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TMI Tax Updates - e-Newsletter December 8, 2023 Case Laws in this Newsletter: GST Income Tax Customs Securities / SEBI Insolvency & Bankruptcy Service Tax Central Excise CST, VAT & Sales Tax Articles COMPOUNDING OF CONTRAVENTION UNDER FEMA -PARA 10 OF SCHEDULE II OF FEMA (DEPOSIT) RULES, 2000 ITC should not be disallowed because of entering the wrong GSTIN number of the recipient in Form GSTR-1 Determination of date of transfer of capital asset before and after AY 2017-18... where two AYs are involved Penalty is to be imposed on the erring Government official for non-compliance with the orders of Tribunal News DPIIT holds meeting with World Bank to showcase initiatives and reforms undertaken to improve India’s Logistics Efficiency Prime Minister Shri Narendra Modi to address the 2nd Edition of IFSCA’s Flagship Event – Infinity Forum 2.0 on December 09, 2023 Notifications DGFT 48/2023 - dated 7-12-2023 - FTP Export of Non-basmati White Rice (under HS Code 10063090) to Comoros, Madagascar, Equatorial Guinea, Egypt and Kenya through National Cooperative Exports Limited (NCEL) 47/2023 - dated 7-12-2023 - FTP Incorporation of Policy Condition for export of Non-basmati rice under HS Code 10063090. SEZ G.S.R. 881(E) - dated 6-12-2023 - SEZ Special Economic Zones (Fifth Amendment) Rules, 2023 - Insert Rule 11 B in Special Economic Zones Rules, 2006 Circulars / Instructions / Orders Customs PUBLIC NOTICE.NO. 46 /2023 - dated 13-11-2023 Declaration of “Container Examination Yard” at Kamarajar Port as “CUSTOMS AREA” under section 8 (b) of the Customs Act, 1962 for handling of both import and export cargo - reg. PUBLIC NOTICE No. 19/2023 - dated 12-10-2023 Seizure and disposal of gold. Highlights / Catch Notes GST Refund of amount deposited by the petitioner during the course of search and inspection - petitioner claims that it was coerced to deposit the aforesaid amount and that the same cannot be considered as a deposit done voluntarily u/s 74(5) of the Central Goods & Services Tax Act, 2017 - The respondents are directed to refund the amount deposited by the petitioner with interest- HC Visit to Get Source Search and seizure - reasons to believe - there are no merit in the petitioner’s contention that the inspection conducted by the central officers were illegal. The provisions of Section 6(2)(b) of the CGST Act do not preclude the central officers from conducting an inspection for concluding an ongoing investigation merely because a prior inspection or search was conducted by the DGST authorities - HC Visit to Get Source Validity of reversal of Input Tax Credit (ITC) during investigation / search proceedings - In the present case, the petitioner has stoutly disputed that the reversal of ITC was voluntary. Undisputedly, the same has been made while the petitioner’s premises were being searched and he was being subjected to questioning / enquiries - it is not difficult to accept that the petitioner may have found the circumstances intimidating and had, accordingly, agreed to reverse the ITC. - Authorities directed to reverse the reversal - HC Visit to Get Source Condonation of delay in filing appeal before the appellate authority - applicability of provisions of section 5 of the Limitation Act, 1963 - Aggregate period beyond 60 days - Section 107 of the Act of 2017 does not exclude the applicability of the Act of 1963 expressly. It does not exclude the applicability of the Act of 1963 impliedly also if one has to consider the provisions of Section 108 of the Act of 2017 which provides for a power of revision to the designated authority, against an order of adjudication. - the period for filling the appeal can be extended by the Appellate Authority. - HC Visit to Get Source Classification of supply - composite supply or mixed supply? - supply of services of coaching to students - The students will only pay for principal supply and anyways are going to receive the student kit. The student kit is part of the package of the coaching services and is not sold separately by the appellant or even by their network/channel partner. It is therefore to be treated as composite supply. - AAAR Visit to Get Source Income Tax Accrual of income - accrue or arise - Although, earning of income is a necessary pre-requisite for accrual of income, mere earning of income without right to receive the same does not suffice. A person may be said to have “earned” his income in the sense that he has contributed to its production by rendering service and the parenthood of the income can be traced to him but in order that the income that may be said to have “accrued” to him an additional element is necessary that he must have created a debt in his favour. The phrase “accrue or arise” has been the subject matter of judicial debate from inception which we now propose to deal with some of them. - HC Visit to Get Source Reopening of assessment u/s 147 - Whether the PCIT applied his mind while granting approval? - Senior officers like ACIT and PCIT are expected to apply their minds to such requests and, only after that, approve the initiation of reassessment proceedings. Several pitfalls that the Court's notice can be avoided if the concerned authorities were to look closely at the request made for re-opening. Clearly, in SIPL’s case, these aspects were not examined by the concerned AO or by the ACIT/PCIT. - HC Visit to Get Source Reopening of assessment - Exemption u/s 47 - In the light of the decision of the Hon’ble Supreme Court in Union of India versus Ashish Agarwal, notices issued after 01.04.2021, were to be treated as notice issued under section 148A of the Income Tax Act, 1961. - The petitioner has also participated in the proceedings and has filed this writ petition only on 16.3.20 23. Therefore, the challenge to the impugned proceedings and show cause notices cannot be countenanced at this stage. - Writ petition dismissed - HC Visit to Get Source Levy late fee u/s 234E - intimation u/s 200A - late fee imposed prior to 01.06.2015 - Section 234E of the Act by itself creates a liability and the liability to pay the late fee is not dependent on Section 200A(1)(c) of the Act which only prescribes the recovery mechanism - Levy of late fee is not dependent on Section 200A(1)(c) - Challenge to the order imposing the levy of late fee prior to 01.06.2015 stands rejected. - HC Visit to Get Source Denial of TDS credit - TDS is not reflected in Form No. 26AS of the assessee - Credit of TDS which was not deductible - We find from updated Form 26AS of the assessee, the very same TDS figure of Rs. 10,80,720/- is duly reflected and hence grievance of the CPC has been duly met. Hence, as per rule 37BA for the Income Tax Rules, the assessee shall be entitled for TDS credit - Credit allowed - AT Visit to Get Source TP Adjustment in respect of extension of performance/ corporate guarantee - Even if it is reckoned as international transaction, then also on FAR analysis and looking to fact that the reward or profit to the AE is almost negligible, i.e. the ultimate profit is not even 1%, the adjustment if at all would also be negligible on the facts of the present case. - No transfer pricing adjustment can be made on account of corporate guarantee - AT Visit to Get Source Disallowance of foreign exchange loss u/s. 43A - The assessee made advance payments through Letter of Credit is the first step for acquisition of capital asset because there was a direct link of LOC towards purchase of the fixed assets, therefore it will be treated as capital in nature. Section 43(1) has defined the actual cost of the assets. - Claim was rightly denied as revenue expenditure - However, depreciation to be allowed - AT Visit to Get Source Clubbing of income u/s 64 - Additions of Sale proceeds of the land belonging to the assessee’s wife claimed to be credited to the assessee’s bank account - Wife has no independent source of income, for her to acquire the said land. Even otherwise, it is apparent that the assessee is managing all the funds belonging to him and his wife - As a corollary, all the income arising to the assessee’s wife would stand to be assessed in his hands, statutorily mandated u/s. 64 of the Act. - AT Visit to Get Source Addition u/s 43CA - difference in the value taken for stamp duty and the actual sale consideration - the provisions to section 43CA have been introduced w.e.f. 01.04.2014 and the ‘agreement to sell’ was entered prior to the 1st April 2014 and therefore, the condition of payment or part payment of consideration on or before the date of agreement cannot be imposed back-dated as the assessee could not have foreseen the introduction of section 43CA. - AT Visit to Get Source Levy of Penalty u/s 271(1)(c) in case of voluntary surrender of income - disallowance of claim of loss - Assessee offered the loss voluntarily to avoid litigation and requested the Assessing Officer to not initiate penalty proceedings u/s 271(1)(c), paid the tax due and challan copy is enclosed. No appeal is filed. - Documents submitted by assessee have not been held as false either by the AO during the assessment proceeding or during penalty proceeding. - No penalty - AT Visit to Get Source Customs Classification of imported goods - LG Watch W7 - The product imported is a Smart Watch which is classifiable under 8517 6290. The appellant has wrongly classified it under 9102 1900. Thus the benefit under exemption Notification No. 152/2009-Cus. was not available to products of 8517 tariff entry hence it is held that same has wrongly been claimed. - Demand confirmed - AT Visit to Get Source Smuggling - foreign origin betel nuts - Violation of principles of judicial discipline - impugned goods i.e. Betel Nuts and Black Pepper are not the goods specified or notified under Section 123 of the Customs Act, 1962. Thus the burden to prove the smuggled nature of these goods lies on the Custom Authorities - AT Visit to Get Source DGFT Export of Non-Basmati White Rice (under ITC-HS Code 10063090) to Comoros, Madagascar, Equatorial Guinea, Egypt and Kenya through National Cooperative Exports Limited (NCEL) is notified. Visit to Get Source One time exemption from 'Prohibition' is granted to Indian Rice Exporters Federation for export of 20 MT of Non-basmati white rice (Semi-milled or wholly milled rice, whether or not polished or glazed: Other) as donation to Nepal earthquake victims. Visit to Get Source IBC CIRP - claims submitted on behalf of sub-contracted workers have been accepted only to the extent of 8% - The submission which has been advanced by Counsel for the Appellant that due to the workers of sub-contractor being not aware of the CIRP could not file their claim cannot be considered at the stage when all claims have been collated and admitted and dealt with in the Resolution Plan. - AT Visit to Get Source Recovery of arrears of electricity dues - The submission raised by learned counsel for the Appellant that Successful Auction Purchaser was liable to pay the arrears of electricity dues which were dues of the erstwhile Corporate Debtor and without payment of said dues electricity connection cannot be granted are not in accord with the statutory scheme of IBC. - Appeal dismissed - AT Visit to Get Source Replacement of IRP - the appointment of the Appellant as IRP was never confirmed by the CoC nor any material has been brought on record to indicate that the appointment of IRP was confirmed by the CoC by majority of not less than 66% of the vote. - the resolution to replace the IRP was passed on 06.10.2023 i.e. much before the assignment of debt. - Appeal dismissed - AT Visit to Get Source Approval of resolution plan - Challenge to Constitution of the Committee of Creditors (CoC) - Simply because the Appellants have raised the issue of avoidance application, it does not stand to reason that the approval of the resolution plan needs to be put on hold or kept in abeyance. - AT Visit to Get Source SEBI Responsibility of the Managing Director - Unlawful gains by fraudulent and manipulative strategy made by Reliance Company - There is a distinction between “offence” and “contravention” - Section 27 of the SEBI Act as it stood prior to the amendment did not apply to civil liability and, therefore, the Managing Director could not be penalised by SEBI u/s 27 of the Act. - The limited role played by the Board was only to take note of the transactions after they had been executed by the two senior executives. - AT Visit to Get Source Service Tax Levy of penalty - when the tax amount stands already deposited with interest, the very SCN was not required to be issued under Section 73(3). Merely because the tax amount has been deposited on the basis of ascertainment by the Department, the assessee cannot be deprived of the benefit of aforesaid provisions - AT Visit to Get Source Case Laws: GST 2023 (12) TMI 293 Refund of amount deposited by the petitioner during the course of search and inspection - petitioner claims that it was coerced to deposit the aforesaid amount and that the same cannot be considered as a deposit done voluntarily under Section 74(5) of the Central Goods Services Tax Act, 2017 - HELD THAT:- A plain reading of the show cause notices would indicate that the same are premised on the mismatch of the ITC in terms of form GSTR-3B and form GSTR-2A. It is also material to note that although, the show cause notices indicate that the petitioner had deposited the tax and penalty on 29.07.2022, the quantum of proposed demand did not provide for any credit for the same. It is apparent that such show cause notices are in terms of Section 74(7) of the CGST Act inasmuch as they are not limited to the amount which falls short of the amount payable after accounting for the tax deposited - the respondents have neither acknowledged the amounts deposited by the taxpayer on 29.07.2022 nor have they granted the benefit of the said deposit, while issuing the proposed demand under Section 74(7) of the CGST Act. In Vallabh Textiles v. Senior Intelligence Officer Ors. [ 2022 (12) TMI 1038 - DELHI HIGH COURT] a Coordinate Bench of this Court had observed that not following the stipulated procedure would also lead to the conclusion that the payments were not voluntary. Whilst the petitioner has accepted that there was a mismatch in its return regarding the ITC, he did not acknowledge that the ITC was incorrectly availed. On the contrary, the Director of the petitioner had acknowledged that in case there was any tax liability, the same would be paid with interest and penalty. Admittedly, the respondents have not ascertained the said liability and no notice has been issued to the petitioner as contemplated under Rule 142 (1A) of the CGST Rules communicating the details of any tax, interest or liability as ascertained - the petitioner s contention is accepted that the payments made by it were not voluntary payments but under compelling circumstances. The respondents are directed to refund the amount deposited by the petitioner by making a payment of ₹23,70,000/- in cash along with interest at the rate of 6% per annum from 13.12.2022 till the date of payment - the present petition is allowed. 2023 (12) TMI 292 Search and seizure - reasons to believe - whether the inspection carried out by the respondent authorities is illegal for want of reasons to believe that the conditions as set out in Section 67(1)(a) of the CGST Act are satisfied? - HELD THAT:- The interpretation of the expression reasons to believe in Calcutta Discount Co. Ltd. v. Income Tax Officer, Companies District I Calcutta Anr. [ 1960 (11) TMI 8 - SUPREME COURT ] is instructive in interpreting the said expression as used in Section 67 of the CGST Act as well. The sufficiency of the reasons is not amenable to judicial review. So long as there is material or information, which supplies a rational basis for forming a belief that the conditions as stipulated under Section 67(1) of the CGST Act are satisfied, the search or inspection authorized under the said section cannot be faulted. In the present case, the information that the petitioner had purchased the goods from a supplier, which was found to be nonexistent at his principal place of business, has a direct link in forming the belief that the petitioner wrongfully availed of the ITC - there are no ground to declare any search or inspection conducted on 12.11.2022 as illegal or vitiated on the ground that there was no reason to believe that the petitioner had wrongfully availed the ITC. Thus, there are no merit in the petitioner s contention that the inspection conducted by the central officers were illegal. The provisions of Section 6(2)(b) of the CGST Act do not preclude the central officers from conducting an inspection for concluding an ongoing investigation merely because a prior inspection or search was conducted by the DGST authorities - the respondents are directed to refund the sum of ₹10,00,000/- deposited by the petitioner in FORM GST DRC-03 on 12.11.2022. Petition disposed off. 2023 (12) TMI 291 Validity of reversal of Input Tax Credit (ITC) during investigation / search proceedings - Validity of search / inspection conducted at business premises - Allegation of availment of inadmissible ITC and shortage of cash - whether the inspection conducted by the Delhi GST Authorities was illegal for want of proper authorization? - HELD THAT:- If the tax is not paid on self-ascertainment basis, the assessee cannot be extended the benefit of Section 73(6) of the DGST Act or Section 74(6) of the DGST Act. In the present case, the petitioner has stoutly disputed that the reversal of ITC was voluntary. In cases where the payment made during search is not voluntary, the taxpayer is required to be refunded the said deposit while reserving the right of the GST authorities to proceed against the said taxpayer to the full extent in accordance with law - It is also material to note that the respondents have not issued an acknowledgment in FORM GST DRC-04. Thus, the procedure under Rule 142 of Delhi Goods Services Tax Rules, 2017 (the DGST Rules) has not been followed. In the present case, the petitioner has stoutly disputed that the reversal of ITC was voluntary. Undisputedly, the same has been made while the petitioner s premises were being searched and he was being subjected to questioning / enquiries - it is not difficult to accept that the petitioner may have found the circumstances intimidating and had, accordingly, agreed to reverse the ITC. The respondents are directed to reverse the ITC amounting to ₹22,14,226/- in the petitioner s ECL - petition disposed off. 2023 (12) TMI 290 Condonation of delay in filing appeal before the appellate authority - applicability of provisions of section 5 of the Limitation Act, 1963 are attracted to the appeal filing period of limitation prescribed under Section 107 of the Act of 2017 or not - HELD THAT:- Parties have agreed that, Appellate Tribunal contemplated under Section 109 of the Act of 2017 has not been established so far as the State of West Bengal is concerned, as on date. The statutory remedy of approaching the Tribunal against the order of the Appellant Authority impugned in the writ petition is therefore not available to the appellant. In Assistant Commissioner (CT) LTU. Kakinada [ 2020 (5) TMI 149 - SUPREME COURT] , the Supreme Court has considered the issue as to whether the High Court in exercise of its writ jurisdiction ought to entertain a challenge to an assessment order on the sole ground that the statutory remedy appeal against that order stood foreclosed by the law of limitation or not. It has answered such issue in the negative against the writ petitioner and in favour of the revenue. It had observed that, where the writ petitioner has statutory alternative remedy available and did not avail of such remedy within the statutory period of limitation prescribed the writ courts should exercise self-restrain and not entertain a writ petition at the behest of such writ petitioner. A Constitution Bench of the Supreme Court has, in New India Assurance Company Ltd [ 2020 (3) TMI 1368 - SUPREME COURT] held that, the period of limitation for filing reply/response to the complaint, under the provisions of Section 13 of the Consumer Protection Act, 1986 cannot be extended beyond the prescribed period of 30 days along with a discretionary extension of 15 days aggregating to 45 days from the date of receipt of the copy of the complaint. Section 107 of the Act of 2017 does not exclude the applicability of the Act of 1963 expressly. It does not exclude the applicability of the Act of 1963 impliedly also if one has to consider the provisions of Section 108 of the Act of 2017 which provides for a power of revision to the designated authority, against an order of adjudication. In case of revision a far more enlarged period of time for the Revisional Authority to intervene has been prescribed. Two periods of limitations have been prescribed for two different authorities namely, the Appellate Authority and the Revisional Authority in respect of the same order of adjudication - Section 107 does not have a non-obstante clause rendering Section 29(2) of the Act of 1963 nonapplicable. In absence of specific exclusion of the Section 5 of the Act of 1963 it would be improper to read an implied exclusion thereof. Moreover, Section 107 in its entirety has not expressly stated that, Section 5 of the Act of 1963 stands excluded. Since provisions of Section 5 of the Act of 1963 have not been expressly or impliedly excluded by Section 107 of the Act of 2017 by virtue of Section 29 (2) of the Act of 1963, Section 5 of the Act of 1963 stands attracted. The prescribed period of 30 days from the date of communication of the adjudication order and the discretionary period of 30 days thereafter, aggregating to 60 days is not final and that, in given facts and circumstances of a case, the period for filling the appeal can be extended by the Appellate Authority. The issue that has been framed is answered in the affirmative, in favour of the appellant and against the revenue. 2023 (12) TMI 289 Seeking direction to respondent to consider the representation of the petitioner dated 18.10.2023 - HELD THAT:- The respondent directed the petitioner to pay a sum of Rs. 4,34,522/-. According to the provision of Section 107 of Goods and Services Tax Act, 2017, if the petitioner paid 10% of the outstanding tax dues along with penalty, the respondent proceedings will be automatically stayed. The said legal position was also confirmed by the learned counsel for the respondents. In such view of the matter, in the present case, since the petitioner had paid a sum of Rs. 83,000/-, the respondent is supposed to have de-freeze the bank account of the petitioner as per Section 107 of the Act. The respondents are directed to consider the representation of the petitioner dated 18.10.2023 and de-freeze the petitioner's bank account, upon the production of proof of deposit of Rs. 83,000/- or 10% of the total demand made by the respondent - Petition disposed off. 2023 (12) TMI 288 Restoration of Appeal filed by the Petitioner - appeal decided without considering the period of limitation for filing of appeal in terms of provisions of Section 107 of the CGST Act / RGST Act - HELD THAT:- Hon ble Supreme Court on 10.1.2022, while taking cognizance for Extension of Limitation (Miscellaneous Application No.21/2022 in MA 665/2021 in SMW(C) No.3/2020) [ 2022 (1) TMI 385 - SC ORDER] has passed a general order and observed that in case where the limitation would have expired during the period between 15.03.2020 till 28.02.2022, all the affected persons shall have a limitation period of 90 days from 01.03.2022. Taking into consideration the overall facts and circumstances of the case and keeping in view the order dated 10.1.2022 passed by the Hon ble Supreme Court, it is opined that the respondents were required to decide the appeal filed by the petitioner on merits while condoning the delay. The order dated 5.1.2022 passed by the appellate authority is set aside. The appellate authority is directed to decide the appeal filed by the petitioner against cancellation of GST Registration on merits expeditiously while treating the same within limitation - Petition allowed. 2023 (12) TMI 287 Classification of supply - composite supply or mixed supply? - supply of services of coaching to students which also includes supply of goods/printed material/test papers, uniform, bags and other goods to students against a lump-sum amount - HELD THAT:- The student kit is integral to one overall supply i.e. supply of coaching services in the instant case. If one or more is removed, the supply would be affected as removal of the student kit would affect the studies of the students (no printed material or study material or exam papers or course planner and only coaching would definitely affect the studies of the students) and furthermore the nature of the ancillary services/goods in this package is facilitative to the students as well - the amount of the printed material, uniform and bags form a small proportion of the total value of the supply as part of the package. Moreover, when the appellant is not separately selling their bags, uniforms and printed material, it is not difficult to infer that their students enjoy these goods only as a part of composite services of educational/coaching services. No student would choose only the student kit and not the coaching. Here the AAR judgement fails prima facie, because the students cannot opt for only coaching service without receiving the student kit. The students will only pay for principal supply and anyways are going to receive the student kit. The student kit is part of the package of the coaching services and is not sold separately by the appellant or even by their network/channel partner. It is therefore to be treated as composite supply. The supply of coaching service by the appellant along with supply of goods/printed material/test papers, uniform, bags and other goods to their students is composite supply and their principal supply is coaching services. 2023 (12) TMI 286 Scope of Advance Ruling application - rectification of mistakes while filing FORM GSTR-1 on the common portal for the financial year 2017-18 - HELD THAT:- As per sub-section (2) of section 97 of the GST Act, the question on which the advance ruling is sought under this Act, shall be in respect of, (a) classification of any goods or services or both; (b) applicability of a notification issued under the provisions of this Act; (c) determination of time and value of supply of goods or services or both; (d) admissibility of input tax credit of tax paid or deemed to have been paid; (e) determination of the liability to pay tax on any goods or services or both; (f) whether applicant is required to be registered; (g) whether any particular thing done by the applicant with respect to any goods or services or both amounts to or results in a supply of goods or services or both, within the meaning of that term. The question on which advance ruling is sought by the applicant is found not to be covered under any of the aforesaid clauses. The applicant was allowed an opportunity for personal hearing and the aforesaid observation was brought to the notice of the authorised representative of the applicant in course of hearing - the question on which advance ruling is sought by the applicant is not covered under any of the clauses under sub-section (2) of section 97 of the GST Act, there may not be any reason to accept the application made by the applicant for pronouncement of ruling. Application rejected. Income Tax 2023 (12) TMI 294 Assessment u/s 153C - Whether CIT(A) considering block of six assessment years with reference to date of handing over of seized assets/documents to the AO of the assessee i.e. person other than the searched person, instead of the date of initiation of search on searched person and holding that AY 2011-12 to AY 2013-14 are outside the scope of section 153C? - HELD THAT:- We find that the first appellate authority has decided the appeal in favour of the assessee following the binding decision in the case of RRJ Securities Limited [ 2015 (11) TMI 19 - DELHI HIGH COURT] and subsequent amendment in the section 153C of the Act w.e.f. 01.04.2017. We do not find any merit in the grievance of the revenue. If the revenue is aggrieved by the binding decision of the Hon ble Jurisdictional High Court of Delhi (supra) the revenue may approach the Hon ble Supreme Court but in no case the revenue can be aggrieved by the binding decision before this Tribunal. 2023 (12) TMI 285 Accrual of income - Income from Other Sources - rent on account of sub-lease agreement of the Appellant with IDBI - terminated the agreement - Appellant has not accepted the rent from IDBI post termination of the sub-lease agreement - cross-suits filed by the Appellant and the IDBI against each other are pending as of today before the Small Causes Court - assessee argued since the sub lease agreement with the IDBI has been terminated and a suit is filed against it, no amount is due from IDBI as lease rent and, therefore, question of taxing the same does not arise - HELD THAT:- Section 56 of the Act which deals with Income from other sources provides for charging to income tax, income of every kind which is not chargeable for income tax under any of the heads specified in Section 14, items A to E. The Appellant is a company governed by the Indian Companies Act, 1956 (now Companies Act, 2013) and maintains its books of accounts on mercantile basis. Section 5(1)(b) of the Act provides for scope of total income to include all income which accrues or arises or is deemed to accrue or arise in India during such year. The words accrue or arise have different meanings attributed to them while the former connotes the idea of a growth or accumulation, the latter connotes the idea of crystallization of the former into a definite sum that can be demanded as a matter of right. A person does not have a legal right to receive the income by merely earning of income. Although, earning of income is a necessary pre-requisite for accrual of income, mere earning of income without right to receive the same does not suffice. A person may be said to have earned his income in the sense that he has contributed to its production by rendering service and the parenthood of the income can be traced to him but in order that the income that may be said to have accrued to him an additional element is necessary that he must have created a debt in his favour. The phrase accrue or arise has been the subject matter of judicial debate from inception which we now propose to deal with some of them. Whether sub-lease rent sought to be taxed accrues or arises to the Appellant in the assessment year 1986-87? - It is not disputed by the Revenue that the cross-suits filed by the Appellant and the IDBI against each other are pending as of today before the Small Causes Court. It is also not disputed that the Appellant has not accepted the rent from IDBI post termination of the sub-lease agreement in the year 1981. The Appellant, in its suit for eviction, has prayed for a declaration that sublease dated 22nd April 1980 is lawfully terminated and forfeited by the Appellant in addition to various other prayers, including a prayer that IDBI be ordered and decreed to pay arrears of rent or compensation for wrongful use and occupation of the property in a suit at the rate of Rs. 4,50,000/- per month as against Rs. 3,42,720/- per annum as per the sub-lease agreement. The Small Causes Court has permitted IDBI to deposit the lease rent in the Court till the rights of the parties are decided and the order of deposit of the rent is without prejudice to the rights and contentions of the parties. In the light of these facts, whether the sub-lease agreement between the IDBI and the Appellant subsists post 1981 termination by the Appellant, is itself a subject matter of dispute between the Appellant and IDBI which is pending adjudication. Thus it cannot be said that the Appellant is entitled to receive a sum under the sublease agreement with IDBI or a right is vested in the Appellant to that sum. In our view, one cannot tax the amount having not accrued to the Assessee and not received by an Assessee on an assumption and presumption that in future the Small Causes Court will at least order the said sum in favour of the Appellant. The determination of the amount payable by the IDBI to the Appellant as prayed for by the Appellant in its suit is to be determined by the Small Causes Court and it is as and when the Court passes a final decree that one can say that right to receive the sum decreed by the Small Causes Court as having accrued to the Appellant. Till then, the right to receive any sum by the Appellant is in jeopardy and sub-judice before the Small Causes Court. The Appellant had informed the Revenue and the IDBI that the garnishee proceedings are illegal because post-termination no rent is due and payable by IDBI to the Appellant. This fact has been missed out by the Tribunal in coming to its conclusion. Even otherwise, merely because a party to a civil dispute to protect its rights makes a payment to the Income Tax Department pursuant to garnishee proceedings, it would not amount to subsistence or existence of the sub-lease agreement between the Appellant and the IDBI for bringing to tax Rs. 3,42,720/- per annum as income for the assessment year under considerations. In our view, the Tribunal has not correctly appreciated the facts of the Appellant's case and the effect of the civil dispute pending between the Appellant and the IDBI on the income tax proceedings. Revenue is not justified in bringing to tax sum as accrued income for the assessment year 1986-87 and for the other years, which are subject matter of appeal before this Court in appeal. 2023 (12) TMI 284 Reopening of assessment u/s 147 - Change of opinion - Machinal approval by CIT / PCIT - capital account transaction - difference between the consideration received by SIPL against the sale of the subject parcel of land and its value calculated based on the then prevailing circle rate was the income that had escaped assessment - reopening after the end of four (4) years from the date of the end of relevant AY and at the end of the cusp of the sixth (6) year - Whether AO committed an error in taking recourse to Section 50C of the Act - HELD THAT:- The subject land was treated as stock-in-trade in the hands of SIPL as well as STPL. Thus, the AO, according to us, committed an error in taking recourse to Section 50C of the Act.Because the AO took recourse to Section 50C of the Act, he proceeded to arrive at the escaped income by calculating the value of the land based on the then prevailing circle rate, after adjusting it against the sale consideration.This, according to us, was a fatal error. What has emerged is that although reassessment had been triggered, concededly, after the end of four (4) years from the date of the end of relevant AY and at the end of the cusp of the sixth (6) year, i.e., on 31.03.2018, the AO did not allege that SIPL had failed to disclose fully and truly all material facts which were necessary for carrying out the assessment. This, according to us, was a grave folly. The reason, perhaps, why the AO did not allude to this aspect was because queries were raised during the original assessment, which included questions concerning the sale of the subject land. More particularly, answers were furnished by SIPL, along with the relevant documents and material sought by the AO, thusit cannot be said that the subject transaction was not scrutinized by the AO. It is well-known that the AOs often issue questionnaires, seek answers to their queries and if satisfied, may decide to accept the explanation and consequently, the return. Therefore, in our view, it is correctly argued on behalf of SIPL by Mr Sinha that this was a case of change in opinion. Whether the PCIT applied his mind while granting approval? - The form for obtaining approval is what appears to have been placed before the ACIT and PCIT. The mandatory entries were not made. Therefore, the weight of the evidence seems to suggest that the ACIT cleared the path without delving into the aspect that this was, indeed, a case of under-assessment and, likewise, the PCIT rubberstamped the request made by the AO for initiating the reassessment proceeding qua SIPL without applying his mind to the requisite aspects. According to us, the reopening of the concluded scrutiny assessment is a serious business. The Act provides for a layered approach precisely for this reason. Senior officers like ACIT and PCIT are expected to apply their minds to such requests and, only after that, approve the initiation of reassessment proceedings. Several pitfalls that the Court's notice can be avoided if the concerned authorities were to look closely at the request made for re-opening. Clearly, in SIPL s case, these aspects were not examined by the concerned AO or by the ACIT/PCIT. Whether the impugned transaction was a sham and, therefore, reassessment was rightly triggered ? - A sham transaction is something that is not what it seems , i.e., a counterfeit document. [See Black s Law Dictionary 8th Edition, page 1407] It is no one s case, not even the AO s case, that SIPL had not executed the MOU/agreement with STPL. The burden of the AO's order is that the sale of the subject land was a capital account transaction and, therefore, Section 50C of the Act was applicable. Thus, reliance on the observations made in the Phool Chand Bajranglal case [ 1993 (7) TMI 1 - SUPREME COURT] has no applicability. The facts therein are entirely distinguishable. That was a case wherein the appellant/assessee had claimed that he had borrowed a certain sum from an entity. Accordingly, the money borrowed was shown as a liability in the balance sheet. The appellant/assessee also claimed that the money had been borrowed and returned in cash, although interest was paid via cheque/bank draft. Based on this broad assertion, the AO allowed a deduction of the interest claimed by the appellant/assessee to the lender company. However, the AO had doubts about the genuineness of the loan transaction, and therefore, he wrote to the AO of the lender company. AO of the lender company informed his counterpart that the director of the lender company had confessed that it was a dummy entity and had not advanced any loan to any person. This letter conveyed that the so-called lender company lends money to different companies to launder their unaccounted money. It is against this backdrop that the court sustained the action taken to reopen the reassessment proceedings. Given this backdrop, the Court observed that it was not a case where the AO sought to draw fresh inference, which it could have raised when he framed the original assessment order regarding the loan transaction based on the material placed before him. Therefore, the fresh information in that case, as observed by the Court, exposed the falsity of the statement made on behalf of the appellant/assessee when the original assessment order was framed. Thus, we are of the opinion that for the reasons given above, this is not a case in which the reassessment proceedings ought to have been triggered against SIPL. Assessee appeal allowed. 2023 (12) TMI 283 Reopening of assessment - Exemption u/s 47 - conversion of the company into a Limited Liability Partnership Firm - whether Notice under Section 148A(b) can be issued for the purpose of re-assessment under Section 147? - HED THAT:- There is no dispute that the notice that were issued were under the old regime. However, the Hon'ble Supreme Court in Union of India and others versus Ashish Agarwal [ 2022 (5) TMI 240 - SUPREME COURT] as a result of which all notices issued under the old regime after 01.04.2021 were to be treated as a notice issued under section 148A of the Income Tax Act, 1961. Thus, the Notice Issued under Section 148 of the Income Tax Act, 1961 to the petitioner on 30.06.2021 was to be decided in accordance with the newly inserted section 148A of the Income Tax Act, 1961. Thus, the Assessment was to be completed in accordance with the aforesaid provision. Prior to issuance of Notice Issued under Section 148 of the Income Tax Act, 1961 to the petitioner on 30.06.2021, the Department had audited the accounts of the petitioner for the assessment year 2016- 17 after the Assessment was completed under Section 143(3) of the Income Tax Act, 1961. The audit memo addressed to the Asst Commissioner of Income Tax dated 19.6.2019 indicates that the petitioner a Limited Liability Partnership Firm was earlier Private Limited Company. The 2 partners of the petitioner Firm were itsdirectors. The company was converted into petitioner firm only on 07.08.2015. As on 31.03.2015, one of the partner namely Ms Nina B. Kothari held 25,07,688 preference shares of Rs. 10/- each in the said company prior to its conversion into a Limited Liability Partnership Firm. After, 31.03.2015, but before the conversion of the company into a Limited Liability Partnership Firm on 07.08.2015, the aforesaid preference shares were transferred to the other partner namely BHK Foundation (Discretionary Trust). Ms Nina B. Kothari thus merely held one equity share in the said company, prior to conversion on 07.08.2015. The Trust, thus had 1,99,999 equity shares of Rs 10 each and 25,07,688 preference shares of Rs. 10 each in the company. This aspect was not brought to the notice of the Income Tax Department prior to scrutiny assessment that came to be completed/passed on 27.11.2018. Prime facie , it appears that income had escaped assessment. The exemption that was claimed under section 47 (xiv) of the Income Tax Act, 1961 is available subject to the rider specified therein. The sales turnover or gross receipts from the business in the 3 preceding year prior to the previous year in which the conversion took place should not have been more than Rs. 60,00,000/-. The petitioner firm has not disclosed all the above information to the assessing officer prior to the assessment order that was passed on 27.11.2018 under Section 143 (3) of the Income Tax Act, 1961. Therefore, the respondents were prima facie justified in re-opening the assessment under Section 148 of the Income Tax Act, 1961 for the Assessment year 2016-17. The limitation stood which was to expire stood protected in view of the orders passed by the Hon'ble Supreme Court and in view of the Ordinance and the Act in the wake of out break of Covid-19 Pandemic. However, in the light of the decision of the Hon ble Supreme Court in Union of India versus Ashish Agarwal, notices issued after 01.04.2021, were to be treated as notice issued under section 148A of the Income Tax Act, 1961. Therefore, the challenge to the proceedings initiated in the light of the decision of the Hon ble Supreme Court cannot be countenanced. Whether the petitioner is indeed entitled to succeed eventually in the re-assessment proceedings or not is to be decided by the 1st respondent. Intervention of this Court against the proceedings initiated cannot be countenanced as prime facie there are indications that income had escaped assessment. The petitioner has also participated in the proceedings and has filed this writ petition only on 16.3.20 23. Therefore, the challenge to the impugned proceedings and show cause notices cannot be countenanced at this stage. Consequently, this writ petition is liable to be dismissed. 2023 (12) TMI 282 Scrutiny of ITR by the Faceless Assessment Officer - Rectification petition to rectify the mistake of double dis-allowance in the intimation - As argued though the respondent had not considered the reply filed by the petitioner, the said reply will be considered at the time of scrutiny by the Faceless Assessment Officers in accordance with law - HELD THAT:- A reading of section 143 makes it clear that if there is any corrections, errors, addition or reduction in the ITR of the Assessee, the Department has to intimate the same to the Assessee. In the present case, the respondent had intimated the error to the petitioner and also directed the petitioner to file his reply within a period of 30 days. Thereafter, as per the provisions of the Act, the respondent is supposed to have considered the said reply and make suitable modifications in his income tax returns as requested by the petitioner. However, though the reply was filed by the petitioner, the respondent not the said reply and issued the impugned intimation dated 29.07.2023. As submitted by respondent that the reply filed by the petitioner will be considered at the time of scrutiny of ITR by the Faceless Assessment Officer, which means the Faceless Assessment Officer has to consider the reply and proceed the petitioner's case with double stands i.e., (1) based on the original returns filed by the petitioner; and (2) based on the modified returns after considering the reply of the petitioner, which would ultimately create unnecessary confusion. Since the learned counsel for the respondent had submitted that the reply, which was rejected by the respondent will be considered at the time of scrutiny and for the interest of justice, this Court is inclined to pass the following orders: i) The respondents are directed to consider the reply filed by the petitioner dated 23.04.2023 and accept the returns accordingly. ii) Thereafter, the Faceless Assessment Officer shall proceed further by providing opportunity of hearing before passing orders in the scrutiny assessment. 2023 (12) TMI 281 Levy late fee u/s 234E - intimation u/s 200A - late fee imposed prior to 01.06.2015 - whether late fee u/s 234E can be levied prior to the amendment to the Section 200A(1)(c) of the Act vide Finance Act, 2015 w.e.f. 01.06.2015? - Reliance was sought to be placed upon the judgment of Fatheraj Singhvi Ors. Vs. Union of India Ors [ 2016 (9) TMI 964 - KARNATAKA HIGH COURT] wherein it was held that the amendment to Section 200A of the Act brought about with effect from 01.06.2015 whereby sub clause (c) to sub-section (1) to Section 200A of the Act was introduced is not merely a regulatory mechanism but is substantive in nature thus the amendment to Section 200A(1)(c) of the Act cannot be given retrospective effect. HELD THAT:- Liability to pay, by way of fee gets attracted under sub-section(1) to Section 234E of the Act once a person fails to deliver or cause to be delivered a statement within the time prescribed in sub-section(3) of Section 200 or the proviso to sub-section (3) of Section 206C of the Act and the liability shall continue for every day during which the failure continues. Sub-section (3) to Section 234E of the Act provides that the fee referred to in subsection (1) to Section 234E of the Act shall be paid before delivering or causing to be delivered a Statement in accordance with sub-section (3) of Section 200 or the proviso to sub-section (3) of Section 206C.Importantly, sub-section (4) to Section 234E of the Act provides that the above provisions would apply to statement referred to in sub-section (3) to Section 200 of the Act which is to delivered or cause to delivered on or after 01.07.2012. Section 234 E of the Act and on considering both the above views, it appears to me that the opinion expressed by the Gujarat High Court that [ 2017 (7) TMI 458 - GUJARAT HIGH COURT] Section 234E of the Act by itself creates a liability and the liability to pay the late fee is not dependent on Section 200A(1)(c) of the Act which only prescribes the recovery mechanism reflects the true intent and purpose of Section 234E of the Act. Section 234E of the Act which provides for late fee is the substantive provision and the levy is not dependent on Section 200A(1)(c) of the Act which only prescribes a recovery mechanism. A reading of Section 234E of the Act would make it clear that it gets attracted, the moment there is a failure on the part of a person to deliver or cause to be delivered a statement within the time prescribed in subsection (3) of Section 200 or the proviso to sub Section (3) of Section 206C of the Act. Sub Section(4) to Section 234E of the Act also makes it clear that the above provision would be effective from 01.07.2012. Therefore the submission that 234E of the Act would not be operable / effective unless and until Section 200A(1)(c) was introduced overlooks the fact that Section 234E (1) of the Act is the substantive provision and Section 234E(3) of the Act provides for a self declaration / payment for the delay in complying with sub-section(3) of Section 200 or the proviso to sub -section(3) of Section 206C of the Act. With due respect I am unable to subscribe to the view expressed by the Karnataka High Court in view of the reasons stated supra. Thus challenge to the order dated 26.02.2021 imposing the levy of late fee prior to 01.06.2015 stands rejected. The writ petition stands dismissed. 2023 (12) TMI 280 Validity of AO s order with no DIN mentioned - scope of subsequent issue of DIN orders afterwards - HELD THAT:- A perusal of the AO s order shows that it is clear in the body of AO s order, no DIN number is mentioned nor there is any reason of not mentioning the DIN number in order of the AO. Is such a situation, the AO order will lose its validity. Subsequent separate communication of DIN is a superfluous exercise. As regards reference to the decision of the Hon ble Jharkhand High Court and Hon ble Allahabad High Court by the Ld. DR , we find that Hon ble Supreme Court in the case of CIT v. Vegetable Products Ltd [ 1973 (1) TMI 1 - SUPREME COURT] has held that if two views are possible one in favour of the assessee is to be adopted. In this regard, we are referring to the decision of the Hon ble Delhi High Court in the case of CIT vs Brandix Mauritius Holdings Ltd. [ 2023 (4) TMI 579 - DELHI HIGH COURT] communication relating to assessments, appeals, orders, etcetera which find mention in paragraph 2 of the 2019 Circular, albeit without DIN, can have no standing in law, having regard to the provisions of paragraph 4 of the 2019 Circular - thus given the language employed in the 2019 Circular, there is neither any scope for debate not is there any leeway for an alternate view. Thus we hold that the impugned AO order is invalid and shall be deemed to have never been passed. Accordingly, we quash the impugned AO order. Further, the issue that a simultaneous DIN number was generated and communicated have considered in Abhimanyu Chaturvedi [ 2023 (8) TMI 378 - ITAT DELHI] forwarding of the intimation of generation of the DIN in ITBA is only a subsequent action and that is not part of assessment order. The manner in which the word communication is defined shows every notice, order, summons, letter and any correspondence from Tax authorities should have a DIN quoted and it is for this reason that the Intimation issued about the DIN of assessment order itself has a DIN quoted on it. The generation of DIN subsequently and generation of intimation to be sent to assessee are of no consequence for the purpose of assessment and raising the demand - Assessee appeal allowed. 2023 (12) TMI 279 Assessment u/s 153A pursuant to a search - assessee submitted that no addition in this case has been done by referring to seized material found during the search - HELD THAT:- We note that the additions are not based upon any incriminating material found during search. DR also could not dispute this proposition. As per the decision of the Hon ble Supreme Court in the case of PCIT vs Abhisar Buildwell Pvt. Ltd [ 2023 (5) TMI 587 - SUPREME COURT] no addition can be made the assessment framed u/s 153A dehors incriminating material found during the search. Since, the AO himself admitted that the addition is made dehors any seized incriminating material during the search, respectfully following the precedent of Hon ble Apex Court, we set-aside the order of the Ld. CIT(A) and decide the issue in favour of the assessee. 2023 (12) TMI 278 Rectification u/s 154 - Disallowance of prior period expenses - Revenue has vehemently argued before us that the Assessing Officer had rightly initiated the impugned rectification process for the purpose of disallowing the assessee s foregoing prior period expenses - HELD THAT: He fails to dispute the clinching fact emerging from the case records that the AO had very well issued sec. 142(1) notice seeking to disallow the same on 26.02.2016 i.e., prior to sec. 143(3) assessment which stood duly explained by the assessee on 08.03.2016. These relevant documents duly form part of the case records. That being the case, we quote hon ble apex court s landmark decision in T.S. Balram, ITO vs. Volkart Brothers [ 1971 (8) TMI 3 - SUPREME COURT] that purpose of sec. 154 rectification is only to deal with apparent mistakes on record than those involving detailed roving enquiries and confirm the CIT(A)'s action reversing the AO s impugned action to this effect. Appeal is dismissed. 2023 (12) TMI 277 Assessment/reassessment against deceased assessee - HELD THAT:- As decided in Alamelu Veerappan [ 2018 (6) TMI 760 - MADRAS HIGH COURT] there is no statutory obligation on the part of the legal representative of deceased to immediately intimate death of the assessee or take steps to cancel the PAN registration. Before us, the facts are much stronger in favour of the assessee because the legal heir has duly informed the Assessing Officer about the death of Puja Shah which occurred much before the issuance of notice u/s 148 of the Act on 31/03/2017. It is a settled principle that a notice issued in the name of a dead person is not enforceable in law and if such is the legal position then, the revenue cannot be held to be justified in contending that they have no knowledge about the death of the assessee. Similar view was taken by the Hon ble Delhi High Court in the case of Savita Kapila vs. ACIT [ 2020 (7) TMI 441 - DELHI HIGH COURT] . Thus since the assessment order has been framed in the name of a deceased person even when information about the death of Puja Shah was provided to the Assessing Officer by her legal heir then, under such circumstances, the assessment order framed is non-est, bad in law and void ab initio - Appeal of the assessee is allowed. 2023 (12) TMI 276 Penalty u/s 271(1)(c) - assessee received proceeds of bogus LTCG - unexplained cash credit u/s 68 - HELD THAT:- Assessee has already offered the same for tax suo-motto as admitted during the course of survey. The AO has not discussed anything on merit as to how this constitute filing inaccurate particulars of income and simply imposed penalty for furnishing inaccurate particular of income. In our opinion, the assessment proceedings are distinct and different from the penalty proceedings. In this case, the AO has only issued show cause notice to the assessee and then proceeded to impose the penalty by ignoring the fact that the assessee has made disclosure of income during survey and has also not contested the issue in appeal. AO has passed an order in a very cryptic manner. In our opinion, the addition is only on the basis of admission of the assessee and the AO nowhere demonstrated that the claim of the assessee was either found to be false either during assessment proceedings or during penalty proceedings In the present case, the assessee has fully disclosed the particulars of the capital gain and claimed the same as exempt u/s 10(38) of the Act and thus fully disclosed all the facts qua the gain on sale of shares. The case of the assessee is also supported by the decision of Reliance Petroproducts (P.) Ltd [ 2010 (3) TMI 80 - SUPREME COURT] in which the as held that where the assessee has fully disclosed the particulars in the return of income then it is not liable to penalty proceedings on the ground that the disclosure made by the assessee are not as per the provision of the Act or not acceptable to the revenue. Accordingly we set aside the order of Ld. CIT(A) and direct the AO to delete the penalty. Decided in favour of assessee. 2023 (12) TMI 275 Denial of TDS credit - TDS is not reflected in Form No. 26AS of the assessee - HELD THAT:- We find that there is absolutely no dispute that the interest earned on advances of the contractors were part of business receipts and since the assessee had not commenced its business, the said interest income was duly reduced by the assessee from expenditure during the construction period in this balance sheet. It is not the case of the Revenue that the said interest income would be liable to be taxed under the head income from other sources. Hence, when there is no obligation on the part of the assessee to offer the said interest income to tax as per the provisions of the Act, and the same have been duly reflected in the books of accounts and audited balance sheet of the assessee, the TDS claimed relatable to such interest receipts cannot be denied to the assessee. We find that the CPC had denied the TDS figure only on the ground that the said TDS figure was not reflected in the Form 26AS of the assessee. We find from updated Form 26AS of the assessee, the very same TDS figure of Rs. 10,80,720/- is duly reflected and hence grievance of the CPC has been duly met. Hence, as per rule 37BA for the Income Tax Rules, the assessee shall be entitled for TDS credit - We further find that the similar issue came up in the case of Trikaal Mediinfotech Pvt. Ltd. [ 2023 (4) TMI 88 - ITAT MUMBAI] held that when TDS is made on a particular income which is otherwise not liable for tax, the assessee is entitled for the said credit of the TOS - when the assessee has earned interest on deposit mandatory for acquisition on installation of machinery then the interest was earned by the assessee and is directly incidental to the acquisition in respect of machinery and therefore the same has been rightly reduced from the cost of the machinery, In this way the assessee has indirectly disclosed income and has offered for assessment - Appeal of assessee allowed. 2023 (12) TMI 274 Enhancing Income from House Property under the head PGBP - rent received was offered for tax by the assessee under the head Income from House Property - Whether CIT (A) erred in not granting 30% deduction on the gross rent at the time of reducing the corresponding gross rental Income which was taxed under the head PGBP? - HELD THAT:- Prima facie on verification of the facts and evidences substantiating the claim, the total income as per the computation of income is Rs. 36,84,300/-. The Ld. AR demonstrated the Acknowledgement of ITR- 3 filed for A.Y 2020-2021 A.Y 2021 22 along with the computation of income disclosing the rental income under Income From house Property . Further the Ld.AR highlighted on the Tax Audit report U/sec 44AB of the Act along with the Form. 3CB CD in support of the Income from business and profession and the total income cannot exceed Rs. 38,69,300/-. Prima facie, we find there is no dispute on the disclosure of income and cannot be taxed twice and the revenue has been accepting consistent accounting system adopted by the assessee. Accordingly, we considering the facts and circumstances, set-aside the order of the CIT(A) on the disputed issue of sustaining the addition made by the CPC and direct the assessing officer to delete the addition and allow the grounds of appeal in favour of the assessee. 2023 (12) TMI 273 TP Adjustment in respect of extension of performance/ corporate guarantee - Assessee is in the business of construction of infrastructure projects and in order to secure the contract for construction of a bridge in Dubai with Road Transport Authority in Dubai, it had found limited liability Company in Dubai called as Afcons Mideast LLC - HELD THAT:- As seen that the entire functions to carry out the work either in the form of sub-contract or executing the contract work by providing entire support services through its own infrastructure, man power, management, technological support, organizational support, etc. all has been done by the assessee. The function of the AE in the execution of work was only on paper and as a legal entity to comply with the domestic laws. In substance there is negligible function performed by the AE. Apart from that, even the assets deployed belonged to the assessee. The entire risk lied upon the assessee that is the risk assumed for executing the contract and carrying out the entire work solely belonged to the assessee. Ergo the rewards of the risks were also entirely reaped by the assessee in the form of 99% profit. Thus, even if one does FAR analysis of the performance guarantee given by the assessee to FGB for execution of the contract where entire risk and rewards and the benefit was of the assessee only, then where is the question of making any adjustment of ALP in the hands of the assessee that any benefit has been passed on to the AE. Even if it is reckoned as international transaction, then also on FAR analysis and looking to fact that the reward or profit to the AE is almost negligible, i.e. the ultimate profit is not even 1%, the adjustment if at all would also be negligible on the facts of the present case. Thus, on the facts of the present case we hold that no transfer pricing adjustment can be made on account of corporate guarantee. Accordingly, the addition made by the ld.TPO / ld. AO is deleted. Disallowance of interest u/s. 36(1)(iii) - Adjustment in respect of receipt of interest on loan given to Afcons Mideast and Afcons Infrastructure International Ltd. - HELD THAT:- It has been informed that the issue stands covered by the decision of the ITAT from A.Y.2001-02 to 2008-09 [ 2018 (5) TMI 508 - ITAT MUMBAI] Since, the ld. DRP has followed the initial order of the Tribunal in A.Y.1997-98 [ 2016 (2) TMI 1372 - ITAT MUMBAI] which has been followed in subsequent years wherein it was held that interest disallowed should be in respect of incremental loans given from 31/03/1996. Once the position from the earlier years has been settled that the opening balance of the loan is to be excluded for making the loans, then we do not find any infirmity in the directions of the ld. DRP which is in accordance with the direction of the Tribunal in earlier year. Therefore, the ground raised by the Revenue is dismissed. Disallowance of depreciation and written down value of speed boat - HELD THAT:- As decided in own case [ 2016 (7) TMI 1439 - ITAT MUMBAI] for the A.Y. 2001-02, A.Yrs. 2002-03 to 2005-06 and A.Yrs 2006-07 to 2008-09 machinery was purchased by the principal but the assessee had been vested with the possession of them and utilized them for its business.It is not disputed that the principal has debited the cost of machinery to the assessee's account and the assessee has capitalized it in its books of account. The Tribunal applying the ratio laid down in the decisions of Mysore Minerals Ltd [ 2000 (8) TMI 83 - SUPREME COURT] , Dilip Singh Sardarsingh Bagga [ 1992 (9) TMI 74 - BOMBAY HIGH COURT] and Varanasi Auto Sales [ 2010 (1) TMI 19 - ALLAHABAD HIGH COURT] dismissed the department's ground. Disallowance of professional fees paid for arbitration award - HELD THAT:- The Tribunal in A.Y.2005-06 .[ 2018 (5) TMI 508 - ITAT MUMBAI] has held that, firstly, the professional fees was incurred in respect of arbitration award and therefore, same was for the business of the assessee. Secondly, assessee was justified in claiming the said amount as expenditure in its profit and loss account and lastly, the Tribunal declined the observation of the ld. AO that since the income from arbitration award is excluded from the total income, therefore, professional fees incurred in this should be disallowed. This exact observation of the ld. AO as made in the present assessment year also has been rejected and accordingly, the ground raised by the Revenue is dismissed. 2023 (12) TMI 272 Unexplained money u/s 69A - cash deposits in bank account - HELD THAT:- We find that the assessee itself has admitted shortage of source in their cash flow statement filed before the AO. Therefore, from the above, it is undoubtedly clear that the assessee could not explain source for cash deposits to the extent of Rs. 6,62,783/- and thus, we are of the considered view that, there is no error in the reasons given by the CIT(A) to sustain this additions made towards cash deposits. Addition towards advance received from group concerns , it was an argument of the appellant that group concerns have paid advance in cash during demonetization period and deposited into IDBI bank account. In this regard, the appellant has filed necessary details including PAN nos. and confirmation letters from the group concerns to prove receipt of trade advance. AO has not disputed these facts, however made additions only on the ground that the assessee should not have accepted cash in specified bank notes after 08.11.2016. We find that this issue is covered in favour of the assessee by the decision of ITAT, Chennai Benches in the case of M/s. Micky Fireworks Industries vs ACIT [ 2023 (8) TMI 217 - ITAT CHENNAI] where the Tribunal under identical set of facts deleted additions made by the Assessing Officer, asheld that cash so received by the assessee is backed by sales carried out by the assessee as recorded in the books of accounts. Therefore, the source of cash is duly explained. The provisions of Sec.68 could be invoked only in cases when there was unexplained cash credit in the books of accounts maintained by the assessee. However, the assessee has duly identified the debtors from whom the cash was received and the same could not be disputed by lower authorities. The PAN of respective debtors as well as quantum of cash realized from each of them has duly been detailed by the assessee before Ld. AO during assessment proceedings. No defect has been pointed out in the books of accounts. In such a case, the credit could not be held to be unexplained cash credit. Appeal filed by the assessee is partly allowed. 2023 (12) TMI 271 Deduction u/s. 80P(2)(a)(i)/80P(2)(d) on the interest income received from the co-operative banks/bank deposits denied - Alternatively if the assessee is not eligible for claim of deduction u/s. 80P(2) then the cost of funds should be allowed to the assessee - HELD THAT:- Assessee has received interest from co-operative banks to which the revenue authorities have not been allowed deduction u/s 80P(2)(a)(i)/80P(2)(d) observing the latest judgment in the case of Totgars Co- operative Sales Society [ 2017 (7) TMI 1049 - KARNATAKA HIGH COURT] in which it has been held that the income by way of interest earned by the assessee co-operative society during the Assessment Years 2007- 2008 to 2011-12 on the investments made in the co-operative bank are not eligible for deductions under Section 80P(2)(d) character of the income does not change irrespective of the investments made in Co-operative Banks or otherwise and would always remain income from other sources and that only operational income would qualify for deduction u/s 80P. We hold that the assessee is not eligible for deduction u/s 80P on the interest income earned on its investments with the Co-operative Banks. Arguments of the ld. AR that the surplus funds or those funds invested by the assessee and interest income received on such deposits are eligible for deduction u/s 80P is also not sustainable because the income by way of interest earned by deposit or investment of idle or surplus funds does not change its character irrespective of the fact whether such income of interest is earned from a schedule bank or a co-operative bank and thus, clause (d) of Section 80P(2) of the Act would not apply in the facts and circumstances of the present case. Since during the course of arguments, the Ld.AR of the assessee took alternative ground that the cost of funds for earning the interest income has to be allowed, we concur with the Ld.AR of the assessee, that benefit of the cost of funds towards earning of the interest income has to be allowed. We noted that entire interest received has been taxed as income from other source. We are of the view that the fundamental principle under Income-tax Act being that only net income has to be taxed and not the gross income. Accordingly, the case is restored to the file of the A.O. with a direction to examine whether assessee has incurred any expenditure for earning interest income, which is assessed under the head `income from other sources . If so, the same (cost of funds) shall be allowed as deduction u/s 57 of the I.T.Act. This alternative ground is partly allowed for statistical purpose. 2023 (12) TMI 270 Disallowance of foreign exchange loss u/s. 43A - assessee has incurred foreign exchange loss towards arrangement of the LoC on purchase of fixed assets - CIT(A) has treated it as a capital expenditure and not to be treated as a revenue expenditure - HELD THAT:- The loss suffered by the assessee is directly linked with the purchase of fixed assets which is capital in nature. Though forex gain/ loss is arising on account of assurance for payments of capital assets are capital in nature which cannot be charged to the profit and loss account. Apex Court has held in the case of Tata Locomotive and Engineering Co. Ltd. [ 1966 (1) TMI 24 - SUPREME COURT ] that the forex gain on money accumulated to purchase capital asset being the first step for acquisition of capital asset is capital in nature and cannot be taxed. The assessee made advance payments through Letter of Credit is the first step for acquisition of capital asset because there was a direct link of LOC towards purchase of the fixed assets, therefore it will be treated as capital in nature. Section 43(1) has defined the actual cost of the assets. Therefore the actual loss suffered by the assessee cannot be charged to the profit and loss account. CIT(A) has rightly decided the issue in favour of the revenue. However, the AO is directed to give benefit of depreciation as per section 32 of the IT Act in the current year as well as in following years if there is effect on the following years. This issue is partly allowed for statistical purposes. Addition u/s 14A r.w.r. 8D - As argued Only the investments yielding non-taxable income have to be considered and not all investments - HELD THAT:- CIT(A) has dealt with this issue in detail however he has not considered the issue completely as per Rule 8D(2)(iii). The disallowance should be calculated as per Rule 8D(2)(iii) considering only the investments in which the assessee has received exempt income. In similar issue in the assessee s own case for the AY 2014-15 [ 2023 (9) TMI 108 - ITAT BANGALORE ] wherein held that while calculating disallowance under section 14A of the Act, only investment that have generated exempt income should be taken into consideration. This issue is allowed for statistical purposes. 2023 (12) TMI 269 Unexplained property - Sale proceeds of the land belonging to the assessee s wife and brother claimed to be credited to the assessee s bank account - Clubbing of income u/s 64 - HELD THAT:- The land purchased in wife s name can, in the conspectus of the case, be reasonably regarded as the assessee s property, in any case, money realized on it s sale as available to the assessee for his purposes. It is customary in Indian society to acquire property in wife s name with a view to securing her, both in terms of an asset and a source of income. Wife has no independent source of income, for her to acquire the said land. Even otherwise, it is apparent that the assessee is managing all the funds belonging to him and his wife, with there being transfers between their bank accounts with MEUCB. The assessee s explanation, to that extent, must therefore be regarded as acceptable. Credit in respect of sale of her agricultural land would be available to the assessee even if she is an assessee under the Kerala Agricultural Income Tax Act, 1950, returning/reporting agricultural income thereunder inasmuch as the assessee, having access to those funds, could certainly have used them for his purposes, so that the source can be regarded as satisfactorily explained. As a corollary, all the income arising to the assessee s wife would stand to be assessed in his hands, statutorily mandated u/s. 64 of the Act. This shall obtain even where Mercy Kurian is an assessee under the 1950 Act. Agreement with assessee s brother, there is firstly nothing to show that the same was produced and relied upon before the Revenue authorities, whose orders bear no reference thereto. Why, Sh. Markose could not answer as to why and how this agreement was entered into 10 months before the actual purchase, with there being nothing to show that the purchase agreement had been entered into, or advance therefor made, at the relevant time. In fact, the copy on record not reflecting the back-side of the first page, the same, called for by the Bench to ascertain the said date, was not produced. The agreement states of it being in view of the Kerala Land Ceiling Act. The argument is not supported by any material, even if a sworn affidavit by the assessee s brother qua his total land holding, for us to take the same with any seriousness. In fact, being against public policy, the same cannot be regarded as a valid agreement in law. The sale proceeds on land sale have expectedly, and contrary to what stands stated, gone to the respective bank accounts of the sellers, being sba/cs 5308 and 5309 (with MEUCB), i.e., of the assessee s brother and wife respectively. There is further no transfer of funds between the bank account of the assessee (sb 5026) and his brother, Sunny Kutty, even as the former bears credit for the sale of his 8.74 acres of land. Management of an estate/business, assuming so, would not, by itself amount to ownership of the property/sale proceeds. The assessee s case qua his brother s land is without merit and, in any case, unproved. Its rejection by the Revenue is, accordingly, upheld. The assessee gets part-relief. AO has, in computing the addition, factored the impact of the bank balances (opening and closing) of the assessee s brother s and wife s bank accounts included in the CFS. The addition sustained, accordingly, shall not be for Rs. 26,53,500, but adjusted for the balances in the brother s bank account/s. For agricultural income, being on cardamom , the same admittedly including that in respect of 17.68 acres of cardamom plantation held by the assessee s wife and brother, the AO, having excluded the sale proceeds of their lands in reckoning the source of funds with the assessee, has, per contra, excluded the income qua their lands in the CFS, which sums thus become the assessee s taxable receipt. We have found the assessee s claim admissible qua his wife. Agricultural income to that extent would accordingly be accepted, though would stand to be included in the assessee s income for rate purposes. This sums our decision in principle. In the absence of any credible material to exhibit and prove the agricultural income, we consider it appropriate that the income, for each year, be adopted on the basis of the estimate of agricultural income on cardamom as provided by the State Agricultural Board or University or that adopted by the bank while processing and advancing agricultural loans for cardamom plantation. That is, and, further, for the category (A, B, or C) of the land/s owned by the assessee at Anaviratty and Chakkupallom villages in Idduki District. Income shall correspond with the harvest period; the Anaviratty village land having been sold on 02.12.2010. Of course, where the assessee is also an assessee under the State Agricultural Income Tax, the income assessed under the said Act or, in its absence, returned there-under, shall be adopted for the purpose of assessment of agricultural income arising to the assessee and his wife, subject, of course, to the extent reported. The excess, if any, and that ascribed to brother, shall be taxed as unexplained money. We decide accordingly. Sale of agricultural land, that is, to the extent of 1.74 acres of land (out of 8.74 acres cardamom plantation), sold separately to one, Nikhil John - CIT(A) has, in computing the % age of total consideration ascribed to land, being in fact at 63%, wrongly worked it at 37%, which is in fact for building. The same would not, however, in any manner, impact the final conclusion, which is based on, firstly, the assessee s case being wholly unproved and, two, of land, forming the major proportion of the total consideration, fetching over twice its regular price. Building, a depreciable asset, its valuation at 37% of the total consideration, as pointed out by the AO, is significant. Adjusting it for the land value, being over twice the normal, i.e., reckoned w.r.t. the normative land rate, the same would be, over 55%, reinforcing the inference drawn of the land sold being, as described in the sale document, appurtenant thereto. Investment in land at Meenachil Village, Pala - HELD THAT:- The basis of the addition is the Agreement dated 14.6.2011, found and seized during the search on 25.9.2014. Besides attracting the statutory presumption as to the truthfulness of its contents u/s. 292C of the Act, the same is admitted as true by Shri Devasia vide his deposition u/s.132(4) dated 25.9.2014. The same, an unregistered document, executed on stamp papers of Rs. 100, has in fact been acted upon; being also attended by advance payment of Rs. 50 lakhs, mentioned therein, followed by registered sale deeds in favour of the three buyers between December, 2011 and February, 2012, for an aggregate of Rs. 93.25 lakhs. The investment is in fact admitted, and the issue before us is the valuation of assessee s share, claimed, without any material, even if indirect or corroborative, of the assessee s share being, in value, lower than per the average rate. The agreement, reproduced in the assessment order, speaks of a gross consideration for the entire 177.44 cents of land sold by 20 persons. That apart, the other two buyers have also claimed their investment as per the average rate. Under the circumstances, we find no infirmity in bringing the shortfall in investment to tax. Income @ 35% stated to arise on sale of latex, arises on application of r. 7A of the Income Tax Rules, 1962 - The said rule is applicable only for manufacture of rubber, and not for sale of latex, the whole of which is to be regarded as agricultural income. The assessee, relying for the purpose on sale bills, has, however, not produced the same at any stage; rather, taking a different stand before the ld. CIT(A). The assessee s claim is allowed subject to production of the sale bills for the relevant year. The assessee is also at liberty to exhibit before the AO, i.e., while giving appeal-effect to this order, that agricultural income of Rs. 10.19 lacs includes the impugned income of Rs. 2.91 lacs, i.e., as stated before the ld. CIT(A), inasmuch as he has not adjudicated thereon. The onus though would be on the assessee. On the flip side, that would though mean that the assessee has no explanation for the source of Rs. 2.91 lacs found credited separately in his bank account. Also, we observe, non-deduction of the corresponding expenditure, which would need to be explained or, as the case may be, estimated. Income from other sources - received by way of sale of scrap of fixed assets, viz., furniture, machinery, etc. belonging to a firm, Greenland Rubbers, brought to tax u/s 56(1) - CIT(A), in appeal, directed the reduction of the said amount from the relevant block/s of assets where depreciation has been claimed thereon. It is this condition that is the cause of the assessee s grievance. The ld. CIT(A) has, as apparent, agreed with the assessee in principle, i.e., of it being a capital receipt. The rider that the depreciation should have been claimed and allowed is not necessary. This is as the reduction is to be only from the written down value (WDV) of the relevant block/s of assets, which would, in case of claim of depreciation, have the effect of reducing its WDV. Only the excess realised over the WDV is assessable as a short-term capital gain u/s. 50 of the Act. The assessee has nowhere stated the WDV of the relevant block/s of assets. The impugned receipt is thus taxable where and to the extent it exceeds the same. The onus to exhibit the WDV of the relevant block/s of assets is on the assessee. We decide accordingly. Assessment u/s 153A - addition having its basis in the incriminating material found and seized in search as being maintainable section 153A proceedings - the appellants are maintaining several bank accounts and, at the same time, not maintaining any accounts for any of their incomes/receipts. On investment in immovable property/s being found in search, corroborated by statements on oath u/s. 132(4) of the Act, CFS for different years were submitted in explanation. All the additions arise on account thereof. The investment in Pala property is during fy 2011- 12, relevant to AY 2012-13. The same, therefore, where not satisfactorily explained, is to be assessed only for that year. The assessee/s, however, in a bid to explain the same, has built-up cash from an earlier period. Where and to that extent, therefore, the receipts are shown to arise during the earlier period, their taxability under the Act has to be with reference to the provisions applicable for that year, i.e., to the extent found taxable, and taxed for that year. The incriminating material found for a period could result in assessment of income for more than one year. However, where and to the extent the Revenue does not admit a receipt, the same has to be excluded from the cash flow for that year, and only the closing balance so arrived at carried forward to the following year, determining the short-fall, if any, for the year for which the investment/s has been found to be made. Where the closing, or for that matter, cash balance during the year, is negative, no addition shall arise for that year in the absence of any incriminating material for that year, and the cash balance carried forward to the following year would be nil. This negative balance can be taxed only in regular assessments or s. 147 assessment for that year. The AO shall, nevertheless, verify and determine the CFS, prepared date-wise, considering all the bank accounts, duly verified, for each of the years under reference, including the intervening years,carrying forward the closing cash as determined, where positive, or, as the case may be, at nil. Payment of income tax, inasmuch as the same is already in the know of the Revenue, where apparently not explained on the basis of the disclosed income, can also lead to s. 153A assessment, though, in absence of any other material, limited to the assessment, in whole or in part, for the said sum only. Decision - The assessments are, accordingly, setting aside the impugned orders in part, set aside to the file of the AO to re-work the additions, if any, for the years subject to s.153A assessment. He shall, in this, be guided by our adjudication herein. The assessee/s shall furnish all the information and workings as required by the AO and, further, within a reasonable time, i.e., participate and cooperate in the proceedings. Even otherwise incumbent, this becomes mandatorily so in view of the directions by the Hon'ble High Court, so that the proceedings are completed in a time bound manner 2023 (12) TMI 268 Addition u/s 43CA - difference in the value taken by the Registration Authority for the purpose of stamp duty and the actual sale consideration - HELD THAT:- The payment through cheque is required to ensure that the agreement to sell, if any, relied upon by the assessee has been actually executed and acted upon as back dated cheque payment cannot be claimed by an assessee. In the case in hand, though some of the parties had not made initial payment i.e. on or before the date of agreement through cheque/banking mode, however, the facts show that the some of the payments were made in each case much before the execution of the sale deed. Under the circumstances, it cannot be said that the agreement to sell relied upon by the assessee are bogus, rather, the payment of consideration in this case has been settled and paid as per the terms of the agreement. Under the circumstances, in the peculiar facts and circumstances, it will not be justified to adopt the stamp duty value as on the date of execution of the sale deed, rather, the object and purpose of the provisions will be achieved by taking the stamp duty value as on the date of execution of the agreement in the light of the peculiar facts and circumstances of this case. Moreover, the issue is otherwise decided by the Coordinate bench of the Tribunal in the case of Disha Construction [ 2021 (6) TMI 614 - ITAT MUMBAI] wherein Tribunal further relied upon the decision of Swananda Properties (P) Ltd [ 2019 (9) TMI 1270 - BOMBAY HIGH COURT] held that the provisions of Sec.43CA would not have retrospective application and accordingly, do not apply to agreement executed prior to its introduction. Thus since the provisions to section 43CA have been introduced w.e.f. 01.04.2014 and the agreement to sell was entered prior to the 1 st April 2014 and therefore, the condition of payment or part payment of consideration on or before the date of agreement cannot be imposed back-dated as the assessee could not have foreseen the introduction of section 43CA. Thus additions made by the Assessing Officer/CIT(A) on the above issue are not sustainable and the same are accordingly ordered to be deleted. Additions on account of concealment of sale consideration - Assessee submit that in fact the flat no. 2 was sold by the land-owner and not by the assessee and similarly flat no. 8 was also transferred by way of gift by the land-owner and not by the assessee - HELD THAT:- We find that since the sale consideration was not received by the assessee as the said flat was sold by the land-owner as per the development agreement and not by the assessee, hence, the addition made by the Assessing Officer on this issue is not sustainable. In view of our findings given above, the additions made by the Assessing Officer/CIT(A) in this issue was not sustainable and the same are accordingly ordered to be deleted. 2023 (12) TMI 267 Revision u/s 263 - as per CIT AO has not verified transaction of sale / purchase of shares offered to tax as Income from Capital Gain, disallowance of expenditure relatable to exempt income u/s. 14A of the Act r.w.r.8D of the Income Tax Rules, 1962 and deduction claimed u/s. 35D of the Act, towards preliminary expenses - HELD THAT:- Disallowance u/s. 14A of the Act r.w.r.8D of the Income Tax Rules, 1962, and deduction u/s. 35D of the Act, the Ld.Counsel for the assessee fairly agreed that the order passed by the Ld.CIT u/s. 263 of the Act, survives on these two issues and thus, we are inclined to uphold the findings of the Ld.CIT on the issue of disallowance u/s. 14A of the Act, and deduction u/s. 35D of the Act. Correct head of income - assessment of profit derived from purchase sale of shares, the assessee has declared profit under the head short term capital gains - CIT was of the opinion that profit derived from sale of shares is assessable under the head profits gains of business and profession - It is very clear that the assessee was maintaining two portfolios i.e. one for investment and another for trading and there was a clear demarcation in the books of accounts of the assessee in respect of both segments. Therefore, we are of the considered view that the assessee has rightly declared profit derived from purchase sale of shares under the head short term capital gains . But, it is only the Ld.CIT wrongly invoked his jurisdiction u/s. 263 of the Act, without pointing how why assessment order passed by the AO on the issue of profit derived from purchase sale of shares is incorrect and erroneous in so far as it is prejudicial to the interest of the Revenue. This, position is clarified by the CBDT in their Circular No.4/2007 dated 15.06.2007, where, various parameters have been prescribed for verification of share transactions and none of parameters prescribed by the Board is adversely affecting the transactions of the assessee. Board has very clearly stated that the tax payers can have two portfolios i.e. one for investment and another for trading, but there should be clearly demarcation in the books of accounts in respect of both portfolios. In this case, the assessee has filed all evidences to prove that it was having two portfolios and maintaining separate records for investment portfolios and trading portfolio. Therefore, we are of the considered view that the assessee has rightly declared short term capital gains towards profit derived from purchase sale of shares, and thus, the assumption of jurisdiction by the Ld.CIT fails on this issue. Order of the Ld.CIT u/s. 263 of the Act, is valid, in case, there is no enquiry at all. In this case, as we have already stated that it is not a case of lack of enquiry. Therefore, case law relied upon by the Ld.DR does not apply to the facts of the present case.we are of the considered view that the assessment order passed by the AO is neither erroneous nor prejudicial to the interest of the Revenue. CIT without appreciating the facts simply invoked his jurisdiction and set aside the assessment order passed by the AO u/s. 143(3) of the Act . 2023 (12) TMI 240 Penalty u/s 271(1)(c) - disallowance of claim of loss - AO received information from DDIT (Investigation), exhibiting the fact that certain entry providers and hawala operators involved in providing entries of bogus LTCG, STCL and bogus business loss and AO issued notice u/s 148 - HELD THAT:- A perusal of the assessment order would reveal that AO has nowhere demonstrated as to how the loss claimed by the assessee is bogus. He only issued a show-cause notice and the Assessee withdrew its claim just in order to avoid litigation with Department. But when the Department intended to impose a penalty upon the assessee u/s 271(1)(c), the assessee has contested the issue in the penalty proceeding. AO instead of entertaining the arguments on merit summarily rejected it on the ground that all these issues must have been raised during the assessment proceedings and must have been rejected. He observed that this penalty proceeding cannot take the character of assessment and cannot sit in judgment. It is pertinent to observe that the addition is only on the admission of the assessee that it withdrew its claim. Nowhere, it has been demonstrated that the claim of the assessee was false or bogus. Explanation 1 to section 271(1)(c) provides that, if the assessee fails to offer an explanation or offers an explanation which is found by AO to be false, but now in the present case, the assessee has an explanation and it has buttressed this explanation with the following documentary evidence, i.e.Trading of shares was done through broker in a recognized stock exchange, Payment and receipt is through banking channel, Documentary evidence for transactions like contract note, demat statement, and bank statement are enclosed. Assessee offered the loss voluntarily to avoid litigation and requested the Assessing Officer to not initiate penalty proceedings u/s 271(1)(c), paid the tax due and challan copy is enclosed. No appeal is filed. These documents have not been held as false either by the AO during the assessment proceeding or during penalty proceeding. Therefore, the assessee does not deserve to be visited with penalty. Assessee appeal allowed. Customs 2023 (12) TMI 266 Permission to redeem the confiscated gold subject to payment of redemption fine - HELD THAT:- The Impugned Order proceeds on the premise that gold as a commodity would not fall within the ambit of prohibited goods as defined under Section 2(33) of the Customs Act, 1962. Dealing with an identical question, a Division Bench of this Court in NIDHI KAPOOR, SUPRIYA, SUDHA MURTHY, MR. JASMEET SINGH CHADHA AND MS. SHANAZ MALIK VERSUS PRINCIPAL COMMISSIONER AND ADDITIONAL SECRETARY TO THE GOVERNMENT OF INDIA ORS., JT COMMISSIONER OF CUSTOMS, IGI AIRPORT T-3 DELHI, COMMISSIONER OF CUSTOMS, IGI AIRPORT, NEW DELHI, UNION OF INDIA [ 2023 (8) TMI 1008 - DELHI HIGH COURT] had held that It is the FTP formulated in terms of Section 5 of the FTDR which makes the import of gold subject to RBI regulation. This stipulation thus clearly evidences the intent of the Union Government to confer RBI with the authority to formulate regulatory provisions in relation to the import of gold. Since this power stands bestowed upon the RBI by the Union Government and forms an integral part of the FTP itself, one need not look for or undertake an expedition to discern a power independently vested in the RBI to issue appropriate directives and circulars regulating the import of gold. In view of the conclusions as recorded in Nidhi Kapoor, the order impugned cannot be sustained - petition allowed. 2023 (12) TMI 265 Seeking grant of bail - valuation of gold biscuits recovered from the possession of applicant - prohibited substance or not - HELD THAT:- Taking an overall view of all the facts and circumstances of this case, the nature of evidence and also the absence of any convincing material to indicate the possibility of tampering with the evidence, without expressing any opinion on merits of the case, this Court is of the view, that the applicant may be enlarged on bail. Bail application allowed subject to conditions imposed. 2023 (12) TMI 264 Refund of excess amount - Benefit of concessional rate of basic custom duty - goods are imported from Republic of Singapore - failure to claim the benefit of notification No. 01/05 dated 01/05/2018, due to an inadvertent mistake - HELD THAT:- It is an admitted fact that this Tribunal has issued a specific direction to the adjudication authority to first decide the request for re-assessment of Bill of Entry on merit and thereafter decide the refund application. However by rejecting the claim of the respondent on the same ground that there is an omission on the part of respondent to challenge the initial assessment amounts to reviewing the order of this Tribunal and it is perse illegal and unsustainable. Moreover if appellant was aggrieved by above final order of this Tribunal, Appellant ought to have challenged it before any high forum. In the absence of any appeal challenging the ibid final order, Appellant is bound to follow the direction of this Tribunal and consider the request for re-assessment on merit. There is no merit in the appeal challenging the findings of the Appellant Authority - Appeal dismissed. 2023 (12) TMI 263 Classification of imported goods - LG Watch W7 - classifiable under CTH 91021900 as claimed by the appellant or is classifiable under CTH 85176290 as confirmed vide the Order-in-Original? - eligibility to claim concessional rate of basic customs duty under serial no. 955 of the Notification No. 152/2009 dated 31.12.2009 - Confiscation - penalty. Whether LG Watch W7 as imported by the appellant is classifiable under CTH 91021900 as claimed by the appellant or is classifiable under CTH 85176290 as confirmed vide the Order-in-Original? - HELD THAT:- Once admittedly the impugned goods work on internet, it is not acceptable that the essential character of the impugned goods remains that of time keeping only. Thus it is held that section notes and chapter notes of Chapter 85 are most relevant for the purpose of classifying imported G-Watch (Smart Watch), it being a device capable of transferring data and even making or receiving phone calls which have not been the intent of the section notes and chapter notes of Chapter 91. Hence, First point of adjudication stands decided in favour of Revenue holding the right classification for the impugned imported product is 8517 6290. Whether the appellant is eligible to claim concessional rate of basic customs duty under serial no. 955 of the Notification No. 152/2009 dated 31.12.2009? - HELD THAT:- The appellant has wrongly classified the goods under 9102 1900. These are held classifiable under Tariff Entry 8517 6290. From the Notification No. 152/2009-Cus. dated 31.12.2009, we observe that the entry at serial no. 955 thereof gives the benefit of exemption from customs duty to the goods falling under Tariff Entry 9102 to 9103 only. As already held above the goods are classifiable under 8157 6290, the benefit of the said notification shall not be available to the appellant. The certificate for origin is not sufficient to extend the benefit of nil rate of duty. As the origination from Korea is not the criteria of the Notification no. 152/2009-Cus. but such goods originating from Korea as are mentioned in the table under the said notification. Apparently and admittedly the goods classifiable under 8517 6290 are not mentioned in the said table. Hence, the benefit of nil rate of duty shall not be available to the appellant - the second point of adjudication is also decided against the appellant. Whether the imported goods are liable for confiscation and the appellant is liable for being penalized? - HELD THAT:- The goods have wrongly been classified by the appellant and the benefit of exemption of duty has also been wrongly claimed but we are aware that imposition of penalty is a penal consequence of some intentional mala fide act. The onus was of the department to prove that the wrong classification was an intentional act of the appellant to wrongly claim duty exemption. Mere mention of wrong tariff or claiming benefit of an ineligible exemption notification cannot form the basis for confiscation of goods - In the present case, it is observed that the appellant is convinced of the fact that the product imported has mechanical hands and quartz movements as identical to a wrist watch and that this apparatus is also wearable on wrist. It is a clear case of misunderstanding on part of the appellant. Question of invoking penal provisions does not at all arise in this circumstance. Resultantly, the third point of adjudication decided in favour of the appellant. The product imported is a Smart Watch which is classifiable under 8517 6290. The appellant has wrongly classified it under 9102 1900. Thus the benefit under exemption Notification No. 152/2009-Cus. was not available to products of 8517 tariff entry hence it is held that same has wrongly been claimed. The order under challenge to the extent confirming demand of customs duty is therefore hereby upheld - Appeal allowed in part. 2023 (12) TMI 262 Seeking permission for re-export of goods on imposition of redemption fine and penalty - quantum of penalty - inadvertent import of battery scrap which was declared at the time of import as Cast Iron Scrap - restricted goods or not - HELD THAT:- Considered, the flow of the decisions in the recent past on redemption fine on re-export is in favor of assessee based on the proposition that on reexport no import takes place on the soil of India and therefore the goods are not redeemed within the territory of India and therefore the redemption fine no more remains imposable. This Court is inclined to agree with the proposition of the learned advocate based on the above quoted decisions and is inclined to do away with the redemption fine of Rs. 3 Lakhs imposed at the time of re-export of goods. However, considering the nature of offending goods which are covered under Hazardous Substances Act, the imposition of fine of Rs. 1 Lakhs appears proper. Even if it is conceded that Section 112(a) requires mens rea, it is trite law that quoting improper Section cannot be reason not to impose penalty when residuary penal Section like Section 117 exist in the legislation, which does not require mens rea . Considering the offending nature of the goods which can create environment perils for Indians, the wrong quoting of section by the department should not come in the way of imposition of penalty, the same is found reasonable and is maintained, in the facts and circumstances of this matter. Appeal allowed. 2023 (12) TMI 261 Violation of principles of judicial discipline - Smuggling - foreign origin betel nuts - foreign origin black pepper - burden to prove - HELD THAT:- It is observed that the impugned goods i.e. Betel Nuts and Black Pepper are not the goods specified or notified under Section 123 of the Customs Act, 1962. Thus the burden to prove the smuggled nature of these goods lies on the Custom Authorities as held by the Tribunal in the case of BABOO BANIK VERSUS COMMISSIONER OF C. EX. CUS., LUCKNOW [ 2004 (7) TMI 482 - CESTAT, KOLKATA ]. Tribunal in the case of BIJOY KUMAR LOHIA VERSUS COMMISSIONER OF CUSTOMS (PREV.), PATNA [ 2005 (11) TMI 306 - CESTAT, KOLKATA ] has held that the local trade opinion cannot take the place of the legal evidence.. No case has been made out for the seizure and confiscation of the Black Pepper or Betel Nuts is made out as no evidence has been placed on record to establish the foreign origin of these goods, or of illegal importation of the same. The Tribunal in the case of COMMISSIONER OF CUSTOMS (PREVENTIVE) , LUCKNOW VERSUS SHRI SHANTI BISWAS [ 2020 (9) TMI 525 - CESTAT ALLAHABAD ] given a clear finding to the effect that there was no evidence to establish that the goods which were moved within the country were smuggled in the country and therefore has held that action on the part of the revenue to detain the said goods and not released the same in spite of the order of Commissioner (Appeals) is an action of high handedness. It was directed that the black pepper and Betel nuts being released to the respondent immediately. When there was clear-cut finding of the Tribunal that there existed no evidence that black pepper and betel nuts were smuggled into the country. The entire proceedings subsequently on issuance of show cause notice and adjudication thereof is contrary to the principles of judicial discipline. There are no merits in the impugned order of Commissioner (Appeals) - appeal allowed. Securities / SEBI 2023 (12) TMI 295 Request to place on record a compilation of documents - Writ petitions by minority shareholders - HELD THAT:- This Court is apprised of the fact that the proceedings are listed tomorrow (29 November 2023) before the High Court of Judicature at Bombay. Hence, it is not necessary for this Court to entertain the Special Leave Petition at this stage, particularly bearing in mind what has been observed in paragraphs 2 and 3 of the earlier order [ 2023 (12) TMI 241 - SC ORDER] which read as follows: 2 Since the impugned orders of the High Court are purely of an interlocutory nature, we are not inclined to entertain the Special Leave Petitions under Article 136 of the Constitution. However, the parties would be at liberty to pursue their remedies in accordance with law on all counts after the final judgment of the High Court. Should it become necessary for SEBI to raise the issue of interpretation of Regulation 29 at a future date, that issue is kept open to be agitated. SLP dismissed. 2023 (12) TMI 260 Unlawful gains by fraudulent and manipulative strategy made by Reliance Company - responsibility of noticee no. 2 i.e. the Managing Director - violating Section 12A of the SEBI Act r/w Regulations 3 and 4 of the SEBI PFUTP Regulations - vicarious liability on both criminal and civil liability for contravention of the SEBI Act, Rules and Regulations - Liability against violations committed by the company - WTM issued directions to disgorge the unlawful gains of Rs. 447.27 crores along with interest @12% per annum and further prohibited the Company and the 12 entities from dealing in equity derivatives in the F O segment of the stock exchanges directly or indirectly for a period of 1 year - Whether Section 27 of the SEBI Act prior to its amendment w.e.f. March 08, 2019 provided for vicarious liability only in respect of criminal proceedings initiated against a Company for contravention of the SEBI Act - Allegation of manipulative scheme - HELD THAT:- There is a distinction between offence and contravention . Consequently, one has to see the intention of the Parliament when it uses the word offence or where it uses the word contravention . Section 27 prior to the amendment i.e. prior to March 08, 2019 had no application to civil liability and only after the amendment w.e.f. March 08, 2019 that Section 27 provided for vicarious liability on both criminal and civil liability for contravention of the SEBI Act, Rules and Regulations. Finance Act, 2018 did not give retrospective effect to this amendment nor can such effect be inferred by necessary implication from the language of the amendment. The amendment, being substantive in nature can only be prospective and cannot have any retrospective application. The impugned order holding the amendment to be clarificatory in nature is thus patently erroneous. The meaning of the term offence is required to be understood in the context in which it is used in the legislation. A suggestion that the term offence as occurring in the SEBI Act also covers civil proceedings is at odds with the range of provisions in Chapter VII of the SEBI Act which is a facet that was not even examined by the AO, much less ruled upon. We find that parliament was conscious of the usage of the two words contravention and offence in the SEBI Act and consciously chose to replace offence with contravention explicitly, in order to enlarge the scope of Section 27. Section 27 of the SEBI Act as it stood prior to the amendment did not apply to civil liability and, therefore, the Managing Director could not be penalised by SEBI u/s 27 of the Act. It is not necessary for us to deal with the issue as to whether the Managing Director could be made vicariously liable under Section 27 of the SEBI Act for contravention of the Section 12A and Regulations 3 and 4 of the PFUTP Regulations. Board of Directors had specifically directed the two officers to explore, identify and implement optional avenues of funding and thereafter on 19.11.2007 the Board of Directors were informed by these two persons that the funds are being raised by disposing 5% of RPL shares through trades in RPL securities. In view of this impeccable evidence, notice No. 2 had discharged the burden under Section 27 of the Act and the onus shifted upon SEBI to prove that notice No. 2 was complicit. The finding that the appellant was complicit to the violations committed by the company and, therefore, liable under Section 27 of the Act is patently erroneous and is based on surmises and conjectures. Specific denial was made by noticee no. 2 of his involvement in the trades executed by the two officers of the company. We also find that the AO in paragraph 64 holds that it is relevant to examine the role of the Managing Director in terms of direct involvement or knowledge with regard to the manipulative scheme or trades undertaken by the company. We find that the AO failed to establish either direct involvement or knowledge of the Managing Director with regard to the trades undertaken by the company and, therefore, the finding that the Managing Director was complicit to the violations committed by the company through its two officers is based on surmises and conjectures and on the basis of the figment of his imagination. The burden that the Managing Director of the Board of Directors exercised all due diligence was discharged and, therefore, the onus shifted back to SEBI to show that the Managing Director was responsible for the execution of the trades in question. In the absence of any finding being given by the AO establishing direct involvement or knowledge of the Managing Director in the execution of the trades the finding that the Managing Director was complicit in the execution of the trades with the two officers is purely based on surmises and conjectures. Thus, on this score noticee no. 2 i.e. the Managing Director cannot be held responsible for the execution of the shares in the facts and circumstances of the present case. The limited role played by the Board was only to take note of the transactions after they had been executed by the two senior executives. Without considering the findings of the WTM the AO in the impugned order has misdirected itself in holding that the Managing Director was responsible under Section 27 of the SEBI Act merely on the ground that he was the Managing Director. Assuming that Section 27 of the SEBI Act is applicable for civil proceedings, we find that the requirement to impute a vicarious liability is not satisfied. The law is well settled that the mere fact that a person holds a designation of Managing Director does not suffice for imputing a vicarious liability to such person. It has been repeatedly held that the proof of active role in the alleged contravention in issue must be demonstrated by clear and concrete evidence of his active role coupled with criminal intent as a necessary pre-condition for affixing vicarious liability. Board of Directors in a company is supreme. The Managing Director reports to the Board. The Board has the full authority to delegate any function to any officers of the Company to the exclusion of the Managing Director. The contention of the respondent that the Managing Director is responsible for the day to day affairs of the Company and the officials report to him and, therefore, the Managing Director is responsible is deemed to be in the knowledge of the transactions is not applicable in the case in hand, especially when the Board had specifically authorised the two senior most officials to execute the trades in question. We also find that in the instant case the two officials have reported to the Board and not to the Managing Director. AO in the impugned order does not arrive at any conclusion that the appellant was involved in the actual conceptualisation and execution of the alleged trades by RIL. We are of the opinion, that whereas the AO recognises that knowledge by the appellant was a pre-requisite for a finding that noticee no. 2 was liable for RIL s alleged violation yet without giving a conclusive finding has travelled beyond the show cause notice to conclude in paragraph 72 of the impugned order that noticee no. 2 had implicit knowledge of the alleged trades and authorised the implementation plan. The AO further went on to hold that it is highly unlikely that noitcee no. 2 was not aware of the execution of the trades. The findings given by the AO in our opinion is purely based on surmises and conjectures. In this regard, the word complicit means involvement with others in an activity which is unlawful. On the other hand, the word implicit is suggestive though not directly expressed. Thus, in the absence of any specific finding by the AO on noticee no. 2 complicit involvement in the execution of the implementation plan or in the execution of the trades, the AO cannot dwell into surmises and conjectures and base its findings on presumption to hold that the noticee no. 2 was implicitly involved in the transactions on the ground of being a Managing Director and which implies a high level of accountability of knowledge of overall functioning of the Company. The burden under Section 27 was discharged by noticee no. 2 and the AO has miserably failed to prove that noticee no. 2 was involved in the execution of the trades carried out by two senior executives. Inordinate delay in the initiation of the proceedings against the noticees - Both noticee nos. 3 and 4 are involved inter alia in the business of construction of building, infrastructure, setting up of a Special Economic Zone (SEZ) and acquisition of properties and invested their idle funds by lending the same by way of short term inter corporate deposits to other companies in order to earn interest and, if necessary, also avail inter corporate deposits from other companies by paying interest - After 10 years the show cause notice dated 21.11.2017 was issued alleging that noticee nos. 3 and 4 were promoted by the Reliance Group and that noticee nos. 3 and 4 by financing the monies to Vinamra were complicit and aided and abetted the manipulation of the trade executed by RIL through its 11 agents - AO has rejected the contention of the appellants holding that there is no delay on the ground that SEBI had taken an internal decision to await the Section 11B proceedings against RIL and its agents before taking further action in the matter. HELD THAT:- The Limitation starts running from the day the impugned order is passed. Limitation order does not stop on the whims and fancies of a regulator. The regulator cannot stop the clock on the ground that they would await the decision in proceedings initiated u/s 11B before taking further action in the matter. In our opinion, there is no legal bar of initiation of adjudication proceedings during pendency of Section 11B proceedings. In our opinion, adjudication proceedings and Section 11B proceedings can be held in parallel. There has been an inordinate delay in the issuance of the show cause notice. Even though there is no period of limitation prescribed in the Act and the Regulations for issuance of a show cause notice and for completion of the adjudication proceedings, nonetheless, the authorities are required to exercise its powers within a reasonable period Time starts to run from the date of commission of the alleged violation. The respondents being aware of this fact and having knowledge of the alleged transactions chose deliberately not to initiate proceedings and, consequently, the action of the respondents cannot be justified by initiating a belated show cause notice. There is a violation of principles of natural justice in not supplying the documents to noticee nos. 3 and 4 which documents were relied upon in the show cause notice. We find that noticee nos. 3 and 4 had repeatedly addressed letters to SEBI on 11.06.2018 and 25.06.2018 requesting certain documents which were specifically mentioned in the show cause notice. Some of these documents were provided by SEBI vide letter dated 17.06.2019 and 08.03.2019. The documents which were not provided were specifically again asked for which also included a copy of the investigation report. As decided in T. TAKANO VERSUS SECURITIES AND EXCHANGE BOARD OF INDIA ANR. [ 2022 (2) TMI 907 - SUPREME COURT] investigation report is an intrinsic component of the Board s satisfaction for determining whether there has been any violation of the regulations and that the investigation report forms the material on the basis of which a show cause notice is issued. Since the show cause notice is on the basis of the investigation report there was an obligation imposed upon the respondent to provide the documents asked for by the appellants which they failed to supply. Non supply of the documents was violative of the principles of natural justice. We are also of the opinion that prejudice caused because of non-disclosure of the relevant material was writ large. On merits finding has been given by the AO that on a combined reading of the Facility Agreement and Agency Agreement it can be inferred that noticee nos. 3 and 4 had prior knowledge of the scheme of alleged manipulative trades by RIL and that noticee nos. 3 and 4 were fully aware that the funds given by them to Vinamra was meant for financing the alleged trades in question and, therefore, noticee nos. 3 and 4 aided and abetted in the manipulative scheme. This finding in our opinion cannot be sustained as Facility Agreement was signed on August 04, 2007 and September 22, 2007. The execution of these documents is not disputed nor there is any allegation that these agreements were manufactured for the purpose of this case. The starting point for the alleged manipulative scheme by RIL was the decision taken in an around October 30, 2007 to sell RPL shares. These facts are noted in paragraph 26 of the impugned order. On or before October 30, 2007 noticee no. 3 had already advanced funds to the tune of Rs. 625 crores and noticee no. 4 had loaned an amount of Rs. 45 crores on or before October 30, 2007. We are of the opinion, that as on the date of the execution of the Facility Agreement it was not possible for noticee nos. 3 and 4 to have knowledge that RIL would sell shares in the cash segment in November 2007 and that RIL would take positions in the futures segment through its agents. There is no evidence to show that prior to October 30, 2007 the decision of RIL to sell shares of RPL and appoint 12 agents was known to noticee nos. 3 and 4. Execution of the Facility Agreement had nothing to do with the Agency Agreement which came two months later and, therefore, the Facility Agreement and the Agency Agreement cannot be read together. The two agreements are wholly unconnected and cannot raise any kind of an inference as held by the AO in the impugned order. The evidence that has been brought on record does not indicate that noticee nos. 3 and 4 could have known in August / September 2007, namely, at the time of execution of the Facility Agreement that RIL would decide in end of October to sell the RPL shares or that RIL would take position in the November futures through its agents or that RIL would enter into agency agreements with the 12 agents or that RIL would trade in the last 10 minutes on November 29, 2007 in such a manner so as to suppress the price of the RPL shares. Thus, in our opinion, when the Facility Agreement was executed, noticee nos. 3 and 4 could not have known that RIL would enter into the cash segment or would take positions in the November 2007 futures. Assumption / presumption drawn by the AO that the Facility Agreement was entered into solely for the purpose of funding RIL transactions in the November 2007 futures market is wholly erroneous. Pursuant to the Facility Agreements ICDs were placed as early as on September 2007 much before the subject transactions took place and continued to be placed from time to time till March 2008. The finding given by the AO that Rs. 2,775 crores advanced by noticee nos. 3 and Rs. 550 crores advanced by noticee no. 4, to Vinamra were utilised by the 12 agents for the purpose of funding the manipulative trades of RIL is patently erroneous and cannot be sustained. The ICDs given by noticee nos. 3 and 4 were from September to March whereas the funds required by the 12 agents were from November 01, 2007 to November 06, 2007 when they took short positions in the futures segment. AO however has considered the entire loans of Rs. 2775 crores given by noticee no. 3 and Rs. 550 crores given by noticee no. 4 from the period September 2007 to March 2008. We may note that noticee no. 4 did not lend any money to Vinamra between November 01, 2007 to November 06, 2007 and that noticee no. 3 had given a loan of Rs. 350 crores in two transactions of November 05, 2007 and November 06, 2007 to Vinamra. Thus, the finding of the AO that Rs. 2775 crores and Rs. 550 crores totalling Rs. 3325 crores were given by noticee nos. 3 and 4 that funded the 12 agents for the alleged trades is patently erroneous. One of the basic charge against noticee nos. 3 and 4 was that noticee nos. 3 and 4 were promoted by Reliance Group. This allegation was found to be false. The AO found that Anand Jain was the Chairman of noticee nos. 3 and 4 and that noticee nos. 3 and 4 were not promoted by the Reliance Group. Once this fact became clear that noticee nos. 3 and 4 were not promoted by the Reliance Group, the AO should have dropped the matter instead of going into a tirade that Anand Jain was closely associated with Reliance Group as a strategic advisor or that Sanjay Punkhia was a common director of noticee nos. 3 and 4 and Vinamra and, therefore, there is a connection between noticee nos. 3 and 4 with Reliance Group. In our view, the reasoning adopted by the AO in coming to a conclusion that noticee nos. 3 and 4 are connected to RIL is baseless and cannot be accepted. Such indirect connection without any further evidence of their involvement cannot be a ground to hold that noticee nos. 3 and 4 were aware of the manipulative trades allegedly conducted by RIL and its agents. It is thus not necessary for us to go into the question of their connection in detail. It is not necessary for us to go into the question as to whether noticee no. 3 and 4 by giving loans to Vinamra could be held to be dealing in securities violating the PFUTP Regulations as in our view no case is made out of any violation by noticee nos. 3 and 4. Appeal allowed. 2023 (12) TMI 241 Request to place on record a compilation of documents - As decided by HC [ 2023 (10) TMI 1173 - BOMBAY HIGH COURT] once it is the entitlement of the petitioners in law to receive such documents, they need to be furnished such documents, unless furnishing of these documents would stand prohibited in law, which is certainly not a situation in the present facts. HELD THAT:- All material which is directed to be disclosed by the High Court shall be used only for the purpose of the proceedings pending before the High Court and shall not be disseminated to any third party. Since the impugned orders of the High Court are purely of an interlocutory nature, we are not inclined to entertain the Special Leave Petitions under Article 136 of the Constitution.However, the parties would be at liberty to pursue their remedies in accordance with law on all counts after the final judgment of the High Court. Special Leave Petitions are dismissed. Insolvency & Bankruptcy 2023 (12) TMI 259 Maintainability of application u/s 7 of IBC - initiation of CIRP - legitimate loan transactions between the Appellant and the Corporate Debtor or not - HELD THAT:- There are no reason to interfere with the order of the National Company Law Appellate Tribunal in GP. CAPT ATUL JAIN (RETD.) VERSUS TRIPATHI HOSPITAL PVT. LTD., DR. BIRENDRA KR. TRIPATHI, DR. MRS. NIDHI TRIPATHI, DR. MRS. MANJU LATA TRIPATHI, MS. SUNAYANA AGARWAL, DR. MANOJ AGARWAL, DR. MAYAK GUPTA, MRS. RAKHI SHUKLA, M/S HERITAGE HOSPITALS LTD. [ 2023 (7) TMI 1242 - NATIONAL COMPANY LAW APPELLATE TRIBUNAL , PRINCIPAL BENCH , NEW DELHI] since no substantial question of law is involved in the appeal. Appeal dismissed. 2023 (12) TMI 258 Admissibility of application u/s 9 of IBC - operational debt qua the Corporate Debtor is due and payable or not - HELD THAT:- There are no reason to interfere with the order in RAJU JAGTAP, SUSPENDED DIRECTOR OF INSTEEL ENGINEERS PRIVATE LIMITED VERSUS JAYESH STEEL PVT. LTD., INSTEEL ENGINEERS PRIVATE LIMITED [ 2023 (9) TMI 1260 - NATIONAL COMPANY LAW APPELLATE TRIBUNAL , PRINCIPAL BENCH , NEW DELHI] since no substantial question of law is involved in the appeal. Appeal dismissed. 2023 (12) TMI 257 Approval of the Resolution Plan - Appellants case is that they are workers engaged by sub-contractor and in the Resolution Plan, the claims submitted on behalf of sub-contracted workers have been accepted only to the extent of 8% whereas workmen of the Corporate Debtor have been proposed payment of 100% of their claim - HELD THAT:- The Hon ble Supreme Court in COMMITTEE OF CREDITORS OF ESSAR STEEL INDIA LIMITED THROUGH AUTHORISED SIGNATORY VERSUS SATISH KUMAR GUPTA OTHERS [ 2019 (11) TMI 731 - SUPREME COURT ] held equitable treatment is to be accorded to each creditor depending upon the class to which it belongs: secured or unsecured, financial or operational. In the present Appeal, the claim which was filed through sub-contractor cannot be treated as workmen of the Corporate Debtor. The Resolution Plan has dealt with claim as admitted by Resolution Professional and reflected in the Information Memorandum. The claim filed by the Operational Creditor in Form B has been dealt with in accordance with the IBC and CIRP Regulation and the claim which was filed by the Operational Creditor cannot be transposed to be claim of workmen for the purpose of this Appeal. The issue raised by the Counsel for the Appellant that workers employed by sub-contractor are also workers of the Corporate Debtor need no answer in this Appeal since the question is as to treatment of the claim which was submitted in the CIRP of the Corporate Debtor and admitted by the Resolution Professional. The submission which has been advanced by Counsel for the Appellant that due to the workers of sub-contractor being not aware of the CIRP could not file their claim cannot be considered at the stage when all claims have been collated and admitted and dealt with in the Resolution Plan. Challenge in this Appeal is to the order of the Adjudicating Authority approving the Resolution Plan - there is no infirmity in the Resolution Plan giving different treatment to the workmen dues and those claimed by the Operational Creditor. Appeal dismissed. 2023 (12) TMI 256 Recovery of arrears of electricity dues on the premises for providing new electricity connection - Respondent submits that the Successful Auction Purchaser is not liable to pay electricity dues which was payable by the erstwhile Corporate Debtor - HELD THAT:- There is no dispute between the parties regarding facts of the case. Electricity dues amounting to Rs.39,15,625/- was owed by the erstwhile Corporate Debtor Shashi Oils and Fats Private Limited. E-auction notice was issued by the Liquidator for sale of the assets. There can be no dispute between the parties that the sale in the liquidation process was on As Is Where Is, As Is What Is, Whatever There Is and Without Recourse basis . Due Diligence Clause also notes that any outstanding charge was also to be performed in the e-auction process by the prospective bidder. The question that electricity dues of the Corporate Debtor who underwent insolvency resolution process/liquidation process can still be insisted against the Successful Resolution Applicant/ Successful Auction Purchaser is not res integra. The issue which has arisen in the present case has been recently considered by this Tribunal in Chinar Steel Segments Centre Pvt. Ltd. vs. Samir Kumar Agarwal [ 2023 (10) TMI 645 - NATIONAL COMPANY LAW APPELLATE TRIBUNAL , PRINCIPAL BENCH , NEW DELHI ]. In the above case, an application filed by the Successful Auction Purchaser seeking direction to Damodar Valley Corporation to energize its electricity connection, was rejected relying on WBERC Regulation. Appeal was filed by the Successful Auction Purchaser which appeal was ultimately allowed by this Tribunal directing that fresh connection be granted without charging any outstanding dues of the Corporate Debtor. It is relevant to notice that the submission which has been advanced by the Appellant that the application filed by the Successful Auction Purchaser was not maintainable was also considered by this Tribunal in the above case and it was held that the application was fully maintainable under Section 60(5). This Tribunal held that application filed by the Successful Auction Purchaser was fully entertainable under Section 60(5) since it arose out of liquidation proceeding of the Corporate Debtor. The Hon ble Supreme Court in Tata Power [ 2023 (9) TMI 1071 - SC ORDER ] clearly held that Tata Power cannot insist on payment of arrears for granting electricity connection. The submission raised by learned counsel for the Appellant that Successful Auction Purchaser was liable to pay the arrears of electricity dues which were dues of the erstwhile Corporate Debtor and without payment of said dues electricity connection cannot be granted are not in accord with the statutory scheme of IBC. The Adjudicating Authority did not commit any error in issuing direction in Para 16 of the impugned order, to energise the electricity connection without insisting on the payment of pre-CIRP dues. There are no ground to interfere in the impugned order of the Adjudicating Authority - there are no merit in the appeal - appeal dismissed. 2023 (12) TMI 255 Replacement of IRP - Submission of appellants were not considered - non-speaking order - violation of principles of natural justice - HELD THAT:- From the facts brought on the record, it is clear that the Appellant was appointed as IRP by order of the Adjudicating Authority dated 09.02.2023 which appointment was not even confirmed by the CoC since no resolution could be passed by the CoC confirming the Appellant as Resolution Professional. From the facts it is clear that the first agenda for 1st CoC meeting was issued only on 03.03.2023 which meeting could not be concluded by Appellant till April 2023. CoC was left with no remedy except to file an IA No.1874 of 2023 seeking a direction for convening a meeting with agenda of replacement of the IRP on which order was passed on 12.05.2023 directing the Appellant to hold the meeting within one week from receipt of the order. In spite of the order dated 12.05.2023, no meeting was convened by the Appellant with the agenda of the replacement of the IRP and ultimately the Adjudicating Authority had to pass another order on 27.09.2023 issuing direction to convene the meeting. From the facts which have been brought on the record, it is clear that the appointment of the Appellant as IRP was never confirmed by the CoC nor any material has been brought on record to indicate that the appointment of IRP was confirmed by the CoC by majority of not less than 66% of the vote. When Appellant s appointment as IRP has not been confirmed, the Appellant could have been replaced by the CoC under Section 22 - The objection which was raised before the Adjudicating Authority that the State Bank of India has assigned its debt, hence, it has no locus to file the application has been dealt with by the Adjudicating Authority. It has been noticed in paragraph 3 that assignment was made on 12.10.2023 whereas the application IA No.1874 of 2023 was filed in May 2023 and the resolution to replace the IRP was passed on 06.10.2023 i.e. much before the assignment of debt. There is no error in the order passed by the Adjudicating Authority dated 17.10.2023 - There is no merit in the Appeal - Appeal dismissed. 2023 (12) TMI 254 Approval of resolution plan - Challenge to Constitution of the Committee of Creditors (CoC) for the purposes of initiating Corporate Insolvency Resolution Process (CIRP) against the Corporate Debtor - HELD THAT:- The statutory construct of IBC clearly puts the onerous responsibility of pursuing avoidance applications on the RP. In terms of Section 25(2)(j) of the IBC, it is the duty of the RP to file appropriate applications for avoidance of transactions which fall under the ambit of preferential, fraudulent, undervalued or extortionate transactions. When the statutory scheme clearly states that it is the duty of Resolution Professional to determine the nature of such transactions and file an appropriate application before the Adjudicating Authority, neither the Appellants-1 being home buyers themselves nor the GSC as unsuccessful resolution applicant are entitled on their own to file applications seeking avoidance of transactions. The ratio of the Jayanta case [ 2022 (2) TMI 305 - NATIONAL COMPANY LAW APPELLATE TRIBUNAL, PRINCIPAL BENCH, NEW DELHI ] cannot come to the aid of the Appellant-1 since in that case the RP without verifying the claims submitted by the Financial Creditors had allotted voting share. Further, the RP had not prepared the Information Memorandum and the CIRP proceedings were conducted without any valuation of the Corporate Debtor. Neither was there any publication of Form G inviting Expression of Interest. Moreover, in that case the CoC had rushed into liquidation of the Corporate Debtor - It cannot be commended that such unilateral addition of names in the list of suspect home buyers by the Appellants-1. Simply because the Appellants have raised the issue of avoidance application, it does not stand to reason that the approval of the resolution plan needs to be put on hold or kept in abeyance. We also find that the present resolution plan also provides that recovery under Section 43 , 45 , 50 and 66 of the IBC would be the exclusive rights of the CoC of the Corporate Debtor. Thus, no cogent grounds have been raised in either of the two appeals which would warrant any interference with the impugned orders passed by the Adjudicating Authority - appeal dismissed. Service Tax 2023 (12) TMI 253 Refund of Service Tax - Erection, Commissioning Installation services for transmission of electricity which is exempted under Notification No. 11/2010-ST dated 27.2.10 - impugned order passed without affording an opportunity of hearing - violation of principles of natural justice - HELD THAT:- The appellant has proved on record that he has paid the service tax for the month of April, May and June 2010 amounting to Rs. 7,27,884/-. Further, the Notification No. 11/2010-ST dated 27.02.2010 provided that the services provided by any person to another person for transmission of electricity is exempt from service tax. The appellant has filed various documents as was demanded by the original authority but the original authority has wrongly come to the conclusion that the appellant has failed to establish whether the service tax paid for the month of April, May and June, 2010 is for the services provided by them for period after issuance of Notification No. 11/2010-ST or otherwise. The Ld. Commissioner (Appeals) has passed the impugned order without affording an opportunity of hearing to the appellant and without considering all the submissions made by him in his appeal. Both the authorities have wrongly come to the conclusion that the burden of duty has already been passed on to the customers. Both the authorities did not examine the invoices/bills submitted by the appellant. There is no invoice wherein the appellant has charged service tax and in the absence of specifically charging the service tax, it cannot be presumed that service tax has been actually charged. Moreover, the appellant has paid service tax on the gross value received from PSEB which is a Government undertaking and as per the terms and conditions of the work order, it is the responsibility of the appellant for payment of all the taxes and duties due to the Central Government. This case needs to be remanded back to the original authority for denovo adjudication of the refund application filed by the appellant - Appeal allowed by way of remand. 2023 (12) TMI 252 CENVAT Credit - appellant raised finance through External Commercial Borrowings (ECB) Foreign Currency Convertible Bonds (FCCB) for which they have received services of various service providers - reverse charge mechanism - deposit of entire amount of service tax liability along with interest much before the issue of show cause notice - applicability of the provisions of Section 73(3) of the Finance Act, 1994 - revenue neutrality - Penalty - HELD THAT:- It is admitted fact on records that the appellant herein had discharged the Service Tax liability along with interest before receipt of the show cause notice. It is also undisputed that the Service Tax liability under RCM has arisen on the ground of appellant being the recipient of services of Banking and Financial Services from an overseas banks. Understandably, Service Tax paid on such services rendered would be available to the appellant themselves as Cenvat credit which can be utilized for discharge of any excise duty on the final goods manufactured and cleared by the appellant. Revenue Neutrality - HELD THAT:- The plea of Revenue neutrality is strong plea, as in this case also credit is available to the appellant on Service Tax paid under reverse charge mechanism can be utilized for discharge of excise duty and hence there can be no reason to avoid Service Tax liability - the appellant is a manufacturer of dutiable goods and the Service Tax paid on services provided by foreign service-providers would have been available to them as Cenvat credit under the Cenvat Credit Rules, 2004 leading to a revenue neutral situation. In the facts and circumstances of this case, it is improper to allege that the appellant did not pay service tax with an intent to evade payment of Service Tax. Penalty - HELD THAT:- The penalty has been imposed by the Ld. adjudicating authority with the finding that the appellant had not deposited service tax on the basis of own ascertainment and that it was only after the department letter they deposited - the very SCN was issued on 28.01.2010 for which the compliance was already made by the appellant on 24.11.2007 by way of payment of tax and interest. The only grievance of revenue is that the appellant-assessee has not deposited service tax on their own ascertainment - when the tax amount stands already deposited with interest, the very SCN was not required to be issued under Section 73(3). Merely because the tax amount has been deposited on the basis of ascertainment by the Department, the assessee cannot be deprived of the benefit of aforesaid provisions, more so in view of the fact that no evidence has been adduced in the SCN that there was a deliberate short payment. Any other interpretation will render the said provision redundant inasmuch as the very intention of the said provision is to reduce litigation when compliance is made by the assessee. The appellant s case is fully covered by the provisions of Section 73(3) of the Finance Act, 1994 and the Revenue should not have issued show cause notice to the appellant for imposition of penalties. Accordingly, the penalties imposed upon the appellant under the Finance Act, 1994set aside - Appeal allowed. Central Excise 2023 (12) TMI 251 Relevant date for calculation of interest - interest under Section 11BB of the Central Excise Act, 1944 would accrue from the date of expiry of 3 months from the date of receipt of application for refund or on the expiry of 3 months from the date of communication of the order of the Appellate authority / Court? - HELD THAT:- The issue stands resolved by the judgment of the Hon'ble Supreme Court in RANBAXY LABORATORIES LTD. VERSUS UNION OF INDIA AND ORS. [ 2011 (10) TMI 16 - SUPREME COURT ] wherein after finding that the appellant s claim for rebate of duty was rejected by the Assistant Commissioner and was subsequently allowed in appeal which was affirmed in further appeal before the Joint Secretary, Government of India it was held Section 11-BB of the Act lays down that in case any duty paid is found refundable and if the duty is not refunded within a period of three months from the date of receipt of the application to be submitted under sub-section (1) of Section 11-B of the Act, then the applicant shall be paid interest at such rate, as may be fixed by the Central Government, on expiry of a period of three months from the date of receipt of the application. It is clear from the extract that the submission of the learned counsel for the respondent on the basis of the Explanation to Section 11BB of the Act to suggest that in view of the deeming contained therein, the interest payable on delayed refund under Section 11BB of the Act would accrue only in the event of delay in making the refund beyond 3 months from the date of the order of the adjudicating authority / appellate authority / Court was rejected by the Hon'ble Supreme Court. The above judgment of the Hon ble Supreme Court in the case of Ranbaxy has been subsequently followed in the case of Manisha Pharmo Plast Private Ltd., v. Union of India [ 2020 (11) TMI 726 - SUPREME COURT] . Following the above judgments of the Hon ble Supreme Court, this Court has no hesitation to hold that interest on refund in terms of Section 11 BB of the Act would accrue in the event of delay in grant of refund beyond 3 months from the date of application i.e., 11.07.2016 in the present case - the respondents are directed to calculate the statutory interest in terms of Section 11 BB of the Act i.e., 3 months from 11.07.2016 (date of application for refund) until 17.12.2019 when the rebate was actually granted and pay the same within 4 months from the date of receipt of a copy of this order. Petition disposed off. 2023 (12) TMI 250 Principles of natural justice - opportunity had not been accorded to the appellant by the first appellate authority for being heard - refund of duty paid under protest - HELD THAT:- It is found from the impugned order that the issue of limitation has been dealt with in terms of rule 233B of Central Excise Rules, 1944 which came into force only from 11th May 1981. Consequently, and in the absence of any mechanism prescribing for protest , the presumption in the adjudication order of failure to protest is not tenable. The appellant claims that protest had been filed with the department by mail, under certificate of posting ; that has not been denied. The first appellate authority has taken upon itself to infer that, with certain eventualities not occurring, presumption of not paid duty under protest was to be operated as default - it is found from the decision of the Hon ble Supreme Court, in BHOR INDUSTRIES LTD. VERSUS COLLECTOR OF CENTRAL EXCISE [ 1989 (1) TMI 128 - SUPREME COURT] , that classification list came to be filed for the first time in November 1975. At the same time, in the same judgment, it has been noted that the classification list had been approved by the competent authority in December 1977 before which, in a separate dispute, the first appellate authority in order of June 1974 had held the goods not liable to excise duty. Notwithstanding the lapse of time since the dispute on excisability was taken up and concluded and its appearance before the the Tribunal for the third time, a fresh decision cannot be directed after taking the submission on facts, as well as certificate of the Chartered Accountant, into account - matter remanded back to the first appellate authority on the terms and conditions directed by the Tribunal formerly and subject to the law as judicially determined. 2023 (12) TMI 249 Availment of credit to the extent of loss in transit , ascertained from measurement at the factory - rule 3 of CENVAT Credit Rules, 2004 - lower authorities had adopted the benchmark of 2% as the tolerance and further denied credit wherever the difference was more than 0.4% as established by issue of debit notes - HELD THAT:- It would appear that payment of duty by the supplier on clearance of the goods, as well as inclusion thereof in invoices raised on appellant, is not in dispute and objection is solely on the ground that, in terms of rule 2(k) of CENVAT Credit Rules, 2004, only such duty paid goods as have been used in the manufacture of excisable goods are entitled to be availed as credit. The issue is no longer res integra and that, in SAVITA OIL TECHNOLOGIES LTD VERSUS COMMISSIONER OF CENTRAL EXCISE BELAPUR, NAVI MUMBAI [ 2022 (6) TMI 1175 - CESTAT MUMBAI] , it was held that Availment of CENVAT credit of duties paid on inputs is enabled by rule 3 of CENVAT Credit Rules, 2004. The credit taken by the appellant is the duty of central excise paid by the supplier as recorded in the invoices and any difference in quantity, manifested in goods receipt note (GRN) on actual weighment at place of receipt, does not alter the tax thus borne on the goods except when credit accrues to the supplier through appropriate debit notes raised by recipient. No such document is placed on record. There is no evidence of any of inputs having been returned to supplier or rerouted elsewhere. Credit allowed - nothing remains in the impugned order which is set aside - appeal allowed. 2023 (12) TMI 248 Prayer for restricting the penalty to the extent of pre-deposit, which they have already paid - relevance of statements - obligation of law as per Sec. 9D of the Central Excise Act, 1944 not met - Illegal availment of CENVAT credit of CVD paid on the imported goods by the manufacturers of aluminium products without physically receiving the goods - Misuse of imported goods - evasion of Central Excise Duty - HELD THAT:- It is seen that section 9D is relevant for the purpose of proving the truth of a fact, in any prosecution launched for an offence under the Central Excise act, 1944. The impugned order does not emanate from a proceeding of prosecution. A five judge Bench of the Apex Court by a majority decision in THOMAS DANA VERSUS STATE OF PUNJAB [ 1958 (11) TMI 7 - SUPREME COURT ] held that there is no escape from the conclusion that the proceedings before the Sea Customs Authorities under s. 167(8) (which was a pre-cursor to the Customs Act, 1962, a sister Act to the FA 1994 and CEA, 1944), were not prosecution within the meaning of Art. 20 (2) of the Constitution. The judgement above makes it clear that offences and penalties are of two distinct kinds. First there are contraventions of the Act and Rules thereunder which are dealt with by Customs officers and the penalty for which is imposed by them, called customs offences. Besides these there are criminal offences which are dealt with by Magistrates and which result in conviction and sentence of imprisonment and/or fine. Action by quasi-judicial officers under CEA 1944 is not done as per the provisions of criminal law. Prosecution of offenders are launched separately in a criminal court. The principal idea in this case is as per section 9D(1) of the Central Excise Act 1944, which clearly states that it is concerned with a statement which shall be relevant, for the purpose of proving, in any prosecution for an offence under the Act. Detailed Criminal Court procedures are not expected for proceedings having only civil consequences - there are no lacunae in the proceedings by the Adjudicating Authority and the impugned order does not deviate from the provisions of section 9D ibid. Whether Appellants had prior knowledge of the clandestine activity? - HELD THAT:- The charges against the appellants have been made after a very detailed investigation of clandestine activity by a group of people who have abetted to evade payment of duty by misusing high-sea sales and CENVAT schemes. It is difficult to find direct evidence in such cases and they are mostly proved by a mix of direct and indirect evidence, as duty evasion is seldom an open affair. The blame worthy act has hence to be inferred from the circumstances and the conduct of the people involved - The circumstances as brought out in the impugned order taken cumulatively form a chain leading to the conclusion that the Appellants were fully involved and abetted with the main notice in the clandestine scheme to wrongly utilise inadmissible CENVAT credit at the cost of the exchequer. Also, the discussion in the impugned order has established the role and knowledge of the appellants in the clandestine activity designed to misuse CENVAT credit. Imposition of penalty - prayer of the Appellants is to confine the penalty to the amounts of pre-deposits made - HELD THAT:- The involvement of the Appellants has been established mainly on the basis of collaborative statements, perhaps due to the clandestine nature of the activity and the lack of proper documentation in such cases, as discussed above. However, the imposition of stiff penalties requires stronger evidence. Hence to that extent the penalties imposed on the Appellants are disproportionate and needs to be modified - it is also found that the matter relates to a very old issue and there would be no purpose in extending the litigation on the matter of penalty. Appeal disposed off. 2023 (12) TMI 247 Valuation - inclusion of excess freight collected from the dealers in the assessable value - HELD THAT:- In the present case, it is undisputed fact that the place of removal of excisable goods is a factory gate of the appellant. It is also found that in the case of ex-factory sale, the freight amount collected is not includible in the assessable value of the excisable goods. This issue is no more res-integra that the excess freight collected by the appellant from the buyer is merely a profit and no excise duty can be levied on such profit as held in the various decisions - the appellant has sold the vehicles to the dealers at the ex-factory price and the title is transferred to the buyer at the factory gate and the appellant made arrangement for the transportation of vehicles on the request of the dealers. Since, the title in the vehicles is transferred at the factory gate, all the risk of damage during the transportation is that of the dealer and therefore, the assessable value is the transaction value in terms of Section 4(1)(a) of the Act and the provisions of Section 4(1)(b) and Valuation Rules are not applicable. This issue has recently been considered by the coordinate bench of the Ahmedabad in the case of KASHYAP SWEETNERS LIMITED VERSUS COMMISSIONER OF CENTRAL EXCISE ST, VAPI AND JITENDRA PANDEY VERSUS COMMISSIONER OF CENTRAL EXCISE ST, VAPI [ 2023 (7) TMI 1111 - CESTAT AHMEDABAD] , wherein the Tribunal has held excess amount of freight from the customer is profit on account of transportation and not part and parcel of the value of the goods therefore, same cannot be included in the assessable value. The impugned orders are not sustainable in law - Appeal allowed. 2023 (12) TMI 246 Eligibility for exemption under Notification No. 6/2006-CE, dated 01.03.2006 - goods supplied against International Competitive Bidding. Denial of exemption on the ground that Project Authority Certificates were not issued by the prescribed Authority i.e. Chairman and Managing Director of NTPC as required under Condition No. 86(b) of Serial No. 400 of Customs Notification No. 21/2002-Cus dated 01.03.2002. HELD THAT:- The supplies made by the Appellants were for the projects, meets all the stipulated criteria specifically awarding of contract under ICB route. Further, there is a provision for supply through sub-contractor also, even though the sub-contractor might not have directly participated in the process of ICB for getting the contract, which was obtained by the main contractor namely BHEL in this case. It is also now clear that both these projects were Mega Power Projects in terms of certificates issued by the Ministry of Power and that these two projects would have been entitled for exemption under Customs Notification No. 21/2002-CU (serial no. 400). The wordings in the certificate issued by the Ministry of Power clearly matches with the wordings at serial no. 400 of this Notification. Therefore, there is no specific requirement for signing of the Certificate by Chairman not of the PSU which is only in relation to the goods imported into India. In the case of goods procured domestically, the exemption is available as long as the supplies have been made against ICB and projects are meeting the criteria. In this case, the supplies have been made by the sub-contractor through contractor to the project duly recognised for entitlement of exemption from the customs duty also, in case they import goods for said project. Thus, there are sufficient documents on record to prove that the Appellants were not required to pay any duty and were clearly entitled for benefit of Notification No. 6/2006. No duty is leviable on clearances made to these two projects through the main contractor M/s BHEL - Since the duty is not leviable, the penalty is also not imposable on the Appellants - Appeal allowed. 2023 (12) TMI 245 Process amounting to manufavture or not - cutting, boring, beveling, threading operations undertaken by the appellant company on other materials, namely seamless pipes/tubes. Whether the appellant have undertaken processes amounting to manufacture, in respect of Drill Pipes/ Drill Rods as per Section 2(f) of the Central Excise Act, 1944 and leviable to central excise duty? - HELD THAT:- The process of manufacturing of drill rods/ drill pipes from raw material stage to final product stage is that the Round Bars and Semaless pipe are their main raw materials. The Round Bar are used to manufacture connectors (Male and Female). The Round bar is cut into required size on the bandsaw machine before subjecting it to machining operations (on the lathe machine) that is, drilling to make solid round bars into hollow state, turning to make the outer diameter of appropriate size, threading and slotting. The product namely, Connector, is thus manufactured. In Drill Pipe Section, Seamless pipes of different diameters which are another major raw material for Drill Rods were stored. In the said section, on Lathe Machines the seamless pipes are cut into required size and then boring and beveling operations to make the pipe suitable for further welding with connectors are carried out at both the ends of the said pipes so that the connectors (Male and Female) can be fitted at both ends of the seamless pipes and thereafter are welded together. The welding of the connector with the seamless is carried out manually. The seamless pipe so fitted and welded with the male and female connectors at the end is final product called the Drill Rods . Then the painting was carried out by the workers on the said Drill Rods . The process undertaken by the appellant satisfies the test manufacture as above and consequently it is concluded that the resultant products of the appellant are liable to payment of Excise duty. Demand confirmed by the Ld. Commissioner for Spindle Subs/Bits Subs/Connectors - HELD THAT:- Appellant argued that goods for which this demand of duty is confirmed were duly accounted for in statutory records of the appellant company and appropriate duty was paid on these goods while their clearance from the factory, and such clearances were also recorded in ER-1 returns. Since the said facts cannot be verified at this stage, it is opined that for verification of these facts viz. whether appellant has paid the appropriate duty or not on impugned goods, the case needs to be remanded back to the Adjudicating authority and the Ld. Adjudicating authority will examine the evidences which may be submitted by the appellant relating to payment of duty on disputed goods and thereafter will pass a fresh decision relating to the demand of duty of Rs. 9,89,159/-. Confiscation of goods - HELD THAT:- When the goods have already been removed and are not available for confiscation, the goods cannot be confiscated - on perusal of the statements recorded by the investigating officers we find that the appellant was having full knowledge as to what is to meant by manufacture but still they mis-stated that the processes under taken by them do not amount to manufacture. Further intention to evade payment of duty on disputed goods is further established by the revenue that Appellant not maintaining any Daily Stock Accounts as prescribed under Rule 10 of the Central Excise Rules 2002. The appellants have also pleaded that they had a bona fide belief that their goods are not chargeable to duty - It is difficult to understand this plea. Evidences on record clearly indicate that they were aware that the goods are chargeable to duty and their process is amount to manufacture. Statement recorded during the investigation indicates that they were fully aware about their duty liability and manufacture of the disputed goods. Penalty imposed under Rule 26 of CER, 2002 on Shri Sanjay Jayantilal Gandhi, Director (Commercial) - HELD THAT:- Revenue disputed that earlier adjudication order passed vide OIO dated 31.01.2013, the authority had imposed a personal penalty of Rs. 50 Lacs. However in the present OIO the penalty stands reduced to Rs. 5 Lacs. Appellant also disputed that penalty of Rs. 5 Lacs not imposable - It is found that penalty imposed by the Learned Commissioner in impugned order is proper. Penalties are very much on the lower side and are not incommensurate with the acts and omissions of person concerned. The finding given by the Learned Commissioner clearly held that Shri Sanjay Jayantilal Gandhi knows and had reason to believe that goods were liable to confiscation therefore he was liable for penalty under Rule 26. Appeal disposed off. 2023 (12) TMI 244 Confiscation of cash seized by the investigating officer from the house of the partner of the Appellant firm - cash amount seized from the premises of the partner of the Appellant firm was against the sale proceeds of clandestinely removed goods - HELD THAT:- The Learned Commissioner (Appeal) has referred to para 4.2.3 wherein the Adjudicating Authority has clearly found that the cash of Rs. 50,73,710/- seized from the residence of Shri Mahesh Chaodhary, partner of the Appellant is sale proceeds of the excisable goods which has been sold by the noticee without licit documents and without payment of duty - it is found that after giving this clear finding by the Adjudicating Authority, he should have passed an order for confiscation of the cash further no order on proposal of confiscation made in the show caused notice was passed by the Adjudicating Authority. At the same time the cash which was seized was adjudged against the duty, interest and 15% penalty. Therefore, there is an apparent error in the order of the Adjudicating Authority, accordingly the Learned Commissioner (Appeal) instead of straightway confiscating seized cash should have remanded the matter to the Adjudicating Authority. The Appellant also raised the issue on the provision of section 11 AC (1) (d) that after payment of duty, interest and 15% penalty entire proceeding of the show cause notice should have been concluded and no confiscation could have been ordered. In this regard, it is found that since Adjudicating Authority had given clear finding that the cash seized by the investigating officer is liable to confiscation in such case without passing any order on the confiscation of the cash the adjustment of the same towards the duty, interest and penalty is also incorrect. Thus, the matter relates to confiscation of seized cash needs to be reconsidered by the Adjudicating Authority - appeal allowed by way of remand. 2023 (12) TMI 243 Reversal of CENVAT Credit - credit availed on inputs alleged to have been written off in their books of account in accordance with Rule 3(5B) of Cenvat Credit Rules, 2004 - HELD THAT:- The condition precedent under Rule 3(5B) of CCR, 2004 is, if the value of any inputs/goods have been written off fully or partially or where any provision to write off fully has been made in the books of account, in respect of value of any inputs, then the manufacturer or service provider, as the case may be, shall pay an amount equivalent to the Cenvat credit taken in respect of the said inputs. In the facts and circumstances of this case, there being no writing off or removal of inputs under the provisions of Rule 3(5B) of CCR, 2004, the same is not attracted - Appeal of Revenue dismissed. CST, VAT & Sales Tax 2023 (12) TMI 242 Denial of adjustment of entry tax paid on the damaged cement against VAT liability - liability to pay entry tax on damaged cement under the provisions of the Entry Tax Act - entitlement for the refund or adjustment of the same - imposition of interest under Section 39 (4) of the VAT Act. HELD THAT:- INDIAN OIL CORPORATION LIMITED VERSUS STATE OF BIHAR AND ANR. INDIAN OIL CORPORATION LIMITED VERSUS STATE OF BIHAR AND ANR. [ 2017 (11) TMI 747 - SUPREME COURT] is a case on point, dealing with the set-off of entry tax when the imported goods did not suffer further liability to tax within the State of Bihar at the hands of the importer itself. The assessee therein imported crude oil from outside the State of Bihar, manufactured high speed oil, petrol etc. at its refinery within the State and transferred it to its branch at Patna from where it was sold inter alia to other oil marketing companies (OMC) who in turn sold it to retailers, end consumers through its own petroleum outlets inside and outside Patna; which sales were effected by the assessee too. The appellant paid entry tax at the rate of 16% and was liable to sales tax @ 24.5%, from which total liability, set-off was claimed and accepted by the department; which later stood reversed giving rise to proceedings before the Advance Ruling Authority. After copious reference to the provisions the Hon ble Supreme Court held as follows: Since the set-off in question depends upon the interpretation of Section 3(2) of the Entry Tax Act, it is necessary to state, at the outset, that the following conditions need to be satisfied for claim of set-off under the said provision: (i) First and foremost, under Section 3(2) itself, the tax leviable by way of entry tax can only be paid by every dealer liable to pay tax under the VAT Act; (ii) The set-off can only be granted if the assessee is an importer of scheduled goods, who is liable to pay tax under the VAT Act; (iii) The assessee must incur tax liability at the rates specified under Section 14 of the VAT Act; (iv) This must only be by virtue of the sale of imported scheduled goods; and (v) His tax liability under the VAT Act will then stand reduced to the extent of tax paid under the Act. The assessee being a registered dealer under the Finance Act was found to be satisfying the first condition and though the assessee was the importer of the goods, it had no liability to pay VAT on its sales to OMCs thus not satisfying the second third condition. The assessee also did not satisfy the fourth condition since the words employed in the provision; or sale of goods manufactured by consuming such imported scheduled goods which connotes a sale by the importer itself, who alone is entitled to the set-off as per the fifth condition - The dictum squarely applies in the instant case where admittedly the appellant- assessee did not suffer tax on the imported goods within the State of Bihar thus disabling the appellant from claiming set-off to the extent of such imported goods which did not suffer tax within the State of Bihar. Associated Cement Company Limited [ 2004 (9) TMI 380 - SUPREME COURT ] strongly relied on by the assessee was distinguished in Ĭndian Oil Corporation Ltd. on two counts; one, that there the question was raised of an exemption which does not efface the liability to tax and next that the words: by virtue of sale of imported scheduled goods or sale of goods manufactured by consuming such imported scheduled goods was added to the provision granting set-off by way of an amendment, later to the ACC case. It was categorically held that set-off is a concession which none can claim as a matter of right unless the specific conditions under which it is granted are satisfied. The instant appeal by the assessee has to fail and the questions of law are answered against the assessee and in favour of the respondents.
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