, 2017, requiring submission of declaration in TRAN-1, is merely processual and not a substantive provision and, therefore, not mandatory, cannot be accepted. Firstly, the provision under Rule 117(2) of the CGST Rules, 2017, requiring submission of statutory declaration in form TRAN-1, is not by virtue of rule making power alone. Such a requirement is mandated under the substantive provision contained in sub-section (3) of Section 140 of the CGST Act, 2017 - it was absolutely mandatory for the Rule Making Authority to prescribe the period of limitation for submitting statutory declaration. As to what should be the period within which such submission should be made and whether there should be a provision for further extension, and if so, in what circumstances and in what matter, was left by the legislature to be provided by the Rule Making Authority. Such a provision in a fiscal statute providing for time limit within which statutory limitation to avail credit is made, is not merely procedural but not only substantive but mandatory also. The submission of statutory declaration in TRAN-1 is not a mere formality, but has a purpose. While the legislature intended to extend benefit of transitional credit to eligible persons, the rule framed by the Rule Making Authority seeks to ensure smooth and hassle free operation of the mechanism of availment of input tax credit. The requirement of submission of declaration is a requirement of enabling provision contained in Section 140 of the CGST Act, 2017. It is not a mere submission of certain details dehors the eligibility criteria prescribed under the law. The declaration bind the claimant to solemnly declare as to how and in what manner, he is eligible - The Rule clearly provides that initially ninety days period is allowed, which could be extended for a further period of ninety days. Not only this, even beyond this, if a case is made out, on the recommendation of the GST Council, the period could be further extended. There is no merit in the writ petition and the same is accordingly dismissed.

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• Income Tax

• 2024 (12) TMI 265
  LTCG - exemption u/s 54F - eligibility to claim exemption only in respect of one flat - Interpretation of a residential house - two flats purchased by the assessee in the one society, located in the same tower, but on different ends of two different floors - ITAT was of the opinion that since the two flats purchased by the assessee were on two different floors and were neither adjacent to each other nor they could have been joined to form a dwelling house, the same could not be considered as a residential house - Whether the benefit provided u/s 54F which uses the phrase a residential house , should be interpreted strictly as applying to a single residential unit, or if it can be construed more broadly to encompass multiple residential units? - HELD THAT:- We note that the legislature has used the words new asset , and not new assets , in relation to a residential house . As per the principles of interpretation of statutes, we see that there is no ambiguity in the words a residential house or a new asset . Further, even by going behind the intent of the provision, the said words would essentially mean a singular house or a singular asset and not multiple houses or multiple assets. To conclude, the word a would indicate one or singular item, entity, object, person, etc. and will not indicate more than one or many . In case the legislature intended to use it in plural connotation, it would have used the word assets instead of a new asset , and not used the article a before the term residential house . In the said eventuality, there would have been merit in the contention of the learned counsel for the assessee that she was entitled to exemption u/s 54F even if she had invested in purchasing/acquiring multiple residential flats incapable of being structurally or legally combined and even failing the test of being adjacent. If the argument of the assessee is to be accepted, even different residential units bought in different parts of a city or different states would have to be brought under the ambit of Section 54F of the Act, which was not the intent of the legislature. It is essential to add a caveat that such a decision will depend on the facts of each case. As in the case of Gita Duggal [ 2013 (3) TMI 101 - DELHI HIGH COURT ] the plot of land and the entire house built up on the said land originally belonged to the assessee only, which was demolished and reconstructed by the builder under an agreement. Bench had observed that people can construct their houses in the manner they so desire, and the said observations would also indicate that the assessee in that case was constructing a house as per her own needs, after modifying the original residential house that she owned. Conversely, in the present case, the assessee had bought, and not constructed, two flats which are on two different floors and situated at diagonally opposite ends, in a manner which does not make it feasible for them to be connected structurally as one single unit. This assumes significance in the backdrop of our opinion that the word a used in Section 54F of the Act denotes one singular residence, along with the caveat that in case the floors or houses are so constructed as to be used as one singular unit or capable of being used as such, they may fall within the definition of a residential house. Considering terminology used in Section 54F of the Act, the intent of the provision, and the judicial precedents discussed above, we conclude that the appellant s purchase of two distinct, non-adjacent flats, located on diagonally opposite ends of two different floors, even though in a same tower of a residential society, does not fulfill the criteria for exemption under Section 54F of the Act. While it is true that the words a residential house used in Section 54F of the Act (prior to amendment) were judicially interpreted to allow certain flexibility in cases where more than one residential unit could, in essence, form a single residential house, as seen in Gita Duggal (supra). This was premised on the possible practical use of the residential units as a unified residence, the characteristics which are absent in the present case. No error in the learned ITAT s decision to grant exemption under Section 54F of the Act in respect of only one of the two flats purchased by the appellant. Decided in favour of revenue.

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• 2024 (12) TMI 264
  Deduction for the provision made for leave salary u/s 43B(f) - HELD THAT:- In the present case, it is an admitted position, as seen from the order of the Tribunal dated 09.06.2017, that the appellant had made a provision, which, in light of the clear language of Section 43B(f) calls for disallowance. The question of law is hence answered in favour of the revenue and against the assessee. Fixing eight years limitation for setting off the unabsorbed depreciation when section 32(2) - HELD THAT:- This issue is covered by a decision of this Court in Tamil Nadu Small Industries Corporation Limited [ 2021 (7) TMI 849 - MADRAS HIGH COURT] decided against the Revenue and in favour of the assessee as held once the Circular No. 14 of 2001 clarified that the restriction of 8 years for carry forward and set-off of unabsorbed depreciation had been dispensed with, the unabsorbed depreciation from asst. yr. 1997-98 up to the asst. yr. 2001-02 got carried forward to the asst. yr. 2002-03 and became part thereof, it came to be governed by the provisions of section 32(2) as amended by Finance Act, 2001 and were available for carry forward and set-off against the profits and gains of subsequent years, without any limit whatsoever. Decided in favour of assessee.

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• 2024 (12) TMI 263
  Cost of delay in Refund of eligible amount on Government of India - interest on refund - HELD THAT:- These situations payment of interest is an unwarranted burden required to be borne by the Government of India. The concern of the Court is on a larger issue, not only in regard to the present proceedings but in several similar proceedings reaching the Court. Whether there is any routine audit, as to who would become accountable for such huge interest amounts being required to be paid by the Government of India, when there are refund amounts which are admittedly payable to the assessee s. Any delay being caused in making payments of such refund and the interests payable thereon, is attributable wholly to the officials of the department, as it is they who are not taking prompt actions. As a Constitutional Court, we cannot overlook these issues and merely pass routine orders recording grant / receipt of refund. This ought not to be the only concern of the Court, in considering the legal rights of the assessees, as the Court would be equally concerned with the larger public interest of a burden on the public exchequer, when it is noticed by the Court that for no justifiable reasons, such refunds are blocked and huge interest in that regard is ultimately paid by the Government of India. We direct respondent Nos. 5 and 6 to place an affidavit on record, after taking appropriate instructions from the CBDT and after confirming such affidavit from the CBDT, as to approach the concerned officials are required to follow, in such situations so as to avoid burdening the public exchequer with interest payments. We are constrained to pass such order, in view of the concerns, we have recorded hereinabove. In such context, we may also observe that if already the rules are not in place, such rules would be required to be framed and if any rules are already framed, as to why such rules are not being strictly adhered, and as to why any mechanism by which accountability needs to be fixed on the particular officers, whose actions are increasing the burden on the Government of India, are concerns required to be immediately looked into. These are the issues and concern which be addressed in the reply affidavit, to be filed by the said respondents. We are also equally conscious that the delayed payment of refunds not only burdens the public exchequer with such interest amounts being required to be paid, but it also brings about a situation that the assessees are deprived of these amounts causing them a serious prejudice. Also the Government of India would not be in a clear position to utilise such funds for any public purpose, as these funds are required, to be in any case paid to the assessee. Thus, any situation of an unjust enrichment is not acceptable. The situation in hand is of a delay, by which a serious prejudice to both the revenue and to the assessee is caused. As regards the total interest amount being payable to the petitioner in the present proceeding Respondents would take instructions and make an appropriate statement either on the adjourned date of hearing or earlier to that so that appropriate orders can be passed.

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• 2024 (12) TMI 262
  Entitlement of refund as amount of tax arrears refundable as per Vivad Se Vishwas Act, 2020 ( VSV Act, 2020 ) along with interest u/s 244A - HELD THAT:- A bare perusal of the Explanation would reveal that the Explanation pertains to payment of any amount under the Income Tax Act for the period before filing the declaration under sub- section (1) of Section 4 of the VSV Act, 2020 and nothing to do with the entitlement to interest for the period after issuance of Form No.5 indicating entitlement of the petitioner to the amount of refund. For the delayed payment, the petitioner is entitled to interest on the refund amount for the delay beyond the period of 90 days from the date of refund order i.e. 20.09.2022.Consequently, the writ petition is allowed. It is directed that respondents shall make payment of refund of Rs. 2,19,42,954/- along with interest @ 6% per annum on the delayed refund amount with effect from 20.12.2022 i.e. beyond the period of 90 days from the date of determination of refund amount on 20.9.2022 till the date of actual payment to the petitioner. The entire amount of refund and interest be paid within a period of eight weeks from the date of this order.

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• 2024 (12) TMI 261
  Reopening of assessment u/s 147 - Violation of the provisions of Section 148A - Petitioners herein were not provided an opportunity of being heard in the manner specified in the order - HELD THAT:- From a perusal of the impugned orders, it would be seen that in the impugned orders, the Respondent No.3 had categorically mentioned that Shri Ashok Kumar Gupta had made non-genuine accommodation entries of purchase and sale to various individuals and entities. These accommodation entries were made through various firms which were controlled by Shri Ashok Kumar Gupta. Amongst these firms, it included the firms namely M/s Kalki Trading Company which was owned by the servant of Shri Ashok Kumar Gupta and M/s Swastik Traders which was owned by the nephew of Shri Ashok Kumar Gupta. From the replies so submitted by both X and Y to the Show Cause notices would show that both X and Y admitted transactions with these firms. It showed that commodities i.e. Rajma and Kabuli Chana on the same day was purchased by the firms belonging to X and Y from a firm namly M/s NCS Enterprise at Nagaland and on the same date, that commodities were sold to these firms namely M/s Swastik Traders and M/s Kalki Trading Company at Delhi. The said aspect shows that there were transactions on papers and the Respondent No.3 therefore have proper reasons to believe that these were only paper transactions which was also admitted by Shri Ashok Kumar Gupta on oath during the survey proceedings. In the opinion of this Court, the impugned orders assailed under Section 148A(d) of the Act of 1961 in both the writ petitions cannot be said to be in violation of Section 148A of the Act of 1961. Further to that, from the impugned orders, it is also seen that the transactions in question being bogus transactions, the efficacy of the contentions made by the Petitioners that the transactions were of sale and not purchase had lost its effect. No violation to Section 148A while passing the impugned orders and as such the said impugned orders do not come within the ambit of the exceptions as settled by the Supreme Court in Godrej Sara Lee Vs. Excise and Taxation Officer cum Assessing Authority and Others [ 2023 (2) TMI 64 - SUPREME COURT ].

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• 2024 (12) TMI 260
  Validity of Assessment u/s 153C - whether no incriminating material has been found either belonging to the petitioner or pertaining to the petitioner in any search conducted u/s 132? - HELD THAT:- Neither any books of account nor documents, either belonging to the petitioner or containing information pertaining to the petitioner, were found. The fact that an Agreement to Sell between two separate parties has been retrieved from the mobile phone of the husband of the petitioner, does not establish that the information pertains to the petitioner. As noted above, the information is that there was an Agreement to Sell between two separate parties. Therefore, the assumption that the said information pertained to the petitioner is clearly erroneous. It appears that the AO has, based on the image of the Agreement to Sell sent on Whatsapp, assumed the value of one floor of the property and based on this assumption, the AO is seeking to impute that said value in a separate transaction involving the petitioner. The only question to be addressed is, whether any asset, bullion, jewellery, books of account, documents were found during search, which either belonged to the petitioner or contained information pertaining to the petitioner. The fact that the image suggested a value of a particular property, in respect of a transaction between two other parties, cannot be stated to be pertaining to the petitioner. Assessee appeal allowed.

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• 2024 (12) TMI 259
  Reopening of assessment u/s 147 - genuineness of purchases made by the petitioner for export of garments questioned - Investigation Wing had found that one of the entities (Balaji Enterprises) had purportedly supplied the goods to the petitioner, was found to be non-existing at the principal place of business - HELD THAT:- As considered the petitioner s contention that the transactions were through banking channel. Plainly, if the entries are accommodation entries as suspected then at least one limb of the transaction would necessarily be through banking channel. The petitioner had not produced any material to establish the credibility of Balaji Enterprises or Dev Sales Corporation. Petitioner submits that since the goods have been exported, it was also necessary to make the Customs department a party as the petitioner had availed duty drawback. This contention is also insubstantial. At the stage of issuance of notice under Section 148 of the Act, the AO is required to have reasons to assume that the income of the assessee has escaped assessment. Section 148A of the Act sets out a mechanism for ensuring that the AO s decisions are not based on any unfounded suspicion. The scheme thus, entails a preliminary enquiry, which in this case was done by the department. It is then followed by a notice under Section 148A (b) of the Act to enable the assessee to respond to the information that is available. AO is required to consider the assessee s response under Section 148A (c) of the Act in taking an informed decision whether it is a fit case to reopen the assessment by passing an order under Section 148A (d) of the Act. This exercise is for a limited scope of merely determining whether the assessment is required to be reopened. It does not foreclose the assessee s contention regarding the genuineness of the ITRs. All rights and contentions of an assessee to support its declaration of ITR is available to the assessee. At the stage of Section 148A of the Act, the AO is merely required to form a view whether he has reasons which indicate that the assessee s income has escaped assessment. In the present case, there is material on record the sufficiency of which, this court is not required to examine which bears a live nexus to the opinion that the petitioner s income has escaped assessment. The material indicates that there is evidence that two of the entities from whom the petitioner had procured materials are not genuine. The bank accounts indicate matching of inflows and outflows coupled with the high turnover in a short span of time. This provides the reasons for the AO to question the purchases that are declared by the petitioner. No grounds to interfere with the impugned order, the impugned notice and the notice issued under Section 148 - Decided against assessee.

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• 2024 (12) TMI 258
  TP Adjustment - adjustment in relation to purchase of finished goods and on account of advertisement, marketing and promotion (AMP) expenses - AMP expenses were considered as a separate international transaction and benchmarked by applying the Bright Line Test (BLT) - HELD THAT:- This Court is unable to accept that adjudication of the issue regarding the determination of ALP on account of AMP expenses would necessarily entail determination of transfer pricing adjustments on the ground of purchase of finished goods. Concededly, the impugned order does not reflect that learned ITAT had adjudicated any of the aforesaid grounds. It is apparent that the learned ITAT had proceeded on the basis that since the matter is remanded to the TPO, the petitioner s challenge to the adjustment on account of purchase of finished goods would also be considered afresh. We consider it apposite to remand the matter to the ITAT to consider the grounds raised by the Assessee regarding transfer pricing adjustment in respect of transactions pertaining to purchase of the finished goods. We also clarify that we have not expressed any opinion on the merits of the transfer pricing adjustment and the learned ITAT shall consider the same and pass a reasoned order.

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• 2024 (12) TMI 257
  Validity of reopening of assessment u/s 147 - Reasons to believe - allegation of accommodation entry availed by the petitioner assessee - as argued reasons recorded by the AO are based upon the borrowed satisfaction and there is no prima facie opinion formed for escapement of income - HELD THAT:- It appears that the AO has recorded the reasons based upon the information made available to him without application of mind. On perusal of the reasons recorded, it is apparent that the AO has not referred to the nature of accommodation entry availed by the petitioner from Jignesh Shah and Sanjay Shah for AY 2016-17 is concerned. Merely recording the facts from the information made available to the effect that the petitioner was beneficiary who has availed the accommodation entry cannot be said to be a reason having nexus with the material made available to the Assessing Officer for opening of the assessment. In case of Mehrunnisa Mohamed Fazal Maniar [ 2021 (3) TMI 1013 - GUJARAT HIGH COURT ] and Backbone Projects Ltd. [ 2021 (8) TMI 382 - GUJARAT HIGH COURT ] as well as Kantibhai Dharamshibhai Narola [ 2021 (2) TMI 102 - GUJARAT HIGH COURT ] the information was available with the Assessing Officer from the concern controlled by Jigesh Shah and Sanjay Shah from which the assessee was beneficiary of accommodation entry. It therefore, appears that in the facts of the case, the reasons recorded by the AO are absolutely vague based upon the borrowed satisfaction and without application of mind. With regard to the alleged accommodation entry from Mahavir Sales Corporation amount as reflected in the reasons recorded for both the Assessment Years which clearly shows that there is non application of mind on the part of the Assessing Officer to reopen the assessment on the basis of such information. It is also pertinent to note that the petitioner-Assessee has requested forming the basis of the reasons recorded, however, the same was never provided. On the contrary, in the order disposing of the objections, the Assessing Officer has recorded that the petitioner availed the accommodation entry from Mahavir Sales Corporation which was denied by the petitioner in the objections Considering the material available on record in form of reasons recorded, we cannot travel beyond the same for the settled legal position that the AO is required to confine to the reasons recorded for reopening and he is not authorized to refer to any other reason or fact even if it can be otherwise inferred or gathered from the record for the purpose of the validity of the assumption of the jurisdiction u/s 147 of the Act. Decided in favour of assessee.

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• 2024 (12) TMI 256
  Validity of assessment u/s 153C V/S reopening the assessment u/s 147 - AO has relied upon the material seized during the course of search for making addition in the hands of the appellants-assessees - HELD THAT:- Both the CIT (Appeals) and the Tribunal have not taken into consideration and no such plea was raised before the CIT (Appeals) and the Tribunal and once the reopening is held to be valid, there is no material on record to show that the Assessing Officer has found any seized material pertaining to or belonging to the assessees during the course of search and therefore, we are of the opinion that the reopening under Section 147 of the Act as held by both the CIT (Appeals) and the Tribunal to be valid and the contention raised by the appellants-assessees at this stage is not tenable. Estimation of income on bogus purchases - Both the CIT (Appeals) and the Tribunal has given cogent reasons for making addition on estimate basis at 5% by the CIT (Appeals) which was increased to 6% by the Tribunal and such estimated addition is confirmed by this Court arrived at by the fact finding authority being CIT (Appeal) and Tribunal, in such circumstances, we are in agreement with the decision rendered. Addition of 6% of the purchases on estimate basis arrived at by the Tribunal and the Tax Appeals preferred by the Revenue are also dismissed by this Court in number of similarly situated assessees. Therefore, in order to maintain the consistency of addition of 6% in cases of the assessees who have been found taking accommodation entries during the course of search in case of Pravinkumar Jain Group/Bhavarlal Jain Group, no interference is required to be made in the impugned order.

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• 2024 (12) TMI 255
  Validity of assessment u/s 153C as barred by limitation - time limit for completion of assessment u/s 153B - starting point of limitation for the purpose of passing order of assessment - HELD THAT:- The proviso to Section 153B of the Act needs to be examined. A microscopic reading of relevant portion of the said proviso leaves no room for any doubt that the date when books of account or documents or assets seized were handed over to the assessing officer having jurisdiction over such person is the crucial date and if it is later in time, under whichever is later expression, this date will be starting point for counting limitation. Since previous notices which were issued to four transferor companies were void, same vanished in thin air and relevant dates for issuance of said notices are of no relevance. Merely because some time was consumed in centralising and handing over relevant incriminating material to the assessing officer having jurisdiction, the petitioner will not come out of rigors of the said proviso which is clear and unambiguous. In the instant case, it is not the case of the petitioner that the officer who conducted search on aforesaid four companies and the officer who has been given jurisdiction by order dated 27.12.2022 are same. We are unable to persuade ourselves with the line of argument of learned Senior Counsel for the petitioner that the notices dated 30.12.2022 are barred by limitation and bad in law. We find no reason to interfere with the impugned orders dated 10.10.2023 and also notices dated 30.12.2022 issued by the Department. Writ Petitions fail and are hereby dismissed.

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• 2024 (12) TMI 254
  Condonation of delay u/s 119 (2) (b) - Delay in filing Form 10IC - whether petitioner has no case of genuine hardship? - petitioner had adopted the option for taxation u/s 115BAA of the Act which is further fortified from the intimation issued u/s 143 - as per revenue petitioner is not entitled to file Form 10IC belatedly after the filing of the return under Section 139 (1) - HELD THAT:- As relying on Wipro Limited [ 2022 (7) TMI 560 - SUPREME COURT] it is also apparent that the Hon ble Apex Court has considered the significance of filing declaration under Section 10B(8) of the Act considering the provisions of Section 10B (5) of the Act being a check to verify the correctness of the claim of deduction at the time of filing of return so that if an assessee claims an exemption under the Act by virtue of Section 10B of the Act, then the correctness of the claim has already been verified under Sub-section (5) of Section 10B and therefore, if the claim is withdrawn post the date of filing of return, the report of the Accountant filed under Section 10B (5) of the Act would become falsified and would stand to be nullified. However, the provisions of Section 115BAA of the Act are in a way granting relief to the assessee-Companies to enable them to pay the reduced rate of tax at rate of 22% on exercise of the option on the various conditions mentioned therein. Respondent No. 1 was required to consider the facts of the case by permitting the petitioner to file a fresh Form 10IC and condoning the delay in filing such Form by moulding the prayer made by the petitioner to treat the Form 10IC filed by the petitioner for Assessment Year 2021-2022 to be treated as that of for Assessment Year 2021. The provisions of Section 119 (2) (b) of the Act are meant for redressal of the grievance and hardships caused to the petitioner. The petition succeeds and accordingly allowed. The petitioner is permitted to obtain Form 10IC for Assessment Year 2021 in the facts of the case and after obtaining such Form, the petitioner shall make a fresh Application .

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• 2024 (12) TMI 253
  Direct Tax Vivad Se Vishwas scheme - Issuance of Form No. 3 under the Direct Tax Vivad Se Vishwas Act - erroneous calculation of interest by the tax authorities - difference as regards waiver of interest on disputed taxes and interest on tax not in dispute - HELD THAT:- A plain reading of the provisions contained in Section 3 of the DTVSV Act is sufficient to come to the conclusion that no distinction has been made / drawn between waiver of interest on disputed taxes and waiver of interest on tax not in dispute; it follows therefrom that in the instant case, in the light of the undisputed fact that the Assessment orders were passed pursuant to search proceedings and the provisions contained in Section 3 of the DTVSV Act supra, the petitioner would be entitled to waiver of the entire interest amount as determined in the Assessment orders and consequently, the applications in Forms - 1 and 2 submitted by the petitioner undertaking to make payment of the disputed taxes in the manner laid down under Section 3 of the DTVSV Act by granting waiver of interest deserve to be allowed. It is therefore clear that the respondents have failed to consider and appreciate this aspect of the matter while issuing Form - 3 and have erroneously called upon the petitioner to pay the interest by issuing the impugned Forms at Annexures - E1 to E4, which are not only without jurisdiction or authority of law but also illegal, arbitrary and contrary to facts and the provisions of the DTVSV Act warranting interference by this Court in the present petition. Petitioner submits at this stage that in view of the present petition being allowed, petitioner would withdraw the pending appeals / rectification applications as expeditiously as possible. The said submission is placed on record. Insofar as the CBDT standing order directing the process under the DTVSV Act to be completed by 30.09.2024 is concerned, having regard to the present petition being filed on 12.07.2024 and being allowed by the present order, the respondents are directed to comply with the directions issued in the present order even though the same is beyond 30.09.2024. Petition allowed. The respondents are directed to accept Forms -1 and 2 at Annexures - D1 to D4 submitted by the petitioner and issue fresh Certificate in Form - 3 in favour of the petitioner within a period of four weeks .

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• 2024 (12) TMI 252
  Validity of the notice issued u/s 148 - reason to believe - valid approval granted u/s 151(2) or not? - HELD THAT:- We agree with the revenue contention that the AO formed a reason to believe and not reason to suspect . AO had verified information in his possession that the assessee had made investment in the said property. Besides, the AO had in front of him the ITR of the assessee showing meager income not commensurate with the investment made. Following the principal of natural justice, the AO gave the opportunity to the assessee to explain the investment before taking recourse to section 148. In absence of any explanation in response to the notice u/s 133(6), in respect of investment, the AO formed a reason to believe and reopened the assessment u/s 148. It does not lie in the mouth of the assessee now to say that the AO should have verified from the AO of the wife of the assessee whose name/PAN featured in the purchase deed when he himself failed to avail the opportunity to explain the entire transaction. There was sufficient tangible material on record which justifies the prima facie belief of the AO regarding the escapement of taxable income. The facts noted above clearly demonstrate that the AO indeed had tangible material having a live link to the reasons to believe for arriving at a prima facie opinion that the income has escaped assessment. We find that the PCIT has recorded her satisfaction after clearly applying her mind on the reasons recorded by the AO before giving approval. The approval, reproduced as above, amply demonstrate that the PCIT has examined the reasons recorded by the AO, agreed and was satisfied with the views of the AO for issuance of notice u/s 148. We therefore hold that the approval u/s 151(2) was not granted mechanically but was accorded after careful thought. We are of considered view that the approval u/s 151(2) was properly granted, and there was reason to believe on the basis of prima facie tangible materials on record leading to the conclusion that the assumption of jurisdiction by the AO u/s 148 is valid and legally permissible. Accordingly, the Ground No. 1 is dismissed. Addition u/s 69 - Assessee has duly explained the source of his share of the investment made in the property purchased. As far as the veracity of unsecured loan taken by the wife of the assessee and amount received on account of jewellery is concerned the same may be decided at appropriate time in appropriate case as the neither the AO nor the CIT(A) has examined/ adjudicated on this issue. We therefore direct the AO to delete the addition on account of unexplained investment made u/s 69.

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• 2024 (12) TMI 251
  Penalty u/s. 271(1)(b) - failure to comply with the notice u/s 142(1) - HELD THAT:- Every non-compliance to notice u/s 142(1) give a separate cause of action for levying penalty u/s 271(1)(b) and there has to be a specific initiation and issuance of notice u/s 271(1)(b) for each non compliance, and the assessee is to be put to notice for the same. Thus, initiating penalty proceedings u/s 271(1)(b) for non compliance to notice u/s 142(1) and levying penalty u/s 271(1)(b) for non compliance to notice u/s 142(1) is itself not correct. AO issued only one notice u/s 271(1)(b) which the assessee has claimed that it was never received by him, and the AO imposed penalty ex-parte u/s 271(1)(b) vide penalty order and hence principles of natural justice are clearly breached and the assessee is condemned un-heard by the AO. It is observed that the ld. CIT(A) did not verify the contentions and explanations submitted by the assessee wrt to non compliances to the notices issued u/s 271(1)(b), and the appeal of the assessee was dismissed by ld. CIT(A). CIT(A) did not even called for assessment records nor called for records from the AO wrt penalty levied u/s 271(1)(b), and dismissed the appeal of the assessee, without verifying the contentions and explanations of the assessee. CIT(A) did not specify as to non-compliance of which of the notices u/s 142(1), the ld. CIT(A) is upholding the penalty. It is well settled that power of CIT(A) are co-terminus with the powers of the AO. As assessee has given reasonable explanation for not attending the hearing before the AO and keeping in view the provisions of section 273B read with section 271(1)(b) of the Act, accept the contentions of the assessee and delete penalty.

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• 2024 (12) TMI 250
  Admissibility of appeal without filing a return or paying advance tax - assessee has not filed return of income and has not deposited an amount equal to the amount of advance tax which was payable by it - Addition u/s 69A - HELD THAT:- Section 249(4)(b) clearly stipulates that no appeal shall be admitted by ld. CIT(Appeals) unless at the time of filing of appeal where in the cases no return has been filed by the assessee, the assessee has paid an amount equal to the amount of advance tax which was payable by him. There is proviso which clearly stipulates that in a case falling under clause (b) and on an application made by the appellant in this behalf, the Joint Commissioner (Appeals) or the Commissioner (Appeals) may, for any good and sufficient reason to be recorded in writing, exempt him from the operation of the provisions of said clause. CIT(A) dismissed the appeal as unadmitted as the assessee has not filed return of income and also the assessee has also not paid an amount equal to the amount of advance tax which was payable by her. The assessee has claimed that the amount deposited in cash in her bank account represents old recoveries from the farmers/villagers and there is no income during the year under consideration, as the assessee has shifted to USA and the business has been closed down since 2014. In any case, on perusal of the assessment order, it is clearly discernible that there is no admitted income by the assessee and the addition as was made by the Assessing Officer which is also the assessed income in the hands of the assessee, is subject matter of dispute and challenge by the assessee before the ld. CIT(Appeals) as well as before Tribunal. Thus, the assessee has never admitted this addition to be her income, and under these circumstances, there is no advance tax liability arising on such disputed income keeping in view the claim of the assessee that she was not having any other income in India except that there was interest income which was below matter. In any case, the AO has not brought to tax any income apart from this addition on account of cash deposits in the bank account. Thus, so far as maintainability of appeal before ld. CIT(A) is concerned, we do not find that in such circumstances the appeal will not be maintainable because entire additions as were made by the AO is subject to dispute and challenge before higher appellate authorities, and that the assessee does not have other income which is above the threshold limit of being taxable, as is emerging from records. Assessee has duly explained with sufficient and reasonable cause that the provisions of section 249(4)(b) is not applicable. Moreover, the proviso also provides that when there is good and sufficient reasons then appeal can still be admitted and the CIT(Appeals) can exempt from operation of the provisions of that clause. See case of Vishnusharan Chandravansh[ 2024 (6) TMI 238 - ITAT RAIPUR] Thus, direct the ld. CIT(Appeals) to admit the appeal of the assessee and thereafter adjudicate the same on merits in accordance with law after providing opportunity to both the parties. The appeal of the assessee is partly allowed for statistical purposes.

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• 2024 (12) TMI 249
  Reopening of assessment u/s 147 - estimation of income on bogus purchases - HELD THAT:- Last part of the proviso, i.e. assessee fails to disclose fully and truly all material facts necessary for his assessment is important and the same is applicable on the facts of the assessee because the sundry creditors appearing in the books were examined by the AO in the assessment proceedings for A.Y. 2008-09 and the assessee did not furnish the requisite information asked by the AO about the addresses of the vendors. AO deputed Inspector to make the verification and then it was revealed that 7 out of 8 vendors/sundry creditors refused to have any transaction with the assessee. This information indicated that purchases of the assessee are prima-facie not genuine to the extent it has been claimed in the income-tax return. This information in my considered view was sufficient for the AO to have initiated the reassessment proceedings for the year which has already been assessed u/s. 143(3) of the Act since the material information was not disclosed correctly and truly by the assessee. Therefore, no interference is called for in the findings of the ld. CIT(A) dismissing the assessee s legal ground challenging the validity of reopening proceedings u/s. 147. Disallowances made by the AO @10% of the total purchases - Net Profit rate declared by the assessee for A.Y.2007-08 and A.Y. 2009-10 is 1.98% and 2.28% respectively. However, in order to end the litigation, we deem it proper to estimate the net profit rate of 3.5% on the gross sales declared by the assessee for the year under consideration and the amount calculated over and above the net profit declared in the audited profit and loss account would be sustained as an addition in the hands of assessee. To bring clarity, for A.Y. 2007-08 on the gross sales of Rs. 2,71,55,215/-, net profit @3.5% would amount to Rs. 9,40,432/- and the net profit declared by the assessee in the profit and loss account is Rs. 5,37,096/-. So the difference of the amount, i.e. Rs. 4,12,336/- is sustained as an addition for A.Y. 2007-08. So far as A.Y. 2009-10, 3.5% of gross sales of Rs. 4,12,60,323/- comes to Rs. 14,44,111/- and the net profit declared by the assessee in the profit and loss account is Rs. 9,41,225/- and therefore difference of Rs. 5,02,886/- is the addition sustained in the hands of assessee for A.Y.2009- 10. Appeals of the assessee are partly allowed.

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• 2024 (12) TMI 248
  Disallowance u/s 14A - expenditure attributable to the exempt income in respect of profits earned by the assessee from investments - HELD THAT:- We hold that the suo-moto disallowance made by assessee u/s. 14A of the Act is reasonable. Learned assessing officer is directed to restrict the disallowances to that extent only. The aforesaid first point is determined in favour of the assessee and against the revenue accordingly. Disallowance u/s 14A added in the book profit of the assessee u/s. 115JB for the purpose of Minimum Alternate Tax (MAT) liability - In view of the decisions rendered by special bench in Vireet [ 2017 (6) TMI 1124 - ITAT DELHI] and Radha Madhav [ 2018 (7) TMI 1849 - ITAT MUMBAI] we hold that the adjustment of disallowance u/s.14A of the Act r/w rule 8D of the IT rules, was not required to be made in the book profit for MAT liability by resorting to section 115JB of the Act. Disallowance to Investors Service Fund (ISF), which is 20% of the listing fees received for Investors Service Fund (ISF) - HELD THAT:- SEBI s circular depicts the manner in which such funds are to be utilized primarily for the promotion of investor education and investor awareness programme. Through seminars, lectures, workshops, publications, training programmes, etc. for enhancing securities market literacy. According to this circular, in case the assessee company is wound up or derecognized, than the balance in the above fund lying unutilized could be transferred to the similar funds of SEBI. CIT(A) has thus rightly held that the contribution and utilization of the funds is mandatory for aforesaid purposes, which are directly related to the business activity of the appellant, hence allowable u/s. 37(1) - Decided in favour of the assessee. Disallowance of club entrance fees and subscriptions - Addition made as such expenses are not specified or clarified to be linked with assessee s business activities and further on the basis, that the appellant s auditor has qualified such expenses as being personal in nature - HELD THAT:- CIT(A) has rightly observed that learned assessing officer has failed to bring on record any instance which could indicate that the subscriptions to the aforesaid clubs were meant for personal purposes of directors or shareholder of the appellants company. Further, that the auditors of the appellant did not report this amount in the column of personal expense in form 3CD of report but the prescribed column of expenses on club etc, which is only for the reporting purposes. CIT(A) has thus rightly deleted the aforesaid additions. - Decided in favour of the assessee

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• 2024 (12) TMI 247
  TDS u/s 194A - Assessee in default for non-deduction of TDS - interest paid on loan from group entities - As argued payment are in nature of reimbursement and therefore not liable for deduction of TDS - HELD THAT:- From the records, we noticed that the assessee has submitted relevant documents to prove that the payment of interest is a reimbursement in nature. As per the language used by the Parliament in section 194A what is contemplated is the interest in the form of income . In the present case the argument of the assessee is that it is only reimbursement of the interest payment in respect of the funds utilized by the assessee towards borrowing facility of it s group entities. As per the facts on record the assessee-company is a sister concern of Ruparel Realty Group . The assessee-company borrowed a sum of money from its group entities which is repayable on demand. The same is evident from the presentation in the Balance Sheet of the period under consideration. In the balance sheet for year ending 31.03.2016,note no.6 under the head short-term borrowings the Loans repayable on demand from the group companies is disclosed. In the interim period group companies has advanced a loan as Short Term Loan Advances under Current Assets of same amount. From the above evidence, it can safely be concluded that the assessee-company was enjoying borrowing facilities from the bank through it s group entity companies and the funds have been advanced to the assessee. As per the contention of the assessee to the extent of the funds utilized in respect of bank borrowing in the name of the group entity companies, the interest cost is reimbursed. In fact, the assessee is paying only the interest to the bank but itis through the group entity companies. The group entity companies is not in lending business. From the Balance Sheet of the assessee it has been observed that the assessee has shown the loan amount in the name of the group entity companies. If the credit limit has not been not transferred in the name of the assessee but the credit facility is being enjoyed by the assessee through the group entity companies, then in such a situation the assessee cannot directly show the name of the bank but liability has to be shown on the name of the group entity companies. Assessee is under no statutory obligation to deduct the tax at source under section194A.Consequently, the interest payable for failure to deduct TDS under section 201(1A) of the Act does not arise. Therefore, the ground of appeal taken by the assessee is allowed

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• 2024 (12) TMI 246
  Assessment u/s 153C v/s 147 - information has been received from the investigation wing on the basis of which assessment was sought to be reopened - search material of a third party is sought to be used against a non-searched person - HELD THAT:- Since the search material found in the course of Shri Anand Kumar Jain and Shri Naresh Kumar Jain stating that the transactions carried out by the assessee are to be construed as accommodation entries is sought to be used against the assessee herein in the present reopened proceedings, any proceeding against the assessee using such information could be proceeded only under section 153C. Whereas, in the instant case, based on the information received from the investigation wing, the assessment of the assessee for assessment year 2013-14 was sought to be reopened by AO u/s 147. Now, when the search material of a third party is sought to be used against a non-searched person, then the right recourse available to the revenue would be to proceed only u/s 153C of the Act and not under section 147 of the Act. This issue is no longer res integra in view of the decision of this tribunal in the case of ACIT vs Shri Deepak Gambhir [ 2024 (7) TMI 1560 - ITAT DELHI] wherein held if search material incriminating material found during the course of search from third party which pertains to assessee herein, the right course of action to be initiated on the assessee qua such incriminating material would be initiation of proceedings u/s 153C of the Act and not u/s 147 Admittedly, the assessment in this case was made by the Learned AO under section 147 by treating the sum as unexplained cash credit under section 68 of the Act by using the search material received in the case of Shri Anand Kumar Jain and Shri Naresh Kumar Jain treating it as accommodation entry. Hence, the ratio decidendi laid down in the aforesaid cases would squarely be applicable to the facts of the instant case - we hold that the reassessment proceedings u/s 147 of the Act are to be declared void ab initio and liable to be quashed. Assessee appeal allowed.

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• 2024 (12) TMI 245
  Addition u/s 56(2)(vii)(b) - difference in purchase price of flat shown in the documents as compared to market value - HELD THAT:- Section 56(2)(vii)(b) of the Act is applicable in the circumstances of this case as difference in purchase price of flat shown in the documents is more than the market value exceeding Rs. 50,000/-.The appellant did not mention any reason for the difference between the price mentioned in the document and market value before the AO or the Ld. CIT(A) or ITAT. Appellant s simple argument that the section is not applicable without giving any reason in the grounds of appeal is not tenable. Additional ground of appeal stating that CBDT instructions forbid the Ld. AO from exceeding the purview of reasons mentioned in the CASS to make any addition - This additional ground of appeal is entertained and adjudicated against the appellant because the Ld. DR has shown in paragraph 2 of the assessment order that one of the scrutiny reason is whether investment and income in property is properly disclosed and hence the appellant cannot dispute the issue on this technical ground. In our considered view also, the issue is covered under CASS, and hence the Ld. AO is empowered to adjudicate this issue in limited scrutiny and the reliance placed by Ld. AR of the appellant on CBDT Instruction No. 20/2015 dated 29.12.2015 is not applicable in the present case. This section comes into play in case of an individual receives an immovable property for a consideration which is having difference of more than Rs. 50,000/- compared to the stamp value thereof. Hence, the addition made by the Ld. AO in this regard is correct and upheld.

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• 2024 (12) TMI 244
  Mistake apparent from record u/s 254(2) - loss which mentioned in the seized documents has to be entertained by the AO while framing assessment order u/s 143(3) r.w.s. 153A of the Act, however, he failed to do so - As submitted if the assessing officer, takes into account the undisclosed income, to tax, in the hands of the assessee, as per seized material, then undisclosed loss, as per seized material, should be considered and benefit of set-off of losses, should be given to the assessee, however, the assessing officer, failed to do so HELD THAT:- We find that undisclosed income and undisclosed losses, both were not shown by the assessee, in the return of income, filed by the assessee, in response to notice u/s 153A of the Act, therefore, either the assessing officer should ignore both the items or should consider both the items, to compute the tax liability of the assessee, as per seized material. The Income as well as losses , both were undisclosed, as seized material, however, the assessing officer has taken into account to tax the undisclosed income and ignored the undisclosed losses, which is not acceptable. It is a common knowledge that seized material must be read as a whole, that is, every part of the seized material must be constructed within the four corners of the Act. When the undisclosed income has been taken from seized material, then why not the undisclosed losses should not be taken from the seized material. Apple to Apple comparison is needed, which is required, as per the principle of equity and justice. No any seized material should be interpreted in isolation, if the assessing officer, takes the undisclosed income from seized material, then he has to take into account the undisclosed losses from the same seized material, and benefit of set-off of losses, should be given to the assessee, on account of undisclosed losses, which the assessing officer has failed to do so. We are of the view that every part of the seized material, must be analyzed, within the four corners of the Act, when the undisclosed income is considered by the assessing officer, based on the seized material, then assessing officer ought to have considered, the undisclosed losses, based on the same seized material. In fact, even if an assessee inadvertently failed to claim any legitimate claim, the revenue has to correct it and due tax has to be collected. In this regard in the case of S.R. Koshti vs. CIT [ 2004 (12) TMI 62 - GUJARAT HIGH COURT ] has held that the authorities under Income Tax Act, 1961 are under an obligation to act in accordance with law. Tax can be collected only as provided under the Act. If an assessee under a mistake, misconception or not being properly instructed is over assessed, the authorities under the Act are required to assist him and assure that only legitimate taxes due are collected . As we have noted that any document has to be taken as a whole and the Assessing Officer should not pick and choose those parts of the impounded/seized material which suits him and totally rejected those parts of the same document which are in support of the assessee. Therefore, either the Assessing Officer should not rely on such impounded/seized material, at all, or if he uses these documents as evidences against the assessee, then he should read it as a whole and also accept those parts of the documents which support the assessee. One Cannot be permitted to blow hot and cold in the same steam. Head I win and tail you lose , approach is alien to the principles of justice. There cannot be approval and rejection in the same steam. To attempt to take advantage of one part and to reject the rest, is against the fine norms of jurisprudence Considering these facts, we are of the view that there is a mistake apparent from record in non-consideration of these facts, and non-consideration of a decision of the Supreme Court, which can be said to be a mistake apparent from the record . Therefore, we direct the assessing officer to allow undisclosed loss of immediately preceding year, to be set- off against the undisclosed income for the impugned year Miscellaneous application is allowed.

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• 2024 (12) TMI 243
  Penalty levied u/s 271(1)(c) - M.A seeking rectification of the order previously passed by ITAT u/s 254(2) - HELD THAT:- Apparently, this is ot permissible. The M.A. u/s 254(2) of the Act does not lie against the order already passed u/s 254(2) of the Act. It is only an order passed u/s 254(1) of the Act which can be subject matter of rectification u/s 254(2) of the Act. This view is supportable the plain language of the Act as well as various judicial precedents including the Pr. CIT vs Smt. Alpana Bhartia [ 2019 (4) TMI 1035 - KARNATAKA HIGH COURT] and other judgements cited on behalf of the assessee. M.A. filed by the Revenue is dismissed in limine.

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• 2024 (12) TMI 242
  Assessment u/s 153C - Transfer Pricing Adjustments - Whether payment towards equipment purchase was not at arms length price? - HELD THAT:- We note that the entire basis of the present appeals is the transfer pricing orders wherein downward adjustments were made to the price paid for the equipment imported by the AE. The Assessee had filed an appeal to this Tribunal against the appellate order for Assessment Year 2013-14 (arising from the assessment under Section 143(3) and the TPO order). This appeal was disposed in RKM POWERGEN PRIVATE LIMITED [ 2024 (3) TMI 878 - ITAT CHENNAI ] wherein the downward adjustment was deleted in its entirety. This Tribunal, had after careful appraisal of the evidence, concluded that the price paid by the Assessee was at arm s length. Thus, addition u/s. 56(1) made by the AO based on the TP order alone cannot stand in the eyes of law. As observed that the assessment for Assessment Years 2013-14 and 2014-15 were originally concluded u/s. 143(3) on 31.3.2017 and 21.12.2016 respectively. The date of the search is 23.11.2015. The dates of the TP orders for Assessment Years 2013-14 and 2014-15 are 01.02.2017 and 20.12.2018 respectively, well after the search. Therefore, any assessments under Sections 153A/153C in respect of unabated assessments must be based on incriminating materials obtained during search proceeding and not based on post-search materials, in this case TP orders passed subsequent to search materials. Further, in respect of assessments under Section 153C the same principle was reiterated in DCIT v U.K. Paints Ltd. [ 2023 (5) TMI 373 - SC ORDER ] Even earlier held in PCIT v Vikas Telecom Ltd. [ 2021 (12) TMI 1386 - DELHI HIGH COURT ] had held that post-search enquiries cannot be the basis of assessments under Section 153A/153C. Therefore, the reliance placed by the AO on the TP orders passed after the search cannot be countenanced. We also accept the assesse s submissions that an Assessing Officer should not step into the shoes of a businessman to decide what should be the right price for issue of shares. This principle has been stated in several cases by the Hon ble Supreme Court of India, and cited by the AR. It has been repeatedly held by the Supreme Court in a number of cases that it was not open to the Assessing Officer to substitute his judgement over that of the businessmen. Moreover, in this case, the share premium was an international transaction with an associated enterprise that was duly reported in Form 3CEB and was referred to the TPO, who had not found any fault with the share premia. Therefore, it was not open to the Assessing Officer to hold that share premia was unduly inflated. Addition made u/s 56(1) being income from other sources of the assessee - Applicability of Section 56(1), which is a residual section to tax incomes that are not chargeable under other heads (Salaries, House Property, Business) and not a deeming provision to assess to tax receipts that are not income. Hence, Section 56(1) cannot be resorted to assess a receipt that does not constitute income. This proposition has been upheld by the hon ble Supreme Court of India in CIT v D P Sandu Bros. [ 2005 (1) TMI 13 - SUPREME COURT ], where the Assessing Officer attempted to tax under Section 56 what could not be assessed under Section 45. Section 56(1) cannot be invoked since for it to apply a receipt should be income whereas share premia is capital in nature as held in Vodafone India Services Private Limited [ 2014 (10) TMI 278 - BOMBAY HIGH COURT ] The matter is now beyond any dispute because after the decision of Vodafone India case, the CBDT issued an instruction No 2 of 2015 noting that the Court had held that share premium was a capital account transaction that does not give rise to income and that the Board had accepted the said decision and directed that all field officers should adhere to the ratio decidendi of this judgement. This Instruction is binding on the Assessing Officer under Section 119 of the Act, as per the decision of the Hon ble Apex court in the case UCO Bank [ 1999 (5) TMI 3 - SUPREME COURT ] Therefore the action of the learned CIT Appeals in applying the CBDT Instruction to delete the addition cannot be faulted. Thus, the action of the ld.CIT(A) in deleting the additions made by the AO u/s. 56(1) on account of share premium at Rs. 240/- per share collected by the assessee through allotment of shares to the non-resident companies is upheld by dismissing the grounds of appeal of the revenue for both the assessment years 2013-14 and 2014-15.

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• 2024 (12) TMI 241
  Addition u/s 68 - unexplained cash credit - amount was receivable from sundry debtors - HELD THAT:- The money was advanced against the pawning security and the same was realised in the year under consideration. Assessee has already offered the interest arising out of those advances in the year when the advances were given. Even that aspect of the matter has not been disputed before us by either party. Thus, when the assessee has demonstrated that she has given advances against the security in the earlier year that source is not disputed even the interest earned on that is not disputed. Now when these money received back the same cannot be considered as unexplained money within the meaning of section 68. As the money so received in the year under consideration is on account of opening balance of the advances of the earlier year and the same cannot be considered as income of the current year merely on the reasons that the assessee failed to give the complete details of the pawning debtors outstanding as on 31.03.2015. We do not find any single reason to sustain the addition in the hands of the assessee and we direct the ld. AO to delete that addition. Ground No. 1 raised by the assessee is allowed.

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• 2024 (12) TMI 240
  Validity of the jurisdiction of AO to legally usurp the jurisdiction u/s. 153C against a third party who has not been searched as well as to test - whether AO satisfied the condition-precedent before issue of notice u/s. 153A read with Section 153C? - HELD THAT:- As relying in Sinhgad Technical Education Society s case [ 2015 (4) TMI 190 - BOMBAY HIGH COURT] we hold that the satisfaction note prepared by the AO does not satisfy the requirement of law as stipulated u/s. 153C of the Act, as the relevant seized material did not pertain to the appellant nor did it contain anything incriminating against the appellant. Accordingly, the notice issued under section 153C of the Act without satisfying the condition precedent as discussed is legally unsustainable, and therefore, the very assumption of jurisdiction u/s 153C of the Act, in these AYs 2014-15 2016-17 are held to be bad in law and hence the consequent impugned assessment orders are null in the eyes of law. Addition/s impugned in unabated AYs 2014-15 2016-17 were not based on any incriminating material found in the course of search and therefore has urged that the same be deleted - It is by now well settled position in law that, in unabated assessments u/s 153C of the Act, the AO is empowered to only make those additions which are based on incriminating material found/unearthed during search. In support of this proposition, we gainfully refer to the decision of the Hon ble Supreme Court in the case of Abhisar Buildwell (P.) Ltd. [ 2023 (4) TMI 1056 - SUPREME COURT] . As noted that in the case of DCIT vs U.K. Paints (Overseas) Limited [ 2023 (5) TMI 373 - SC ORDER] has held that, in absence of any incriminating material which was found from the premise of the Searched party (i.e., searched person), no addition/s is permissible in an unabated assessment u/s 153C of the assessee (other person). Thus we hold that in the case of unabated assessments of an assessee, no addition is permissible in the order u/s 153C of the Act unless it is based on any incriminating material found during the course of search. Whether the addition/s made u/s 56(2)(vii)(b) in the orders impugned in this appeal was based on or made with reference to any incriminating document found in the course of search? - There was no incriminating material/statement found in the course of search on the basis of which additions u/s 56(2)(vii)(b) of the Act could have been legally made in the unabated AYs 2014-15 and AY 2016-17. We accordingly direct the AO to delete the impugned addition/s made u/s. 56(2)(vii)(b) of the Act in the unabated AYs 2014-15 2016-17.

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• 2024 (12) TMI 239
  Addition u/s 69 - unexplained investment - PDCs are issued against the cash payment made by the assessee for acquiring different properties/spaces in the projects - HELD THAT:- As recorded by the CIT(A), is not rebutted by the Revenue by bringing any contrary material on record. The law is well settled that the addition made on the basis of conjectures cannot be sustained in the eye of law. CIT(Appeals) has rightly followed the decision of the co-ordinate Bench [ 2013 (10) TMI 974 - ITAT AHMEDABAD] that no addition can be made purely on the basis of post-dated cheques. In the case in hand impugned addition has been made on the basis of the post dated cheques recovered from the possession of the assessee. The explanation offered by the assessee is not controverted by the AO. AO has failed to establish any link of post dated cheques with undisclosed income of the assessee. In the absence of such nexus or link it cannot be construed that such cheques related to some unexplained income of the assessee. Therefore, we do not see any infirmity into the finding on fact recorded by the CIT(Appeals). The same is hereby upheld. The grievance raised by the Revenue lacks merit, hence dismissed.

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• Benami Property

• 2024 (12) TMI 238
  Benami transactions for the cash - Orders for attachment of the property - benamidars appellant before this Tribunal were holding the cash on trust under fiduciary capacity - on what cases the property held by someone else on trust can be taken to be under fiduciary capacity? HELD THAT:- The evidence available on record proves it because the money was channelized through shell companies and for that the accounts were opened so that cash amount of demonetized currency can be deposited in the account and thereupon, through banking channels, it is transferred so as to make it monetized money. The purpose aforesaid is apparent and cannot be accepted that the appellant Nitin Gupta has given the currency notes to three others under trust rather it was for purpose of getting it converted to monetize, thus we do not find that the case in hand would fall under one of exception to section 2(9)(A) of the Act of 1988 and therefore, the judgment of Tribunal in Sivashankari Anr [ 2024 (9) TMI 130 - APPELLATE TRIBUNAL UNDER SAFEMA AT NEW DELHI] and so as the judgment of the Apex court in the case of Sri Marcel Martins (supra) would have no application. In those cases, the property was given to others on trust and not for its use for illegal purpose or any other purpose and therefore, it was found to be a simple case of passing of the property to keep it in fiduciary capacity which is not the case in hand. Thus, we are unable to accept the first argument raised by the counsel for the appellant. Notice was served to Nitin Gupta u/s 24(1) of the Act of 1988 treating him to be benamidar of the cash recovered from Mohit Garg, Raj Kumar Sharma and Devendra Kumar Jha - As at the time of issuance of the notice, the IO had relied on the material available on record at the relevant time. However, during the course of adjudication, there was change in the statement of appellant Nitin Gupta and accordingly the order was passed holding him to be the beneficial owner. The appellant Nitin Gupta in his statement dated 26.09.2018 u/s 19(1)(b) of the Act of 1988 stated that he has made a declaration of his income under the Pradhan Mantri Garib Kalyan Yojana, 2016. The appellant Nitin Gupta thus, changed his stand and stated that the money was belonging to him. In view of the changed stand and the plea raised before the Adjudicating Authority, he was transformed from benamidar to beneficial owner. The appellant is trying to seek benefit of his own default of change in his version and accordingly for that reason also, we are unable to accept the second ground raised by the appellant. Case of the appellant is that demonetized money had no fair market value and thus, could not have been termed to be property - We find no force in the argument because the currency notes of 1000 and 500 were demonetized by the Government of India but with the permission to tender the notes for getting monetized money. The period for it was given and thereby, the demonetized money could have been used for getting it to be monetized. The time was extended by the RBI and if aforesaid is taken into consideration with the date of search and seizure, it would become clear that on the date of search and seizure the demonetized money could have been converted into monetized with its deposit in the bank and could have been by way of tender. It was thus a property with its fair market value. Thus, we are unable to accept the argument of the counsel for the appellant that demonetized money was not having fair market value at the time of its seizure and accordingly even the third argument is rejected. Finding recorded by the IO going contrary to record - The argument was made by the appellant referring to record but we do not find, that the finding recorded by the IO and ultimately by the Adjudicating Authority is contrary to record. In fact IO, caused investigation/inquiry and what was found in the inquiry has been recorded. At the initial stage, appellant Nitin Gupta did not accept the currency notes to be belonging to him rather he disowned the ownership of the currency notes. Accordingly, the case was taken up for causing show cause notice but during the course of adjudicating proceedings, the appellant Nitin Gupta came out with a changed stand and claimed ownership of currency notes. Since there was change in version, the case was adjudicated by the Adjudicating Officer as per the material found available with it. In the light of the aforesaid, we are unable to accept even the last argument of the appellant. Appeal fails.

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• Customs

• 2024 (12) TMI 237
  Seeking provisional release of the goods subject to such terms and conditions as imposed by the Single Judge - HELD THAT:- We had already passed an interim order directing provisional release of the goods subject to such terms and conditions as imposed by the Single Judge. The interim order in M/S. ATUL AUTOMATION PVT. LTD. VERSUS COMMISSIONER OF CUSTOMS (PORT) ORS. [ 2024 (12) TMI 180 - SC ORDER] should be made absolute and is ordered accordingly. However, it is made clear that the release of goods shall be subject to final orders to be passed by the Department concerned in the adjudication proceedings under provisions of the Act. The Special Leave Petition is disposed of.

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• 2024 (12) TMI 236
  Time limitation for filing appeal - dismissal of petitioner s appeals against impugned orders on the ground that such appeals were time-barred and instituted even beyond the condonable period in Section 128 of the Customs Act - HELD THAT:- Hon ble Supreme Court in the case of Assistant Commissioner (CT) LTU, Kakinada Ors. vs. M/s Glaxo Smith Kline Consumer Health Care Limited [ 2020 (5) TMI 149 - SUPREME COURT] , held that when a right of liability is created under statute by creating a special mechanism for enforcing duty, ordinarily, it is a remedy provided under the statute that must be availed of. The High Court should not normally permit the Petitioner to bypass mechanisms provided under the statute. The Hon ble Supreme Court also held that delay cannot be condoned beyond the maximum condonable period provided under the statute. The Court held that where complete mechanism is provided under the act for challenging assessment orders, that mechanism alone must be followed. A Writ Petition is not maintainable so as to defeat the statutory scheme. Delays beyond the aggregate period prescribed, as the maximum condonable period, cannot be condoned by exercising powers under Article 142 or 226 of the Constitution. Nor can such delay be condoned by invoking Section 5 of the Limitation Act, 1963. The Hon ble Supreme Court made it clear that a party may have an arguable case on merits, but that can have no bearing on the justification for non-filing of the appeal within the statutory period. The Hon ble Supreme Court did not approve the High Court going into the merits of the matter or holding the writ should be entertained because the party had an arguable case, despite the statutory appeal being time-barred. The Court emphasised that when a complete appellate mechanism is provided under the statute, including a maximum period of limitation, writ jurisdiction cannot be exercised to undermine the statutory regime. The ratio of the above decision squarely applies to the facts of the present case; based on these, no case is made to entertain this petition - this petition not entertained.

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• 2024 (12) TMI 235
  Violation of principles of natural justice - petitioner was not heard before the impugned order was passed - HELD THAT:- The impugned order appears to have been passed in violation of the principles of natural justice and hence, it is liable to be quashed. The case is remitted back to the 1st respondent, for passing fresh orders. The petitioner shall positively appear before the 1st respondent, for personal hearing on 09.12.2024 and make his submissions. Thereafter, the 1st respondent shall pass orders afresh, within a period of three months from the date of receipt of a copy of this order. Petition disposed off by way of remand.

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• 2024 (12) TMI 234
  Challenge to confiscation of the gold - smuggling - carrying gold bar/biscuits of foreign origin - prayer for waiver of the penalties imposed - burden to prove - HELD THAT:- It is observed that the seized goods were bearing foreign markings and having a purity of 99.90%. Gold with a foreign marking and having 99.90% purity, is a notified item listed under Section 123 of the Customs Act and accordingly, the burden of proving that it is not smuggled gold lies on the person who claims ownership of the gold. In this case, it is found that the Appellant Nos. 1, 2 and 3 have claimed ownership of the gold and hence, it is their responsibility to establish that the gold was not smuggled into India. For this purpose, these Appellants have been asked to produce documents in their possession which indicate licit procurement of the said gold. However, the Appellants have categorically admitted that they were not in possession of any such documents. Therefore, the Appellant Nos. 1 to 3 have not discharged their onus of proving the ownership of the gold in question in terms of Section 123 of the Customs Act. Thus, the adjudicating authority has rightly confiscated the gold under Section 111(b), 111(d) and 111(f) of the Customs Act, 1962. The gold is not a prohibited item. However, its ownership needs to be established by the claimants for seeking release of the gold. In this case, the persons from whom the gold was seized are not having any documents in their possession to claim ownership of the gold and accordingly, the gold cannot be released to them - Regarding the prayer of the appellant for release of the gold on payment of redemption fine, it is observed that the ownership of the gold has not been established. Thus, the gold cannot be released to the appellants. Levy of penalties - HELD THAT:- As the gold in question has been absolutely confiscated, the penalties imposed on these Appellants is high as compared to the value of gold involved and the nature of offence committed in this case. Therefore, considering the roles played by the Appellants, it is observed that the penalties imposed on them are on the higher side and it can be reduced. The penalty imposed on Shri Ashish Kumar Dutta is reduced from Rs.6,25,000/- to Rs.3,50,000/- under Section 112 of the Customs Act, 1962 - penalty imposed on Shri Goutam Saha is reduced from Rs.6,50,000/- to Rs.4,00,000/- under Section 112 of the Customs Act, 1962 - penalty imposed on Shri Ranjit Das is reduced from Rs.5,80,000/- to Rs.2,00,000/-. Appeal disposed off.

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• 2024 (12) TMI 233
  100% EOU - entitlement to benefit of N/N. 52/2003-Cus., dated 31.03.2003 and N/N. 50/2017-Cus., dated 13.06.2017 and N/N. 46/2011- Cus., dated 01.06.2011 - Revenue is of the view that the appellant could not have availed any exemption under notifications other than that provided under Notification No. 52/2003-Cus., which is specially designed for Export Oriented Unit (EOU) - suppression of facts - extended period of limitation - HELD THAT:- N/N. 52/2003-Cus., is a notification which requires the importer to use the goods for the specified purposes and also account for all the goods manufactured out of the goods imported under N/N. 52/2003-Cus. The said notification also requires the appellant to fulfill export obligation the terms of the Exim Policy. The said notification also permits to Export Oriented Units, the import capital goods duty free. The goods cleared from the Export Oriented Units into Domestic Tariff Area are treated as imports and are liable to duty in terms of proviso to Section 3A of the Central Excise Act, 1944. This is done specially to provide Level Playing Field to domestic manufacturers as the export Oriented Units are allowed to import their inputs and capital goods without payment of duty. From the clarifications/circulars CBIC letter dated 09.02.2007 issued from F. No DGEP/EOU/450/2006 dated 09 February, 2007, it is clear that the Revenue has specifically allowed EOU s to avail the benefit of notifications other than Notification No. 52/2003-Cus.. In these circumstances, the stance of commissionerate of Customs is contrary to that of the supervising office i.e. CBIC. Once CBIC allows this concession the field formations cannot deny it. The impugned order is set aside and appeal allowed.

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• 2024 (12) TMI 232
  Inclusion of demurrage charges in the assessable value for payment of Custom Duty - Explanation to Sub-Rule (2) of Rule 10 of the Customs Valuation (Determination of Value of Imports Goods) Rules, 2007 - invocation of extended period of limitation - confirmation of Custom Duty alongwith the interest and penalty - HELD THAT:- The very issue was before the Hon ble Orissa High Court in the case of TATA STEEL LTD. AND ORS. VERSUS UNION OF INDIA AND ORS. [ 2019 (10) TMI 226 - ORISSA HIGH COURT ]. After going through the statutory provisions and the factual details, the Hon ble High Court has held it is well-settled principle of the statute that while 27 interpreting a statute, one has to go by the scope and object of the principal Act. Under the principal Act, while amending it on 10th October, 2007, proviso has included the costs and services, including commissions and brokerage, engineering, design work, royalties and licence fees, costs of transportation to the place of importation, insurance, loading, unloading and handling charges to the extent and in the manner specified in the Rules. The demurrage has not been included as a part of cost envisaged by the legislation. - the issue is squarely covered by the decision of the Hon ble Orissa High Court. The impugned order is set aside - appeal allowed.

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• 2024 (12) TMI 231
  Levy of Anti-Dumping duty - Import of aluminium strip (use in evaporator) (for automotive heat exchanger) - Challenge to affirmation of charging of anti-dumping duty (ADD) under section 9A of Customs Tariff Act, 1975 - HELD THAT:- It is on record that the proper officer did not go beyond re-assessment and, yet, the first appellate authority, notwithstanding the silence thereafter, took it upon itself to offer reasons for adoption of the revised classification which may, or may not, have occurred to the proper officer when the liability to anti-dumping duty (ADD) was brought to bear - The first appellate authority was as bereft, as continued to be, of any material on record, to determine that the exercise of re-assessment conformed to the framework of the notification issued under section 9A of Customs Tariff Act. And just as it would be inappropriate to adjudge free floating attempt at determination on the part of the first appellate authority, it was no less so for the first appellate authority to venture upon a decision on merit of assessment by the original authority. There is a finding, such as it is and without scrutiny of the entry made under section 46 of Customs Act that there was no dissonance with the assessment. That the assessment which emerged was not the claim preferred in the entry and that consent of the importer had not been obtained for such alteration should have been cause for alarm in the first appellate authority. Affirmation of re-assessment without any material to go by invalidates it ab initio. The lack thereof should have prompted the first appellate authority to enforce compliance with consequence of revision. Not having done so invalidates the impugned order. The impugned orders set aside and the bills of entry restored before the original authority for disposal in the manner set out in section 17 of Customs Act - These appeals are allowed by way of remand.

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• Corporate Laws

• 2024 (12) TMI 230
  Professional Misconduct - Section 132(4) of the Companies Act 2013 read with Rule 11(6) of National Financial Reporting Authority Rules 2018 - Failure to plan the audit and understand the nature of the audited entity and its environment as per SA 300 and SA 315 - Failure to verify opening balances required as per SA 510 - Failure to report material misstatement due to non-provisioning of the ECL on trade receivables (Vikas had trade receivables of 171.46 crores in FY 2020-21 which was more than seven times the sales of 23.60 crores) and not charging depreciation on lease hold land and plant machinery - Failure to demonstrate sufficiency and appropriateness of audit work in several critical aspects of the audit of the Financial Statements i.e., determining materiality, failure to report on the entity s ability to continue as a going concern, failure to determine TCWG and communicate with them and failure to assemble the Audit File - Failure to carry out proper audit of Related Party Transactions ( RPTs hereafter) of Vikas (trade payables to related parties were high as 93.09% of total trade payables and trade receivables from related parties were 68.38% of total trade receivable) - Failure to carry out external confirmation for Trade Receivables or any other alternative audit procedure to verify the audit assertions relating to Trade Receivables - Failure of the audit firm to demonstrate compliance with the requirement of the Standards on Auditing concerning the Engagement Quality Control Reviewer - penalty and sanctions. HELD THAT:- The EP committed professional misconduct as defined by clause 5 of Part I of the Second Schedule of the Chartered Accountant Act, 1949 which states that a Chartered Accountant is guilty of professional misconduct when he fails to disclose a material fact known to him which is not disclosed in a financial statement, but disclosure of which is necessary in making such financial statement where he is concerned with that financial statement in a professional capacity . This charge is proved as the EP failed to disclose in his report the material non-compliances by the company. The EP committed professional misconduct as defined by clause 6 of Part I of the Second Schedule of the Chartered Accountant Act, 1949 which states that a Chartered Accountant is guilty of professional misconduct when he fails to report a material misstatement known to him to appear in a financial statement with which he is concerned in a professional capacity . This charge is proved as the EP failed to disclose in his report the material non-compliances by the company. The EP committed professional misconduct as defined by clause 7 of Part I of the Second Schedule of the Chartered Accountant Act, 1949 which states that a Chartered Accountant is guilty of professional misconduct when he does not exercise due diligence or is grossly negligent in the conduct of his professional duties - This charge is proved as the EP failed to exercise due diligence in the audit of the company in accordance with the SAs and applicable regulations. The EP committed professional misconduct as defined by clause 8 of Part I of the Second Schedule of the Chartered Accountant Act, 1949 which states that a Chartered Accountant is guilty of professional misconduct when he fails to obtain sufficient information which is necessary for expression of an opinion, or its exceptions are sufficiently material to negate the expression of an opinion - This charge is proved as the EP failed to conduct the audit in accordance with the SAs and applicable regulations and failed to analyse and report the appropriateness of accounting policy. The EP committed professional misconduct as defined by clause 9 of Part I of the Second Schedule of the Chartered Accountant Act, 1949 which states that a Chartered Accountant is guilty of professional misconduct when he fails to invite attention to any material departure from the generally accepted procedure of audit applicable to the circumstances - This charge is proved since the EP failed to conduct the audit in accordance with the SAs. It is thus concluded that the charges of professional misconduct against the EP (CA Priyank Mittal) and the audit firm (M/s Singh Ajay Co.) enumerated in the SCN dated 18.01.2024 stand proved based on the analysis of the evidence in the Audit File, the Audit Report issued by auditors, the submissions made by auditors, the annual report of Vikas for the FY 2020-21 and other materials available on record. Penalty and sanctions - HELD THAT:- Section 132(4) of the Companies Act, 2013 provides for penalties in a case where professional misconduct is proved. The seriousness with which proven cases of professional misconduct are to be viewed, is evident from the fact that a minimum punishment is laid down by the law - The EP in the present case was required to ensure compliance with SAs to achieve the necessary audit quality and lend credibility to Financial Statements. As explained in this Order, deficiency in the conduct of Audit, abdication of responsibility and inappropriate conclusions on the part of CA Priyank Mittal establish his professional misconduct. Considering the proven professional misconduct, the nature of violations, principles of proportionality and deterrence against future professional misconduct, in exercise of powers under Section 132(4)(c) of the Companies Act, 2013, it is hereby ordered: I. Imposition of a monetary penalty of Rs.3,00,000/- (Three Lakhs) upon the Audit Firm M/s Singh Ajay Co. II. Imposition of a monetary penalty of 2,00,000/- (Two Lakhs) upon CA Priyank Mittal. III. In addition, CA Priyank Mittal is debarred for two years from being appointed as an auditor or internal auditor or from undertaking any audit in respect of financial statements or internal audit of the functions and activities of any company or body corporate.

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• 2024 (12) TMI 229
  Professional misconduct - Failure to plan the audit and understand the entity and its environment - Failure to evaluate the Internal Audit Function - Failure to determine Materiality and Performance Materiality - Failure to report non-provisioning in respect of the Expected Credit Loss - No evaluation of the arm s length pricing for Related Party Transactions - Failure to assemble the Audit File within 60 days of audit completion - Failure to report non-charging of depreciation of leasehold land and plant machinery - Failure to obtain sufficient and appropriate audit evidence through external confirmations - Failure to determine the appointment of Engagement Quality Control Reviewer (EQCR) - Penalty and Sanctions. HELD THAT:- The EP committed professional misconduct as defined by clause 5 of Part I of the Second Schedule of the Chartered Accountant Act, 1949 which states that a Chartered Accountant is guilty of professional misconduct when he fails to disclose a material fact known to him which is not disclosed in a financial statement, but disclosure of which is necessary in making such financial statement where he is concerned with that financial statement in a professional capacity . The EP committed professional misconduct as defined by clause 6 of Part I of the Second Schedule of the Chartered Accountant Act, 1949 which states that a Chartered Accountant is guilty of professional misconduct when he fails to report a material misstatement known to him to appear in a financial statement with which he is concerned in a professional capacity . This charge is proved as the EP failed to disclose in his report the material non-compliances by the company. The EP committed professional misconduct as defined by clause 7 of Part I of the Second Schedule of the Chartered Accountant Act, 1949 which states that a Chartered Accountant is guilty of professional misconduct when he does not exercise due diligence or is grossly negligent in the conduct of his professional duties - This charge is proved as the EP failed to exercise due diligence in the audit of the company in accordance with the SAs and applicable regulations. The EP committed professional misconduct as defined by clause 8 of Part I of the Second Schedule of the Chartered Accountant Act, 1949 which states that a Chartered Accountant is guilty of professional misconduct when he fails to obtain sufficient information which is necessary for expression of an opinion, or its exceptions are sufficiently material to negate the expression of an opinion - This charge is proved as the EP failed to conduct the audit in accordance with the SAs and applicable regulations and failed to analyse and report the appropriateness of accounting policy. The EP committed professional misconduct as defined by clause 9 of Part I of the Second Schedule of the Chartered Accountant Act, 1949 which states that a Chartered Accountant is guilty of professional misconduct when he fails to invite attention to any material departure from the generally accepted procedure of audit applicable to the circumstances - This charge is proved since the EP failed to conduct the audit in accordance with the SAs. The charges of professional misconduct against the EP, as enumerated in the SCN dated 18.01.2024, stand proved based on the evidence in the Audit File, the Audit Report issued by EP, the submissions made by EP, the annual report of Vikas for the FY 2018-19 2019-20 and other materials available on record. Penalty and sanctions - HELD THAT:- Section 132(4) of the Companies Act, 2013 provides for penalties in a case where professional misconduct is proved. The seriousness with which proven cases of professional misconduct are to be viewed, is evident from the fact that a minimum punishment is laid down by the law - The EP in the present case was required to ensure compliance with SAs to achieve the necessary audit quality and lend credibility to Financial Statements of a listed company. As explained in this Order, deficiency in the conduct of Audit, abdication of responsibility and inappropriate conclusions on the part of CA Yogesh Mahipal establish his professional misconduct. Considering the proven professional misconduct, the nature of violations, principles of proportionality and deterrence against future professional misconduct, in exercise of powers under Section 132(4)(c) of the Companies Act, 2013, it is hereby ordered: I. Imposition of a monetary penalty of 2,00,000/- upon CA Yogesh Mahipal; II. Debarment of CA Yogesh Mahipal and the audit firm M/s Yogesh Mahipal Associates (FRN: 030845N), for two years from being appointed as an auditor or internal auditor or from undertaking any audit in respect of financial statements or internal audit of the functions and activities of any company or body corporate.

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• 2024 (12) TMI 228
  Professional misconduct - Legality of the appointment of branch auditors - Compliance with Standards on Auditing (SAs) - Maintenance of proper audit documentation - penalty and sanctions - Section 132(4) of the Companies Act 2013 - HELD THAT:- It is established that CA Krishna Bihari Chaturvedi did not comply with the stipulations in the Chartered Accountants Act, 1949, ICAI Code of Ethics 2009 SAs. The subject matter assignment was accepted and executed as a Statutory Branch Audit. However, CA Krishna Bihari Chaturvedi was grossly negligent in performing his professional duties by not adhering to the requirements laid down by the relevant SAs, despite stating in his audit reports that he had complied with SAs. The following failures on the part of CA Krishna Bihari Chaturvedi as contained in the Articles of Charges in the SCNs are established. a) Failure to comply with the requirements of Clause 2 of Part 1 of Second Schedule to Chartered Accountants Act, 1949 which states a chartered accountant in practice shall be deemed to be guilty of professional misconduct, if he- certifies or submits in his name, or in the name of his firm, a report of an examination of financial statements unless the examination of such statements and the related records has been made by him or by a partner or an employee in his firm or by another chartered accountant in practice , b) Failure to exercise due diligence and being grossly negligent in the conduct of professional duties. c) Failure to obtain sufficient information which is necessary for the expression of an opinion or its exceptions are sufficiently material to negate the expression of an opinion. Thus, it is found that CA Krishna Bihari Chaturvedi committed professional misconduct, as defined in the respective clauses of the CAs Act, the meaning of which is conceived under Section 132 (4) of the Companies Act as amounting to professional misconduct. Penalties and sanctions - HELD THAT:- Section 132(4) of the Companies Act, 2013 provides for penalties in a case where professional misconduct is proved. The law lays down a minimum punishment for such misconduct - despite being a qualified professional, CA Krishna Bihari A Chaturvedi has not adhered to the Standards on Auditing and provisions of the law. Considering the fact that professional misconducts have been proved and considering the nature of violations and principles of proportionality and keeping in mind the deterrence, proportionality, signalling value of the sanctions and time required for improvement in knowledge gaps in exercise of powers under Section 132(4)(c) of the Companies Act, 2013, it is proceeded to order the following sanctions: i. Imposition of a monetary penalty of 1 Lakh upon CA Krishna Bihari Chaturvedi; ii. CA Krishna Bihari Chaturvedi is debarred for One Year from being appointed as an auditor or internal auditor or from undertaking any audit in respect of financial statements or internal audit of the functions and activities of any company or body corporate.

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• 2024 (12) TMI 227
  Professional Misconduct - Acceptance of audit engagement without valid authorization - Failure to comply with Standards on Auditing (SAS) - Section 132(4) of the Companies Act, 2013 - penalty and sanctions - HELD THAT:- It is established that CA Kashinath Chaturvedi did not comply with the stipulations in the Chartered Accountants Act, 1949 regarding the acceptance of the statutory audit engagement and showed gross negligence and lack of due diligence while accepting an invalid appointment as auditor. In addition to accepting a legally invalid appointment, the CA also did not ensure the audit quality. The CA was grossly negligent in performing his professional duties by not adhering to the requirements laid down by the relevant SAs. This has resulted in the issuance of an audit report not backed by valid audit evidence and the absence of quality in the audit work. Specifically, the following failures on the part of CA Kashinath Chaturvedi as contained in the Articles of Charges in the SCN, are established. a) Failure to ascertain from the audited Company whether the requirements of Sections 139 140 of the Act in respect of such appointment had been duly complied with. (As per Section 22 and Clause 9 of Part I of the First Schedule to the CAs Act); b) Failure to exercise due diligence and being grossly negligent in the conduct of professional duties, because of the lapses and omissions. (As per Section 22 and Clause 7 of the Part I of Second Schedule to the CAs Act); It is found that CA Kashinath Chaturvedi committed professional misconduct, as defined in the respective clauses of the CAs Act, the meaning of which is conceived under Section 132 (4) of the Companies Act, 2013 as amounting to professional misconduct. Penalty and sanctions - HELD THAT:- Section 132(4) of the Companies Act, 2013 provides for penalties in a case where professional misconduct is proved. The law lays down a minimum punishment for such misconduct. There were deficiencies in the Audit and abdication of responsibility on the part of CA Kashinath Chaturvedi right from the acceptance of the Audit without due diligence in ascertaining the validity of the offer, which establishes his gross negligence resulting in professional misconduct. In fact, accepting an audit assignment in contravention of the Law and continuing it in non-conformity with the SAs, constitutes a flagrant violation of the Law. It is also concluded that despite being a qualified professional, CA Kashinath Chaturvedi has not adhered to the Standards on Auditing and provisions of the law. Considering the nature of violations and principles of proportionality and keeping in mind the deterrence, proportionality, signalling value of the sanctions and time required for improvement in knowledge gaps, in exercise of powers under Section 132(4)(c) of the Companies Act, 2013, it is ordered to proceed the order with the following sanctions: i. Imposition of a monetary penalty of 1 Lakh upon CA Kashinath Chaturvedi; ii. CA Kashinath Chaturvedi is debarred for One year from being appointed as an auditor or internal auditor or from undertaking any audit in respect of financial statements or internal audit of the functions and activities of any company or body corporate.

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• 2024 (12) TMI 226
  Professional Misconduct - Failure to disclose a material fact known to him which is not disclosed in a financial statement, but disclosure of which is necessary in making such financial statement where the statutory auditors are concerned with that financial statement in a professional capacity - Failure to report a material misstatement known to appear in a financial statement with which the EP is concerned in a professional capacity - Failure to exercise due diligence and being grossly negligent in the conduct of professional duties - Failure to obtain sufficient information which is necessary for the expression of an opinion, or its exceptions are sufficiently material to negate the expressions of an opinion - Failure to invite attention to any material departure from the generally accepted procedures of audit applicable to the circumstances - Failure to accept a position as auditor previously held by another chartered accountant after first communicating with him in writing - Section 132(4) of the Companies Act 2013 - penalty and sanctions. HELD THAT:- M/s Shridhar Associates and the EP CA Ajay Vastani committed professional misconduct as defined by Section 132(4) of the Companies Act, 2013, read with Section 22 and Clause 5 of Part I of the Second Schedule of the Chartered Accountants Act, 1949 (No. 38 of 1949) as amended from time to time, which states that a CA is guilty of professional misconduct when he fails to disclose a material fact known to him which is not disclosed in a financial statement, but disclosure of which is necessary in making such financial statement where he is concerned with that financial statement in a professional capacity - This charge is proved as the Auditors failed to disclose in their report the material non- compliances the Company. M/s Shridhar Associates and CA Ajay Vastani committed professional misconduct as defined by Section 132 (4) of the Companies Act, 2013, read with Section 22 and Clause 6 of Part I of the Second Schedule of the Chartered Accountants Act, 1949 (No. 38 of 1949) as amended from time to time, which states that an Auditor is guilty of professional misconduct when he fails to report a material misstatement known to him to appear in a financial statement with which he is concerned in a professional capacity - This charge is proved as the Auditors failed to disclose in their report the material misstatements made by the Company. M/s Shridhar Associates and CA Ajay Vastani committed professional misconduct as defined by Section 132 (4) of the Companies Act, 2013, read with Section 22 and Clause 7 of Part I of the Second Schedule of the Chartered Accountants Act, 1949 (No. 38 of 1949) as amended from time to time, which states that an Auditor is guilty of professional misconduct when he does not exercise due diligence or is grossly negligent in the conduct of his professional duties - This charge is proved as the Auditors, conducted the Audit of a Public Interest Entity in total disregard of their statutory duties, evidenced by multiple critical omissions and violations of the standards. The instances of failure to conduct the audit in accordance with the SAs and applicable regulations, and failure to report the material misstatements in the financial statements and non-compliances made by the Company. M/s Shridhar Associates and CA Ajay Vastani committed professional misconduct as defined by Section 132 (4) of the Companies Act, 2013, read with Section 22 and Clause 8 of Part I of the Second Schedule of the Chartered Accountants Act, 1949 (No. 38 of 1949) as amended from time to time, which states that an Auditor is guilty of professional misconduct when he fails to obtain sufficient information which is necessary for expression of an opinion or its exceptions are sufficiently material to negate the expression of an opinion - This charge is proved as the Auditors failed to conduct the audit in accordance with the SAs and applicable regulations as well as due to their total failure to report the material misstatements and non-compliances made by the Company in the financial statements. M/s Shridhar Associates and CA Ajay Vastani committed professional misconduct as defined by Section 132 (4) of the Companies Act, 2013, read with Section 22 and Clause 9 of Part I of the Second Schedule of the Chartered Accountants Act, 1949 (No. 38 of 1949) as amended from time to time, which states that an Auditor is guilty of professional misconduct when he fails to invite attention to any material departure from the generally accepted procedure of audit applicable to the circumstances - This charge is proved since the Auditors failed to conduct the audit in accordance with the SAs but falsely reported in their audit report that the audit was conducted as per SAs. M/s Shridhar Associates and CA Ajay Vastani committed professional misconduct as defined by Section 132 (4) of the Companies Act, 2013, read with Section 22 and Clause 8 of Part I of the First Schedule of the Chartered Accountants Act, 1949 (No. 38 of 1949) as amended from time to time, which states that an Auditor is guilty of professional misconduct when he fails to communicate with outgoing Auditor - This charge is proved since the Auditors failed to accept the audit in accordance with the law. It is concluded that the charges of professional misconduct in the SCN, as detailed above, are established based on the evidence in the Audit File, the audit reports on the financial statements for the FY 2018-19 dated 14th August 2019 and the submissions made by the Auditors, and the Annual Report of Reliance Commercial Finance Limited for the FY 2018-19. Penalty and sanctions - HELD THAT:- Section 132 (4) of the Companies Act, 2013 provides for penalties in a case where professional misconduct is proved. The seriousness with which proved cases of professional misconduct are viewed is evident from the fact that a minimum punishment is laid down by the law. Because professional misconduct has been proved and considering the nature of violations and principles of proportionality, in the exercise of powers under Section 132 (4) (c) of the Companies Act, 2013, it is ordered as follows: a. Imposition of a monetary penalty of Rupees Two Crore upon M/s Shridhar Associates. b. Imposition of a monetary penalty of Rupees Fifty Lakhs upon CA Ajay Vastani and in addition, CA Ajay Vastani is debarred for 5 years from being appointed as an auditor or internal auditor or from undertaking any audit in respect of financial statements or internal audit of the functions and activities of any company or body corporate.

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• Insolvency & Bankruptcy

• 2024 (12) TMI 225
  Invocation of bank guarantee and its impact on the claim of the Financial Creditor under Section 53 of the IBC - waterfall mechanism under Section 53 of the IBC - effect of moratorium under Section 14 - HELD THAT:- There is no dispute that irrevocable bank guarantee was issued by the Bank which was independent and separate contract between the parties - It is well settled that the moratorium under Section 14 shall not come in the way of invocation of bank guarantee which is independent and separate contract. In event, the bank guarantee is invoked and any amount is received by Respondent No.1, the claim of Respondent No.1 has to be revised as intimated by the IRP by his email dated 22.12.2022. Recording the aforesaid, we are of the view that there is no error committed by the Adjudicating Authority in allowing the application filed by the Respondent herein. It will be open for the parties to point out order dated 24.07.2024 passed by the Adjudicating Authority in IA No.699/KB/2023. Appeal is dismissed.

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• Service Tax

• 2024 (12) TMI 224
  Non-consideration of petitioner s application filed on 26 December 2019 - petitioner submits that since the petitioner did not receive SVLDRS Form-3 from the respondents, they did not make any payment in the scheme and therefore, the respondents are not justified in not considering the application of the petitioner - HELD THAT:- It is not disputed that the scheme is fully regulated by online mode. The respondents have also not disputed receipt of SVLDRS Form-1. However, the respondent has not produced any evidence, positive or otherwise, to show that SVLDRS Form-3 was intimated to the petitioner online, either by E-mail or otherwise. If the scheme is regulated online, it cannot be accepted that there would be no proof that the respondents issued SVLDRS Form-3 and that the petitioner received it. The petitioner is justified in contending that they could not be called upon to prove negative. Still, on the contrary, the onus lies on the respondents to show that SVLDRS Form-3 was intimated to the petitioner. The respondents were not justified in not considering the petitioner s application filed on 26 December 2019. After February 2020, on account of the pandemic, the petitioner could not approach the respondents. As soon as COVID-19 restrictions were relaxed, they followed up with the respondents sparingly on the issue. Even today, respondents have not produced SVLDRS Form-3. The petitioner is justified in relying upon the decision of this court in the case of M/S. YOUR FITNESS CLUB PVT. LTD. VERSUS THE UNION OF INDIA ORS. [ 2022 (7) TMI 233 - BOMBAY HIGH COURT] which involved similar if not identical facts. This Court directed the petitioner s application therein to be considered by the respondents for the purpose of SVLDRS Scheme - the said decision squarely applies to the facts of the present petition, and therefore, the respondents non-consideration of the petitioner s application is not justified. The respondents are directed to consider the application of the petitioner dated 26 December 2019 within the period of 4 weeks from the date of uploading of the present order and inform the petitioner about the amount payable under the Scheme - Petition allowed.

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• 2024 (12) TMI 223
  Validity of pre-deposits made by the petitioners through their electronic cash ledger - Section 83 of the Finance Act, 1994, read with Section 35 of the Central Excise Act, 1944 - HELD THAT:- The issue raised in these petitions is covered by the decision of the Coordinate Bench in RELIANCE INFRASTRUCTURE LIMITED VERSUS THE UNION OF INDIA AND ORS. [ 2022 (8) TMI 1053 - BOMBAY HIGH COURT] . Ultimately, the record shows that the petitioners made pre-deposits, whether in one form or another. Accepting the respondents hyper-technical contention would only mean that the respondents would have to be directed to refund the amount of pre-deposits made by the petitioners so that the petitioners could once again deposit the same amount to the appeal account. The appellate authority are directed to accept the pre-deposits made as valid pre-deposits and dispose of the petitioners appeal on the merits and in accordance with the law - petition allowed.

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• Central Excise

• 2024 (12) TMI 222
  Refund claim - rejection on the ground that the appellant failed to establish that they reversed cenvat credit availed on common inputs utilised in the manufacture of Sulphur recovery unit - sufficient documentary evidences were not produced - violation of unjust enrichment - HELD THAT:- The refund claim was filed by the appellant subsequent to the decision of this Tribunal in the case of IOC Ltd. [ 2002 (12) TMI 656 - CEGAT, NEW DELHI] , whereby this Tribunal has observed that Sulphur being a by-product emerges during the course of manufacture of final product, cannot be subjected to Rule 6(3)(b) of the Cenvat Credit Rules, 2002 and erstwhile Rule 57CC / 57AD(2)(b) of the Central Excise Rules, 1944. On rejection of the refund claim, the matter reached before this Tribunal and this Tribunal categorically held that refund is admissible to the appellant but remanded the matter to the adjudicating authority to examine the issue of unjust enrichment. Both the authorities below have travelled beyond the scope of the remand order of the Tribunal and both authorities re-examined the admissibility of credit on merit whereas observation of the Tribunal on merit was that 8% of the value of the Sulphur a by-product cannot be collected, which presupposes that proportionate cenvat credit availed on inputs had been reversed; and facts on record revealed that the appellant had reversed credit of Rs.5,27,132/-. No argument was advanced by the Revenue before the Tribunal that the said reversal was not correct. The direction of the Tribunal was that the issue of unjust enrichment be examined before sanctioning the refund. Further, it is found that the refund relates to cenvat credit reversed / paid pursuant to Rule 6(3)(b) of the Cenvat Credit Rules, 2002 and Rule 57CC / 57AD(2)(b) of the Central Excise Rules, 1944 on the Sulphur emerged as by-product - the principles of unjust enrichment could not be made applicable for the payment made under Rule 6(3)(b) of the Cenvat Credit Rules, 2002 and Rule 57CC / 57AD(2)(b) of the Central Excise Rules, 1944. Also on scrutiny of the relevant sample invoices for Sulphur for the period in dispute, it is noticed that the amount of 8% had not been recovered by the appellant from their customers. No contrary evidence has been referred to by the authorities below to rebut the said claim of the appellant. The impugned order is set aside - Appeal allowed.

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• 2024 (12) TMI 221
  Utilisation of CENVAT credit taken on the input service - admissible input services or not - insurance services provided in respect of Mediclaim policy taken for parent of employees by the appellants - levy of penalty under Rule 15(1) of CENVAT Credit Rules, 2004 - HELD THAT:- On plain reading of the provisions of Rule 2(1)(ii) of CCR, 2004, input service means any service used by a provider of output service for providing an output service . In other words, if any output service is provided, services procured for providing such output services will be treated as input service in terms of rule 2 (l)(ii) of CCR,2004. The facts of the case indicate that the appellants had availed the services from the insurance company M/s Bajaj Allianz General Insurance Co. Ltd. and further provided these services to their employees for a consideration inasmuch as the appellants recovered the insurance premium from their employees - In order to render the said services to the employees, the appellants had to use the services from insurance company. Therefore, the services availed by the appellants from insurance company i.e., M/s Bajaj Allianz General Insurance Co. Ltd. for providing the said service ought to be treated as input service and accordingly, the appellants are eligible to avail CENVAT credit paid on such input service in terms of Rule 2 (l)(ii) of the CCR of 2004. The aforesaid issues have been already dealt in detail by the Coordinate Bench of the Tribunal and the present dispute is no more res integra, in view of the decision relied upon by the appellants in the cases of M/S ULTRA TECH CEMENT LTD. VERSUS COMMISSIONER OF CENTRAL TAX TIRUPATI - GST [ 2019 (9) TMI 888 - CESTAT HYDERABAD] . In this case and it has been held that the appellant is required to pay service tax as per the legal provision of Service Tax statute and is entitled to avail credit on input services on the relevant output services. Further, in the cases of M/S. SOUTH INDIAN BANK VERSUS THE COMMISSIONER OF CUSTOMS, CENTRAL EXCISE AND SERVICE TAX-CALICUT [ 2020 (6) TMI 278 - CESTAT BANGALORE - LB] , THE COMMISSIONER OF CENTRAL EXCISE SERVICE TAX CUSTOMS, BANGALORE (ADJUDICATION) , THE COMMISSIONER OF SERVICE TAX VERSUS M/S. PNB METLIFE INDIA INSURANCE CO. LTD. [ 2015 (5) TMI 68 - KARNATAKA HIGH COURT] , the issue in general whether there is a liability to service tax and whether the service tax paid on input service could be eligible to the appellant was decided in their favour in these cases. In view of the settled position of law, the issue arising out of the present dispute is no more open for any debate and as such, the impugned order passed by the learned Commissioner (Appeals) is liable to be set aside - the impugned order dated 12.11.2021 is set aside - the appeal is allowed in favour of the appellants.

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• 2024 (12) TMI 220
  Fraudulent passing on CENVAT credit of duty to various furnace units of Punjab on the strength of their forged excise duty paid invoices - fake purchase of duty paid excisable goods i.e. MS Scrap source manufacturing units/ dealers based in Chattisgarh and Odisha - denial of crossexamination - violation of principle of natural justice - HELD THAT:- The identical issue has been decided by the Hon ble Punjab Haryana High Court in the case of M/S JINDAL DRUGS PVT. LTD. AND ANOTHER VERSUS UNION OF INDIA AND ANOTHER [ 2016 (6) TMI 956 - PUNJAB HARYANA HIGH COURT] as well as by this Tribunal in the case of M/S LAULS LIMITED, SHRI ABHAY GUPTA, DIRECTOR AND SHRI RAM BILAS BANSAL VERSUS COMMISSIONER OF CENTRAL EXCISE, DELHI-IV, FARIDABAD, HARYANA [ 2023 (7) TMI 1113 - CESTAT CHANDIGARH] and M/S TIBREWALA INDUSTRIES (P) LIMITED, SHRI ANIL KUMAR TIBREWALA, DIRECTOR AND M/S R.K. TRADING COMPANY VERSUS COMMISSIONER OF CENTRAL EXCISE AND SERVICE TAX, ROHTAK [ 2023 (7) TMI 1112 - CESTAT CHANDIGARH] wherein it was held that the cross-examination of witnesses whose statements were relied upon by the Revenue to make out a case against the assessee has to be allowed and by following the ratio of the said decisions, the impugned order is not sustainable and therefore, the same is set aside and the cases remanded back to the Adjudicating Authority for a fresh decision after affording opportunity of cross-examination of the material witnesses and by following the procedure as prescribed in Section 9D of the Central Excise Act. The appellants are directed to cooperate with the Adjudicating Authority for a speedy disposal of the case - both the appeals are allowed by way of remand.

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• CST, VAT & Sales Tax

• 2024 (12) TMI 219
  Maintainability of petition - availability of alternative remedy - Attempt to make misleading statements and omitting to make statements that are required in such matters in the context of the availability of alternate remedies - Section 26 of the Maharashtra Value Added Tax Act, 2002 - HELD THAT:- Since the Petitioner is being relegated to avail of the alternate remedy, it is clarified that all contentions of the Petitioner and the Respondents on merits are kept open. At this stage, learned counsel for the Petitioner states that the appeal will be filed within four weeks after paying the costs. Suppose such an appeal is indeed filed within four weeks after complying with all the preconditions required under the law and paying the costs. In that case, the Appellate Authority should entertain the appeal on merits without adverting to the limitation issue. This is because the Petitioner instituted this Petition within the limitation period prescribed for instituting appeal. The Petition is disposed of.

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• 2024 (12) TMI 218
  Challenge to assessment order - wrongful availing of input tax credit - HELD THAT:- A reading of the two counter affidavits and also letter of the petitioner which has been enclosed at Page No.27 seems to indicate that the said letter was sent on 25.12.2014 which accompany an acknowledgement in the Letter Delivery Book which is also dated 25.12.2014. It is highly implausible for the petitioner to have undelivered such a letter on 25.12.2014 as the said date is a holiday it being Christmas day and also highly unlikely an acknowledgement also would not have been given on 25.12.2014 being a holiday. Therefore, prima facie there are indications that there is no truth in the submissions of the petitioner that on 25.12.2014, a letter would have been issued by the petitioner and acknowledged by the respondent in the petitioner s Letter Delivery Book on the same day. Therefore, the challenge to the impugned order on the ground that the petitioner had surrendered the registration under TNVAT Act, 2006 and CST Act, 1956 cannot be accepted. In any event, whether indeed transaction was carried out by the petitioner during the period in dispute in the year 2016-2017 or not is to be verified from the electronic file and IP address which the Department will have in its possession. This Writ Petition is disposed of by directing the respondents to verify as it from which IP address the transactions were made by for filing returns in the name of the petitioner, during the period in dispute which has facilitated wrongful availing of the input tax credit and passing thereof to unscrupulous dealers.

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• 2024 (12) TMI 217
  Recovery of dues of the Company from a deceased director s estate - Request to lift the attachment over the subject property - HELD THAT:- It is not in dispute that the husband of petitioner had resigned on 07.02.2013 and has expired on 11.08.2017 whereas, the recovery proceedings were initiated after the death of the husband of the petitioner in the month of June, 2018. It also emerges from the record that the first recovery notice under Section 152 of the Bombay Land Revenue Code 1879 was issued on 07.08.2018 which is placed on record along with the additional affidavit at page 111 of the petition by the respondent. On perusal of provisions of Sub-Section (3) of Section 53 of the VAT Act read with Section 18 of the CST Act, it is clear that the recovery proceedings can be initiated upon the Director of the Company in liquidation, when the Director proves that non-recovery cannot be attributed to any gross negligence, misfeasance or breach of trust on his part. It is therefore necessary to give an opportunity of hearing to the Director whereas, in the facts of the case, the Director i.e. the husband of the petitioner had expired on 11.08.2017 which is much prior to the issuance of the initiation of the recovery proceedings. Moreover, in case of the C.V. Cherian [ 2012 (3) TMI 372 - GUJARAT HIGH COURT] it is held that As regards the faint plea of lifting the corporate veil, as per the settled legal position, the corporate veil is not to be lifted lightly. It is only when there is strong factual foundation for lifting the corporate veil that the question of examining the applicability of the principle of lifting such veil would be required to be examined. In neither of the two petitions raising the controversy, the authorities have passed any specific order fastening the liability on the Directors personally, much less any factual foundation has been laid to invoke the doctrine of lifting the corporate veil. Hence it is not necessary to dilate on the said principle any further. The impugned recovery proceedings including the order of recovery certificate as well as the order of attachment issued by the respondents-authorities to recover the outstanding dues of the Company in default M/s. Oren Kitchen Appliances Pvt. Ltd. are not sustainable in eye of law and are accordingly quashed and set aside - Petition allowed.

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