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TMI Tax Updates - e-Newsletter February 10, 2022 Case Laws in this Newsletter: GST Income Tax Customs Corporate Laws Insolvency & Bankruptcy PMLA Service Tax Central Excise Indian Laws Articles Proposed Section 38 under CGST Act in Budget 2022-23 - ‘A Punitive Tax Provision’ GST Authority cannot detain goods/conveyance in transit for non-payment of tax by other person in supply chain News LOGISTICS SECTOR Foreign Direct Investment inflows (FDI) GROWTH RATE OF CORE SECTOR INFORMATION OF VARIOUS SCHEMES CCI issues a cease and desist order against Dumper and Dumper Truck Union Lime Stone (Dumper Truck Union) in Sanu Mines area of Jaisalmer, Rajasthan Notifications DGFT 54/2015-2020 - dated 9-2-2022 - FTP Notification of ITC (HS), 2022- Schedule-1 (Import Policy) GST - States 40/2021-State Tax - dated 31-1-2022 - Himachal Pradesh SGST Himachal Pradesh Goods and Services Tax (Tenth Amendment) Rules, 2021. 39/2021-State Tax - dated 31-1-2022 - Himachal Pradesh SGST Seeks to bring in force provisions of Sections 2, 3 and 7 to 15 of the Himachal Pradesh Goods and Services Tax (Amendment) Act, 2021 38/2021-State Tax - dated 31-1-2022 - Himachal Pradesh SGST Seeks to bring in force provisions of sub-rule (2), sub-rule (3), clause (i) of sub-rule (6) and sub-rule (7) of rule 2 of the Himachal Pradesh Goods and Services Tax (Eighth Amendment) Rules, 2021 37/2021-State Tax - dated 31-1-2022 - Himachal Pradesh SGST Himachal Pradesh and Services Tax (Ninth Amendment) Rules, 2021. 22/2021(Rate) GST/SIKKIM - dated 31-12-2021 - Sikkim SGST Seeks to supersede notification 15/2021 – State Tax (Rate), dated the 18th November, 2021 and amend Notification No 11/2017- State Tax (Rate), dated the 28th June, 2017 21/2021(Rate) GST/SIKKIM - dated 31-12-2021 - Sikkim SGST Seeks to supersede notification 14/2021-State Tax (Rate), dated the 18th November, 2021 and amend Notification No 01/2017- State Tax (Rate), dated the 28th June, 2017. 20/2021(Rate) GST/SIKKIM - dated 28-12-2021 - Sikkim SGST Amendment in Notification No. 21/2018-State Tax (Rate), dated the 26th July, 2018 Circulars / Instructions / Orders SEBI SEBI/HO/DDHS/DDHS_Div3/P/CIR/2022/15 - dated 9-2-2022 Framework for conversion of Private Listed InvIT into Public InvIT SEBI/HO/DDHS/DDHS_Div3/P/CIR/2022/16 - dated 9-2-2022 Conversion of Private Unlisted InvIT into Private Listed InvIT GST - States 12039/154/2021 - dated 7-2-2022 Clarification on certain refund related issues TRADE CIRCULAR No. 01/2022 - dated 31-1-2022 GST on service supplied by restaurants through e-commerce operators Highlights / Catch Notes GST Cancellation of GSTIN of petitioner, with effect from the date of registration of GSTIN - The Appellate Authority has passed a clear and cogent order dated 5th April, 2021 where it was held that impugned order of rejection of application for revocation of cancellation of registration dated 24.11.2020 and order for cancellation of registration dated 15.09.2020 are set aside -This Court is of the view that the reliance of the respondents on the order dated 5th August, 2020 is misconceived. - HC Visit to Get Source Detention of goods - It is trite law that this Court cannot, in exercise of its jurisdiction under Article 226 of the Constitution of India enter into issues that falls within the realm of disputed facts. Further, petitioner has an alternative and efficacious remedy under Section 107 of the CGST/SGST Act 2017 and hence it will not be subjected to any prejudice also. - HC Visit to Get Source Income Tax ITO Jurisdiction over the assessee to issue notice u/s 143(2) - rectifiable error u/s 292BB - As in the case on hand, the revenue sought to take coverage under Section 292BB of the Act which was rejected on the ground that the very foundation of the jurisdiction of the assessing officer was on the issuance of notice under Section 143(2) and the same having been complied with, the revenue cannot take shelter under the provisions of Section 292BB - HC Visit to Get Source Addition of consideration received on Transfer of land for Development - if the development agreement is not registered, it shall have no effect in law for the purposes of Section 53A which bodily stood incorporated in Section 2(47)(v) of the Income Tax Act, 1961. Thus, the Tribunal was right in allowing the assessee’s appeal and granting the relief sought for - HC Visit to Get Source Penalty u/s 271(1)(c) - Explanation is bonafide is, we find, supported by the fact that during assessment proceedings the assessee, realizing his mistake even before detection by the Revenue, returned the same to tax. - The assessee having disclosed all particulars of his income from sale of agricultural land, having furnished a bonafide explanation for not returning the same to tax and having surrendered the said income suo moto before detection by the Revenue, we agree with the Ld.CIT(A) that the assessee cannot be said to have furnished inaccurate particulars of income so as to levy penalty u/s 271(1)(c) - AT Visit to Get Source TDS u/s 194C read with section 40(a)(ia) - the legislator provided relaxation to the assessee by inserting the 2nd proviso to section 40(a)(ia) on account of failure to deduct if it fulfill the condition prescribed under proviso to section 201(1) of the Act i.e. furnishing a certificate from accountant in from 26A. To our understanding the duty cast on the assessee cannot be transferred to revenue. If such burden transferred to revenue then the importance of provision of tax deduction at source will be of no relevance. Therefore the alternate contention of the assessee is dismissed. Hence the ground of appeal of the assessee is partly allowed. - AT Visit to Get Source Levy of penalty u/s 271(1)(b) - non appearance before the Assessing Officer - AO kept an issuing notices on the wrong address even when the first notice was not served due to wrong address. All these series of facts shows that there was a mis-communication at the end of the AO about the address and also not mentioning the husband’s name of the assessee which resulted in non serving of the notice since she resided in village - no justification in the action of the AO in initiating and levying penalty u/s 271(1)(b). - AT Visit to Get Source Addition u/s 68 - addition on account of share application money - The identity of the above share applicants was also independently verified by the inspectors during the course of re-assessment proceedings. Notices u/s 133(6) of the Act were issued to the above share applicants which were duly replied to by the share applicants. So far as the share application money received from remaining companies is concerned, we find that the assessee filed ample documentary evidences which discharged the primary onus cast upon it u/s 68 - AT Visit to Get Source Customs The provisions of Regulation 17 of the C.B.L.R., 2018 is required to be considered as directory and not mandatory - having regard to the finding of fact recorded by the Tribunal to the effect that the department has failed to provide sufficient evidence to show that the respondent had lent the IEC without proper verification and thereby he had violated Regulation 11(d) of C.B.L.R., 2013, the substantial question of law No.4 becomes only academical in the present case, because the respondent cannot be held guilty on the merits of the case for want of sufficient evidence as recorded by the Tribunal. - HC Visit to Get Source Undervaluation of imported goods - Once the goods are assessed and cleared, there was no reason for rejecting the declared value and redetermining the same following the CVR, 2007 sequentially. First of all, the declared transaction value needs to be rejected and the value requires to be redetermined in terms of CVR, 2007, and it was incumbent upon the investigation and the adjudicating authority to show reasons for rejection of the declared assessable value and the results as to how the price adopted for rejecting the value is determined. This is a settled principle of valuation as held by this Tribunal as well as various Courts. - AT Visit to Get Source Benefit of Notification NO. 89/2005-Cus - edible oil - DEPB scheme - The appellant would be entitled to get benefit of the exemption notification for the entire quantity of the goods imported in the Ex- bond Bills of Entry which are the subject matter of these two appeals. As half the duty has already been paid in cash and debit in respect of the remaining half has already been made in the DEPB account, the demand of duty and interest cannot be sustained. - AT Visit to Get Source Valuation of imported goods - The Foreign Trade Act and the Section 125 of the Customs Act does not make any bar from redemption of such restricted goods imported without authorization on payment of duty on retail market value and there is distinction between what is prohibited and what is restricted. In those circumstances, the goods cannot be held absolutely confiscated or cannot be restricted for clearance for home consumption, hence, the imported goods are allowed to be cleared for home consumption on payment of redemption fine and penalty. - AT Visit to Get Source Case Laws: GST 2022 (2) TMI 401 Cancellation of GSTIN of petitioner, with effect from the date of registration of GSTIN - Petitioner sought the cancellation of his GSTIN on account of his inability to continue his business, while Respondent no.1 cancelled the GSTIN of the petitioner on suo-moto basis under Section 29(2) of the Act from the date of registration of GSTIN of the Petitioner i.e. 1st July, 2017 - HELD THAT:- It is apparent that the Petitioner s registration has been cancelled at the request of the petitioner and the Appellate Authority has categorically held that the Petitioner was entitled to discontinue its business. Further, the date of cancellation of registration is from the date the petitioner had applied for cancellation of his registration i.e. 4th March, 2020 and not from the date when its registration was cancelled by the respondent No.1. The Appellate Authority has passed a clear and cogent order dated 5th April, 2021 where it was held that impugned order of rejection of application for revocation of cancellation of registration dated 24.11.2020 and order for cancellation of registration dated 15.09.2020 are set aside -This Court is of the view that the reliance of the respondents on the order dated 5th August, 2020 is misconceived. The Respondent No.1 is directed to comply with the order dated 5th April, 2021 by allowing the petitioner to surrender his GSTIN voluntarily w.e.f. 4th March, 2020 - Petition allowed. 2022 (2) TMI 400 Detention of goods - excess quantity of goods in the vehicle than the quantity declared in the 4 e-way bills - HELD THAT:- The 2nd respondent has arrived at a conclusion that the quantity of the load that was being carried did not tally with the quantity mentioned in the e-way bills. Though petitioner disputes the said conclusion, correctness or otherwise of the said conclusion falls within the realm of disputed facts. It is trite law that this Court cannot, in exercise of its jurisdiction under Article 226 of the Constitution of India enter into issues that falls within the realm of disputed facts. Further, petitioner has an alternative and efficacious remedy under Section 107 of the CGST/SGST Act 2017 and hence it will not be subjected to any prejudice also. Petition dismissed. Income Tax 2022 (2) TMI 399 ITO Jurisdiction over the assessee to issue notice u/s 143(2) - rectifiable error u/s 292BB - HELD THAT:- The proviso to Section 292BB would not stand attracted and the said Section cannot be made applicable to the assessee s case. The Tribunal, thereafter, analysed as to the correctness of the submission of the revenue seeking to sustain their stand by referring to a notice issued by the assessing officer, who at the relevant point had no jurisdiction over the assessee and, on facts, found that there is no valid compliance of Section 143(2) of the Act as the notice issued u/s 143(2) of the Act by the assessing officer/Income Tax Officer, Ward-3(1) had no jurisdiction over the assessee at the relevant time. Tribunal to support its conclusion placed reliance in the case of CIT Another Vs. Mukesh Kumar Agarwal [ 2012 (7) TMI 543 - ALLAHABAD HIGH COURT] wherein it was held that the assessing officer did not have jurisdiction to proceed further and make assessment since notice under Section 143(2) of the Act was admittedly not issued. As in the case on hand, the revenue sought to take coverage under Section 292BB of the Act which was rejected on the ground that the very foundation of the jurisdiction of the assessing officer was on the issuance of notice under Section 143(2) and the same having been complied with, the revenue cannot take shelter under the provisions of Section 292BB - Decided in favour of assessee. 2022 (2) TMI 398 Addition of consideration received on Transfer of land for Development - scope of Section 53A of the Transfer of Property Act as well as Section 2(47) of the Income Tax Act, 1961 - whether pursuant to an un-registered agreement, possession of the property was handed over by the assessee to a company engaged in development of housing projects wholly owned by the State of West Bengal? - HELD THAT:- The legal position is no longer res integra and it would be beneficial to refer to the decision of the Hon ble Supreme Court in Commissioner of Income Tax Vs. Balbir Singh Maini [ 2017 (10) TMI 323 - SUPREME COURT] as held that if the development agreement is not registered, it shall have no effect in law for the purposes of Section 53A which bodily stood incorporated in Section 2(47)(v) of the Income Tax Act, 1961. Thus, the Tribunal was right in allowing the assessee s appeal and granting the relief sought for.- Decided against the revenue. 2022 (2) TMI 397 Revision u/s 263 by CIT - Tribunal considered the factual issue and more particularly the fact that on the very same issue the assessment was reopened u/s147 of the Act and after discussing the case and conducting an enquiry relief was granted to the assessee - HELD THAT:- Tribunal rightly took note of the law laid down by the Hon ble Supreme Court in Malabar Industrial Company Ltd. [ 2000 (2) TMI 10 - SUPREME COURT] and allowed the appeal filed by the assessee. In the said decision the Hon ble Supreme Court pointed out that the phrase prejudicial to the interest of revenue occurring in Section 263 has to be read in conjunction with the expression erroneous order passed by the assessing officer. Further every loss of revenue as a consequence of an order of the assessing officer cannot be treated as prejudicial to the interest of the revenue. In the case at hand the Tribunal rightly pointed out that the ground on which notice under Section 263 of the Act was issued was identical to the reason for reopening the assessment earlier. Furthermore, the Tribunal noted that no independent enquiry was conducted by the PCIT to justify assumption of jurisdiction under Section 263 of the Act. It is settled legal principle that the PCIT cannot substitute its opinion to that of the assessing officer on the same material which was noted by the assessing officer in the reassessment proceeding. - Decided in favour of assessee. 2022 (2) TMI 396 Reopening of assessment u/s 147 - partners of the partnership firm, failed to show the remuneration and interest received from the partnership firm when the return of the writ applicant was processed u/s 143(1) - HELD THAT:- Tribunal took notice of the fact that the CIT Appeals had directed to tax the amount of remuneration/interest on the partners capital account in the hands of the partners. AO had allowed the claim of the deduction for the remuneration/interest on the partners capital account however, the same was added back by the AO on the ground that it was not claimed as a deduction in the profit and loss account. CIT- A directed to delete the addition made in the hands of the firm and further directed to tax the same in the hands of the partner of the firm. The aforesaid was not approved by the Tribunal taking the view that there was no good ground to tax the remuneration/interest on the capital in the hands of the partners and the CIT(Appeal) could be said to have exceeded its jurisdiction by issuing such directions to the AO for the dispute which was not arising from the order of the AO. In view of such findings recorded by the Appellate Tribunal, nothing survives in the present matter so far as the reopening of the assessment of the partner of the partnership firm is concerned. Coordinate Bench of this Court while issuing Notice vide order dated 28.11.2018, had directed by way of ad-interim relief that the final order shall not be passed without the permission of the Court. However, the final order of assessment ultimately came to be passed. In such circumstances, the Co-ordinate Bench vide order dated 04.10.2021 directed that there shall be no coercive action inclusive of penalty in connection with the order of the assessment. In view of the aforesaid, even the final order of assessment will have to be quashed and set aside. Writ application succeed and is hereby allowed. 2022 (2) TMI 395 Disallowance u/s 14A read with rule 8D - A.O was of the opinion that there is always an element of indirect expenditure for earning such exempt income which the assessee has not completely identified and offered to tax - HELD THAT:- We are of the considered view, on hearing the submissions of the parties herein that as per the view taken by the Hon ble Special Bench of the Tribunal in Vireet Investments Pvt. Ltd.[ 2017 (6) TMI 1124 - ITAT DELHI] the A.O would exclude investments which do not yield any exempt income for the year under consideration while computing the disallowance u/s 14A r.w.r. 8D(2)(iii). Accordingly, we set aside the order of the learned CIT(A) and remand the matter back to file of the A.O as indicated hereinabove. A.O shall comply with principles of natural justice while re-adjudicating the issue. Grounds No. 1 and 2 and additional ground No. 1 are allowed for statistical purpose. Disallowance of the claim of additional depreciation u/s 32(1)(iia) - Whether assessee is entitled to 50% of the additional depreciation u/s 32(1)(iia) for subsequent assessment year ? - HELD THAT:- Hon ble Karnataka High Court in the Rittal India Pvt. Ltd. case [ 2016 (1) TMI 81 - KARNATAKA HIGH COURT ] had given the right to the assessee to claim the remaining unclaimed 50% depreciation in the subsequent assessment year and at that time the proviso to section 32 was also not there but right now with the insertion of such proviso, this right has been statutorily recognized. That as regards, whether such proviso would apply to past periods or not, the judgment of the Hon ble Madras High Court (supra.) which is still operational and it has been held that the said proviso was only clarificatory in nature and would thus apply to pending cases covering past periods also. Thus, Grounds No.6 and 7 raised in appeal by the assessee are allowed. Education cess and secondary and higher education cess paid be allowed as a deduction while computing the total income of the assessee - admission of the additional ground - HELD THAT:- The assessee had correctly placed reliance on the decision of the Hon ble Supreme Court in the case of National Thermal Power Co. Ltd. [ 1996 (12) TMI 7 - SUPREME COURT ] for admission of this legal ground. We find that Hon ble Bombay High Court in the case of Sesa Goa Ltd.[ 2020 (3) TMI 347 - BOMBAY HIGH COURT ] has held that the Education Cess and Secondary and Higher Education cess are allowable as a deduction while computing the income of the assessee. Respectfully following the said judicial pronouncement, we direct the A.O to allow the deduction on account of education cess and secondary and higher education cess paid for the year under consideration by the assessee. We therefore, allow this ground of the assessee. 2022 (2) TMI 394 Penalty u/s 271(1)(c) - non specification of concealment of particulars of income or furnishing of inaccurate particulars of such income - Whether notice u/s 274 Read with Sec. 271 is bad and defective as it is issued without deleting the appropriate clause under which the penalty is proposed to be imposed ? - HELD THAT:- On perusal of the notices issued u/s 274 read with section 271(1)(c) of the Act we observe that the notices were all steriotyped and the Assessing officer has not specified any limb or charge for which the notices were issued i.e., either for concealment of particulars of income or furnishing of inaccurate particulars of such income. It can be seen from the notices issued u/s 274 read with section 271(1)(c) of the Act, Assessing Officer did not strike off irrelevant limb in the notices specifying the charge for which notices were issued All the notices for issued are apparently for both the charges. We have perused the orders of the Tribunal in the case of Radhika Surgical Pvt. Ltd. vs. ACIT [ 2021 (3) TMI 42 - ITAT DELHI] which is the assessee s group case and find that the Tribunal deleted the penalty on identical facts as the notices issued u/s 271(1)(c) were found to be bad in law as no charge was specified in those notices. We also observed that identical issue came up before the Hon ble Bombay High Court (full bench at Goa) case of Mr. Mohd. Farhan A. Shaikh [ 2021 (3) TMI 608 - BOMBAY HIGH COURT] . Assessee must be informed of the grounds of the penalty proceedings only through statutory notice and an omnibus notice suffers from the vice of vagueness. Penalty order passed u/s. 271(l)(c) of the Act by the Assessing Officer is bad in law and accordingly the penalty orders passed u/s. 271(1)(c) of the Act for Assessment Years 2007-08 to 2012-13 are quashed. - Decided in favour of assessee. 2022 (2) TMI 393 Penalty u/s 271(1)(c) - unexplained investment in paintings - HELD THAT:- We agree with the submission of the Ld. AR that penalty due to addition on account of valuation of paintings is a matter of subjective assessment. It cannot result in levy of penalty for concealment of income. Accordingly, the order of the Ld. CIT(A) is set aside and the AO is directed to cancel the penalty. 2022 (2) TMI 392 Penalty u/s 271(1)(c) - assessee for failure to return income from sale of agricultural land, held as stock in trade to tax - HELD THAT:- The charge of the Revenue being that the assessee had furnished inaccurate particulars of income to this effect. No infirmity in the order of Ld. CIT(A) who has, we find, after a careful consideration of the facts, which have remained uncontroverted and correct application of law, held that there was no furnishing of inaccurate particulars of income by the assessee so as to attract penalty u/s 271(1)(c). The finding of fact of the CIT(A) that the said transaction of sale of agricultural land was reflected in the audited profit and loss account of the assessee and the income therefrom disclosed in the return of income filed, though claimed as exempt u/s 2(14) of the Act, remains uncontroverted before us. The explanation of the assessee for failing to return the said income to tax for the reason that it was under a false impression that the said lands constituted investments of the assessee and did not qualify as capital assets, as per section 2(14) of the Act,thus income earned thereon being exempt from tax, we find has not been found to be outrightly false by the Revenue. As per section 2(14) of the Act rural agricultural lands specified therein do not qualify as capital assets. It is not the case of the Revenue that the lands sold were not rural agricultural lands which did not qualify as capital assets as per section 2(14) - contention of the assessee that it held land both as stock and as investments, has also not been controverted by the Revenue. Therefore, we agree with the CIT(A) that the explanation of the assessee that he mistakenly treated the said transaction as exempt from tax appears bonafide. Explanation is bonafide is, we find, supported by the fact that during assessment proceedings the assessee, realizing his mistake even before detection by the Revenue, returned the same to tax. The fact that the assessee surrendered the said income prior to detection by the Revenue is evident from the chronology of events pointed out to us by the Ld.Counsel for the assessee above showing that the income was surrendered on 16-11-16 before the assesses case was converted from limited to complete scrutiny on 28-11-16 and inquiry made for treating the said income as exempt vide questionnaire dated 02-12 -16, which fact has not been denied by the Revenue. The assessee having disclosed all particulars of his income from sale of agricultural land, having furnished a bonafide explanation for not returning the same to tax and having surrendered the said income suomoto before detection by the Revenue, we agree with the Ld.CIT(A) that the assessee cannot be said to have furnished inaccurate particulars of income so as to levy penalty u/s 271(1)(c) of the Act. We therefore uphold the order of the Ld.CIT(A) deleting the penalty levied. - Decided against revenue. 2022 (2) TMI 391 Rejection of book results u/s 145(3) - Addition on account of unexplained cash receipts from loan and advances given in earlier years - HELD THAT:- We find that the books of account was rejected by Assessing Officer for the want of supporting vouchers and cash books. Similarly, the addition was also made by taking view that no sufficient evidence to substantiate the claim was furnished by Assessing Officer. CIT(A) also confirmed the addition for the want of evidence. Now before us the assessee has filed voluminous evidence and prayed for admission of additional evidence. Considering the fact that the certain entries recorded in the cash books are having direct bearing on the issue under consideration - considering the relevancy of documents, we admit the additional evidence and restore the matter back to the file of Assessing Officer who examine both the issue/ disallowances afresh and pass the order in accordance with law. The assessee is also directed to provide all necessary evidence, documents and information to the Assessing Officer and not to cause for further delay before the Assessing Officer. Hence, the grounds of appeal raised by the assessee are allowed for statistical purpose. 2022 (2) TMI 390 Disallowance of the write off of the advance made to subsidiary company - Whether acquisition was in the normal course of assessee s business with a view to improve trading results? - HELD THAT:- All the three write-off were part and parcel of the same transaction and arose in the course of assessee s efforts to run its business more smoothly and in a more profitable manner. Had the acquisition been materialized, the assessee would have benefitted by way of increase in business and better trading results. Therefore, it could be well said that the acquisition was in the normal course of assessee s business with a view to improve trading results. Any loss arising therefore, thus, was to be viewed as loss in the revenue field and not in capital field as erroneously held by lower authorities. All the above stated facts would lead to a conclusion that the investments were in furtherance of business interest of the assessee and were made out of commercial expediency. The main purpose of investment was not to acquire any manufacturing capacity or any infrastructural capacity but the main purpose was to boost assessee s sales. Therefore, the investments could not be said to be in capital field rather the same were meant to improve the top line of the business by way of higher revenue profits. We find that the issue on similar factual matrix is squarely covered by the cited decision of Hon ble Bombay High Court in CIT V/s Colgate Palmolive India Ltd. [ 2014 (12) TMI 846 - BOMBAY HIGH COURT] wherein it was held that loss in investment out of commercial expediency would be an allowable deduction - Also in M/S. ACE DESIGNERS LIMITED [ 2020 (9) TMI 970 - KARNATAKA HIGH COURT] since the investment was made for enhancement of business activity of assessee in global market which primarily related to business operation of assessee and the investment was not made with a view to create capital asset in the form of holding shares, the said loss would be a business loss allowable u/s 28(i). The Hon ble Supreme Court in Patnaik Co. Ltd. V/s CIT [ 1986 (7) TMI 6 - SUPREME COURT] held that where the government bonds or securities were purchased by the assessee with a view to increase its business, the loss incurred on the sale of such bonds or securities was allowable as business loss We concur with the submissions of Ld. AR that the investments in subsidiaries were made in the normal course of assessee s business to make business more profitable. Therefore, the resultant loss suffered by the assessee was rightly claimed as revenue expenditure / business loss by way of write-off in the Profit Loss Account. We order so. Accordingly, we direct Ld. AO to allow these three write-offs as deduction as claimed by the assessee. The grounds thus raised stand allowed. Claim of depreciation on cylinder - AO has denied the depreciation on the ground that the same represent sales return - HELD THAT:- The assessee had raised excise invoices and also charged applicable VAT on sale of cylinders. However, these cylinders have subsequently been returned on 15.06.2010 by these two parties which is quite evident from the copies of credit notes issued by the assessee to both these parties. Consequently, the block for this year has been increased to that extent and depreciation, as applicable, has been claimed on the same by the assessee. These transactions are duly evidenced by Tax Audit Report and Extracts of financial statements as placed on record. - .AO reasoning could not result into denial of depreciation to the assessee since upon sale of cylinders, the block of asset was reduced whereas on receipt of the same back by the assessee, the gross block was increased accordingly. Therefore, we find no infirmity in the claim of the assessee. If the logic of Ld. AO was to be accepted that the same was merely sales return, the loss thus suffered would be allowed in full as trading loss. Therefore, we direct Ld. AO to allow the depreciation on cylinders as per assessee s claim. This ground stand allowed. The appeal stand allowed in terms of our above order. Disallowance of interest on tax deducted at source - CIT(A) confirmed the disallowance by observing that interest on TDS was akin to Income Tax Payment. Aggrieved, the assessee is in further appeal before us - HELD THAT:- We find that this issue stood against the assessee by the decision of Hon ble High Court of Madras in CIT V/s Chennai Properties Inv. Ltd.[ 1998 (4) TMI 89 - MADRAS HIGH COURT] wherein it was held that interest takes color from nature of principal amount required to be paid but not paid in time and this principal amount being income-tax, interest is in nature of a direct tax and settlement of income-tax payable under Act and, therefore, same cannot be regarded as compensatory payment. Therefore, the same could not be allowed as business expenditure. Respectfully following the same, we confirm the disallowance and dismiss this ground of appeal 2022 (2) TMI 389 Penalty u/s 271(1)(c) - disallowance of of non-compete fee amortized in its returns of income supported with computation sheet - HELD THAT:- When the claim lodged by the assessee company, in its return of income on the basis of its audited financials have been rejected by the lower authorities while taking different view than the assessee, no question of furnishing inaccurate particulars arises. Following the decision rendered in the case of CIT vs. Reliance Petroproducts Pvt. Ltd.[ 2010 (3) TMI 80 - SUPREME COURT] we are of the considered view that in this case, there was no occasion for the assessee to furnish in accurate particulars of its income who has lodged a bona fide claim qua the deduction and writing of the value of signages and ice boxes on the basis of its audited financials which has been rejected by the revenue authorities by taking different view and in these circumstances provisions contained u/s 271(1)(c) are not attracted. Assessing Officer has nowhere brought on record if assessee has furnished inaccurate particulars of income, at the most, the act of the assessee may be termed as filing of incorrect claim which does not attract the penal provisions contained under Section 271(1)(c) of the Act. It is settled principle of law that when quantum appeal is admitted by the Hon'ble High Court by framing a question of law, as in the instant case, penalty u/s 271(1)(c) of the Act is not leviable as has been held by Hon'ble Delhi High Court in cases of PCIT vs. Harsh International (P) Ltd.[ 2020 (12) TMI 1082 - DELHI HIGH COURT] and CIT vs. Nayan Builders Developers [ 2014 (7) TMI 1150 - BOMBAY HIGH COURT] The assessee is that when substantial question of law has been framed by the Hon'ble High Court in an appeal preferred by the assessee challenging quantum order, the issue has become debatable, the impugned penalty could not survive. We are of the view that Assessing Officer has failed to bring on record if assessee has furnished inaccurate particulars income at any stage of assessment proceedings, hence, the question framed in preceding para is decided in favour of the assessee. So finding no illegality or perversity in the impugned order passed by the Commissioner of Income-tax(Appeals) deleting the penalty levied by Assessing Officer under Section 271(1)(c) of the Act, the present appeal filed by the Revenue is hereby dismissed. 2022 (2) TMI 388 Reopening of assessment u/s 147 - unexplained deposit in his bank account in Punjab National Bank - HELD THAT:- We are of the view that the reasons recorded was not correct, and the AO has not assumed jurisdiction validly, therefore, the action of the AO is void-ab initio and all subsequent action is liable to be set-aside. Even on merit, we find that Ld. CIT(A) estimated the income @ 51.84% on account of undisclosed sales. The assessee claimed that he has shown book net book profit @ 11.45% and in subsequent year Assessing Officer has made addition @ 10% of net profit in the assessment order passed under section 143(3) of the Act. It is settled law that only profit element embedded in undisclosed sale or purchases is to be added not the substantial part of transaction. In our view when in subsequent assessment year in AY 2011-12, the AO himself made addition only @ 10% of net profit in the assessment order passed under section 143(3); the book profit shown by assessee @ 11.45% for the year under consideration was reasonable and justified. Therefore, the assessee also succeeded on merit. Appeal of assessee allowed. 2022 (2) TMI 387 Penalty levy u/s. 271(1)(c) - Defective notice - show cause does not strike off/delete the inappropriate/irrelevant/not applicable portion - HELD THAT:- We find that the notice in this is an omnibus show-cause notice as it does not strike off/delete the inappropriate/irrelevant/not applicable portion. Such a generic notice betrays a non-application of mind. Hence, the penalty levied pursuant to such a notice is not legally sustainable in law. See MR. MOHD. FARHAN A. SHAIKH [ 2021 (3) TMI 608 - BOMBAY HIGH COURT] - Hence we hold that the Assessing Officer was bereft of valid jurisdiction as the notice issued to assessee is unsustainable in law - Decided in favour of assessee. 2022 (2) TMI 386 Late remittance of employees contribution to PF and ESI - As submitted assessee had paid the employees contribution prior to the due date of filing of the return u/s 139(1) - Scope of amendment to section 36(1)(va) and 43B - HELD THAT:- As in Bangalore Bench of the Tribunal in the case of M/s. Shakuntala Agarbathi Company [ 2021 (10) TMI 1196 - ITAT BANGALORE] by following the dictum laid down in the case of Essae Teraoka Pvt. Ltd Vs. DCIT [ 2014 (3) TMI 386 - KARNATAKA HIGH COURT] held that the assessee would be entitled to deduction of employees contribution to PF and ESI provided that the payments were made prior to the due date of filing of the return of income u/s 139(1) - Also further held by the ITAT that amendment by Finance Act, 2021, to section 36[1][va] and 43B of the Act is not clarificatory. Therefore, the amended provisions of section 43B as well as 36(1)(va) of the I.T.Act are not applicable for the assessment years under consideration. By following the binding decision of the Hon ble jurisdictional High Court in the case of Essae Teraoka Pvt. Ltd Vs. DCIT (supra), the employees contribution paid by the assessee before the due date of filing of return of income u/s 139(1) of the I.T.Act is an allowable deduction - Decided in favour of assessee. 2022 (2) TMI 385 Revision u/s 263 by CIT - disallowance of huge interest expenses - assessment of the assessee was reopened for limited scrutiny as Large increase of unsecured loans during the year and High interest expenses as compared to business turnover - HELD THAT:- The copy of the assessment order u/s. 143(3) of the Act is on the file in which the interest issue has been examined - The assessee upon the query of AO has also submitted the reply by virtue of letter dated 16.06.2017 and letter dated 30.05.2017 - The assessee also submitted the relevant record before the AO which was examined by AO as requested. Thereafter, the AO disallowed the interest to the tune of ₹ 7,92,27,335/- Once the AO has examined the issue and one possible view has already been taken, therefore, the assessment u/s. 263 of the Act is not liable to be reviewed in view of the decision of CIT Vs. Ballarpur Industries Ltd.[ 2017 (8) TMI 538 - BOMBAY HIGH COURT] , Grasim Industries Ltd. [ 2010 (2) TMI 4 - BOMBAY HIGH COURT] , CIT Vs. Kelvinator of India Ltd. [ 2011 (1) TMI 27 - DELHI HIGH COURT] CIT Vs. Mepco Industries Ltd.[ 2006 (11) TMI 164 - MADRAS HIGH COURT] . If it is assumed that the inquiry was not correct or conducted properly, therefore, the revisional power u/s. 263 of the Act is not liable to be invoked in view of the decision of MOIL Ltd.[ 2017 (5) TMI 258 - BOMBAY HIGH COURT] , CIT Vs. Development Credit Bank Ltd. [ 2010 (2) TMI 161 - BOMBAY HIGH COURT] , CIT Vs. Vikas Polymers [ 2010 (8) TMI 745 - DELHI HIGH COURT] . Taking into account of all the facts and circumstances, we set aside the order passed by PCIT in question and allowed the appeal of the assessee. 2022 (2) TMI 384 Extraordinary expenses Allowability - AR submits that some raw material belonged to earlier concern which was returned back due to quality concerns and it was a loss to the assessee - HELD THAT:- AO/TPO asked the assessee to explain why the loss is treated as of extraordinary nature - as submitted that the year under consideration is the first year of operation and the assessee did not treat the material returned in subsequent years A.Ys. 2016-17 and 2017-18. Considering the same the TPO held the amount of goods returned will not be expenses of extraordinary nature - claim of extraordinary expense due to the defective goods written off is not mentioned as separate item in the audited financials. TPO held there was no such extraordinary item in the audited financials and suitable adjustment to that effect with proper comparability and analysis is not possible. AO/TPO rejected the claim of adjustment of extraordinary expense - AR did not bring on record supporting evidence showing that the cost of goods returned cost of demurrages, etc. is to be considered as extraordinary expenses. Therefore, we find no infirmity in the direction of DRP which was followed by the AO in its final assessment order. Thus, the first issue raised by the assessee is dismissed. Treating the foreign exchange gain as operating revenue - foreign exchange fluctuation gain/loss is included in the operating revenue/expense for the computation of PLI, the actual receipts/payments are substituted in the place of sale price or purchase price charged on the date of transfer and the PLI so computed would reflect the net margin prevalent at the time of realization/payment rather than the net margin at the time of sale or purchase - HELD THAT:- We hold the foreign exchange gain/loss as operating revenue/loss in the ALP determination and the other comparable needs to be considered as operating revenue/cost. Therefore, the issue raised above relation to foreign exchange gain/loss is allowed. TP Adjustment - Selection of MAM - TNMM or RPM - HELD THAT:- We note that when the goods in the trading segment are sold to its AEs the RPM is the most appropriate method as there was no value addition to the goods at the time of selling the same to AEs if the goods are sold to non-AEs i.e. unrelated parties then the TNMM is the most appropriate method. On perusal of the record, we note that when there is no value addition to the goods traded, in our opinion, RPM is the most appropriate method but however, value of manufacturing is to be excluded. Thus, the issue raised regarding the most appropriate method in respect of RPM in the trading segment is to be accepted and accordingly, we direct the AO/TPO to consider the same but however, the value of manufacturing is to be excluded. Thus, issue raised by the assessee is allowed for statistical purpose. 2022 (2) TMI 383 Revision u/s 263 by CIT - Incorrect valuation of shares - PCIT observed that AO had erred in accepting the invalid share valuation certificate - valuation certificate does not reflect fair market value (FMV) of the shares - eligibility of DCF valuation method - difference between Lack of enquiry and inadequate enquiry - HELD THAT:- We note that projections are based on the businessman's consideration of the business prospects and his own surrounding circumstances. Such projections cannot be equated by projections of any other comparable. The report of the Chartered Accountant in the matter of DCF, we note that the same is in accordance with the pronouncements of ICAI and only for mismatch with actual at later date, the same cannot be rejected, unless a patent defect in the method adopted is pointed out by the Revenue Authorities We may examine the method adopted by the assessee and if he does not find any error in the method so adopted then order passed by him should not be treated erroneous. We note that ld PCIT in his revision order observed that clause 11(U) Sub-clause (b) of Rules 11UA defines the word Balance Sheet. This clause again referred to the Balance Sheet as drawn on the valuation date and where such Balance Sheet is not drawn on the valuation date it will be of the date immediately preceding the valuation date. Therefore, if the share was allotted in financial year 2014-15, and the Balance Sheet were not drawn on the date of the allotment, the relevant Balance sheet on the basis of which the fair market value could have been determined would be the Balance sheet as on 31.03.2014. As per ld PCIT, there would be no relevance of the Balance Sheet drawn on 31.03.2013. We do not agree with ld PCIT that fair market value of the shares should be determined based on Balance sheet as on 31.03.2014. The assessee made long term projections based on Balance Sheet drawn on 31.03.2013, and loan was sanctioned by the bank based on said projection. As per said projection, the shares were partly issued in previous year and partly in current assessment year. Moreover, the assessee had submitted before assessing officer, fair market value of shares based on the Balance sheet as on 31.03.2014, and there was no significant difference noticed by the assessing officer. The Income-tax Officer is not only an adjudicator but also an investigator. As an adjudicator and investigator, the assessing officer conducted further inquiry in assessee`s case and framed the assessment order under section 143(3) of the Act. We note that there is difference between Lack of enquiry and inadequate enquiry . It is for the AO to decide the extent of enquiry to be made as it is his satisfaction as what is required under law. Reliance is placed on the decision of CIT v. Sunbeam Auto Ltd.[ 2009 (9) TMI 633 - DELHI HIGH COURT] as held that if there was any inquiry, even inadequate, that would not by itself, give occasion to the Commissioner to pass order u/s 263 of the Act, merely because the Commissioner has a different opinion in the matter and that only in cases where there is no enquiry, the power u/s 263 of the Act can be exercised. The ld. PCIT cannot pass the order u/s 263 of the Act on the ground that further/thorough enquiry should have been made by AO. We note that order passed by the assessing officer is sustainable in law as the assessing officer, during the assessment stage examined the DCF valuation report including the latest audited balance sheet, as on, 31/03/2014 with reference to assessment year 2015-16,whichdoes not give a different valuation. The data used in the report of 2014 is supported by the techno-economic valuation done by independent expert for State Bank of India(The Lender Bank), with suitable modification to the projections for the reason of delay and change in the market conditions at that point of time. Hence assessing officer having examined these valuation reports, took a possible view, therefore, we are of the view that such order passed by the assessing officer under section 143(3), dated 06.12.2017, is neither erroneous not prejudicial to the interest of revenue. none of the reasons set out by ld. PCIT for invoking the jurisdiction u/s 263 of the Act are sustainable - Decided in favour of assessee. 2022 (2) TMI 382 Reopening of assessment u/s 148 - estimated the profit on Share Commodity Transaction at 1% - HELD THAT:- There is no any material evidence in respect of its claim except disputing the estimation of 1% made by the Assessing Officer. As the assessee has not filed the Return of Income in the normal course and also in response to the notice issued u/s.148 of the Act and consistently not produced any evidence to its claim, the estimation made by the Assessing Officer at 1% does not require any interference and thus the grounds of appeal raised the assessee are dismissed. 2022 (2) TMI 381 Undisclosed expenses incurred on development of colony - CIT-A deleted the addition - HELD THAT:- Assessee has duly provided complete details of development expenses as incurred by him and by the other family members before the assessing officer during the course of search assessment proceeding. We find that during the course of Assessment proceedings itself, the assessee has brought to the notice of AO, that he along with family members had entered into an agreement with Shri Mukesh Sangai for development of the colonies. The said agreements were also seized during the course of the search. All the different individuals have debited the development expenses in their books of accounts. The statement giving year wise development expenses incurred by the different individuals was furnished during the course of assessment as well as appellate proceedings. During the course appellate proceedings before the CIT(A), the copies of ledger accounts of the development expenditure along with the relevant bills and copy of bank statement reflecting the amount of development expenditure had been submitted and which were duly examined by her. We find that the Ld. CIT-DR, except placing his reliance on the findings of the Assessing Officer, could not justify the addition made by the Assessing Officer. AO has made the addition towards undisclosed development expenses @ 300/- per sq. ft. in respect of the three colonies on guess work and surmises which was not justified as the addition was purely on the estimations in absence of any incriminating document found and seized during the course of the search and more so, without bringing any cogent and corroborative material or adverse evidence on record. Thus, the Ld. CIT(A) rightly deleted the addition made by the A.O. Therefore, we do not find any reason to interfere with the findings of the Ld. CIT (A). Accordingly, the action of the Ld. CIT (A) in deleting the additions is confirmed. - Decided against revenue. 2022 (2) TMI 380 Reopening of assessment u/s 147 - G.P. addition after applying G.P. @ 9.5% on a sum being cash deposit in Bank account - HELD THAT:- The reasons recorded on 21.03.2016 has categorically mentioned that R.K. Traders is a proprietary concern of the assessee which has business dealings with M/s. Wonder Packaging Industries as the business premises of M/s. Wonder Packaging Industries is used by the assessee (his proprietary firm). The assessee has filed return of income in the year 23.02.2011 but has not mentioned this particular issue/income in the said return related to the transactions. In fact, in respect of notice under Section 148 of the Act, the assessee opted that the said earlier return filed in February 2011 should be taken as it is. The reopening was done with the prior approval and proper satisfaction and the legal viable reasons. Therefore, the contention of the assessee that the notice issued under Section 148 of the Act itself is bad in law and is not sustainable. Quantification of the actual G.P - Quantification before the AO given by the assessee as well as the calculations done by the Assessing officer both seems to be unclear and the basis of G.P. has to be taken into account. No past historical figures were produced before us. Therefore, it will be appropriate to remand back this matter to the file of Assessing Officer for proper adjudication and quantification of the actual G.P. Needless to say the assessee be given opportunity of hearing by following principles of natural justice - Appeal of the assessee is partly allowed for statistical purposes. 2022 (2) TMI 379 Disallowance of interest expenses - adding the interest income on the financial transactions carried out with the sister concern - HELD THAT:- Generally it is not expected from the assessee to raise the issue before the higher forum when the same was not pressed before the lower authorities - there are certain exceptions to it. If the assessee under wrong appreciation of facts and the law has not pressed the issue before the lower authorities, the same can be raised before the higher forum. It is for the reason that the assessee should not be deprived of the benefit for which it is entitled under the provisions of law merely on wrong appreciation of facts/law. All the facts relating to the issue are arising from the order of the AO and there is no need to refer to any fresh document to decide the issue on hand. Therefore in the interest of justice and fair play, we have no hesitation in admitting the ground raised by the assessee as discussed above though the same was not pressed before the learned CIT(A) by the assessee. As there is no finding by the learned CIT(A) qua the dispute on hand, therefore we are inclined to set aside the same to the file of the learned CIT(A) for fresh adjudication as per the provisions of law. Hence, the ground raised by the assessee is allowed for statistical purposes. TDS u/s 194C read with section 40(a)(ia) - disallowances of expenses on account of non/short deduction of Taxes provided that the assessee furnishes the certificate in the prescribed form - HELD THAT:- Assessee has not furnished the necessary certificate in form 26A prescribed by the CBDT. Now at the time of hearing before us, the learned AR has also not furnished any certificate in form 26A prescribed by CBDT. Now the issue arises, can the matter be set aside to the file of the AO for collecting the necessary evidences from the respective payees to ensure that such payees have paid the taxes on the amount received from the assessee. We note it is the duty of assessee to deduct appropriate tax from the amount paid/payable to any party i.e. payee if such amount falls under the preview of provision of chapter XVII(B) of the Act i.e. deduction at source - provision of section 40(a)(ia) of the Act provides that if assessee failed to deduct or failed to deduct appropriate tax on amount paid on which it was liable to deduct tax then such amount will not be allowed as business expenses. However the legislator provided relaxation to the assessee by inserting the 2nd proviso to section 40(a)(ia) on account of failure to deduct if it fulfill the condition prescribed under proviso to section 201(1) of the Act i.e. furnishing a certificate from accountant in from 26A. To our understanding the duty cast on the assessee cannot be transferred to revenue. If such burden transferred to revenue then the importance of provision of tax deduction at source will be of no relevance. Therefore the alternate contention of the assessee is dismissed. Hence the ground of appeal of the assessee is partly allowed. Disallowance of interest expenses under the provisions of section 36(1)(iii) - HELD THAT:- We are not inclined to make any reference to consider the financial transactions carried out by the assessee with the sister concern for making the disallowance of the interest expenses claimed by the assessee with respect to its project. Assessee in the year under consideration has not claimed any deduction of the interest being shown as part of the closing WIP. Indeed, in the later years, this closing WIP shall become the opening WIP and again the same will be allowed as deduction in the subsequent year which will result in the reduction of the profit of the assessee of the subsequent years. Once, an amount of interest has already been suffered to tax, if the addition is sustained, then the same amount should not be treated as opening WIP. In doing so, it would lead to the double taxation which is not warranted under the provisions of law. On this count as well as, the addition to the extent of ₹ 37,99950 is liable to be deleted. All the details about the interest expenses, financial statements, written submissions of the assessee were available before the learned CIT(A) and no defect of whatsoever was pointed out by him therein. CIT(A) has just dismissed the claim of the assessee by observing that the assessee failed to furnish the necessary details. To our understanding, this kind of approach of the learned CIT(A) is unwarranted for confirming the addition made by the AO after ignoring the necessary details which were available on record.Hence the ground of appeal of the assessee is allowed. 2022 (2) TMI 378 Levy of penalty u/s 271(1)(b) - non appearance before the Assessing Officer - no compliance was made by assessee to notice by A.O. served u/s 142(1) - HELD THAT:- On perusal of records we find that on some instances notice were sent to the wrong address due to which the postal authorities could not deliver the document. A confirmation letter from the Postmaster of returning the speed post has been filed. Notice u/s 148 was served through affixture which was never received by the assessee as the address was not correct. AO kept an issuing notices on the wrong address even when the first notice was not served due to wrong address. All these series of facts shows that there was a mis-communication at the end of the AO about the address and also not mentioning the husband s name of the assessee which resulted in non serving of the notice since she resided in village - no justification in the action of the AO in initiating and levying penalty u/s 271(1)(b). We accordingly set aside the finding of the Ld. CIT(A) and delete the penalty levied u/s 271(1)(b). Ground raised by the assessee is allowed. 2022 (2) TMI 377 Addition u/s 68 - addition on account of share application money - whether assessee has discharged the onus to prove the identity and creditworthiness of the share applicants/creditors and the genuineness of the transactions in accordance with section 68 ? - HELD THAT:- AO deputed inspectors to physically visit Kolkata and collect information directly from the share applicants who gave share application money to the assessee during the year under consideration. It is also an uncontroverted fact that notices under section 133(6) of the Act were issued to the said share applicants which were duly complied with. Assessing Officer himself accepted that inspectors met Shri Ashok Kumar Surekha who represented as the Chairman in these companies. The share applicant companies also provided their acknowledgement of return, copy of account of the assessee in their books of accounts, copy of share certificate and copy of their bank statement directly to the Ld Assessing Officer which were never disproved by the Ld Assessing Officer We find that with the help of supporting/corroborative documentary evidences, the existence of the share applicant companies was proved beyond doubt by the assessee. The assessee during the course of re-assessment proceedings and first appellate proceedings filed requisite documentary evidences which included share application form, extract of minutes of the meeting of the companies, Master data and signatory details, Certificate of incorporation, MOA, AOA, audited financial statements etc. so as to justify the identity and creditworthiness of the share applicants and genuineness of the transactions entered into with them. It is also an uncontroverted fact that the said documents were never disproved by the Ld AO and Ld CIT(A). The identity of the above share applicants was also independently verified by the inspectors during the course of re-assessment proceedings. Notices u/s 133(6) of the Act were issued to the above share applicants which were duly replied to by the share applicants. So far as the share application money received from remaining companies is concerned, we find that the assessee filed ample documentary evidences which discharged the primary onus cast upon it u/s 68 There was no justification for doubting the identity and creditworthiness of the share applicants and genuineness of the transactions entered into with them in the light of the aforesaid discussion and judicial pronouncements (supra). Under the given facts and circumstances of the case, we are of considered view that the assessee company properly discharged the primary onus cast upon it u/s 68 of the Act to justify the identity and creditworthiness of the share applicants and genuineness of the transactions entered into with them and accordingly, addition of made by the Ld AO on account of share application money was not justified - Decided in favour of assessee. 2022 (2) TMI 376 Alternate claim to allow deduction u/s. 43B clause (C), (d) and (e) - royalty was an allowable deduction when computing the assessee s income chargeable to tax - HELD THAT:- As identical issue is decided in favour of the assessee for the A.Y. 2001-02. While deciding the issue, the Coordinate Bench of the Tribunal [ 2014 (10) TMI 994 - ITAT MUMBAI] held that as the facts and circumstances during the year under consideration are para materia wherein appeal of department in earlier year was dismissed by the Tribunal, therefore, ground taken by assessee for disallowance during the year has become infructuous. Write off of Bad and Doubtful Debt - HELD THAT:- We observe from the record that on identical facts the Hon'ble Supreme Court in the case of Vijaya Bank [ 2010 (4) TMI 46 - SUPREME COURT] held that the assessee debits to Profit and Loss Account and reduces from debtors/loans and advances on the asset side of the balance sheet amounts to write off and deduction u/s. 36(i)(vii) is available - we notice that assessee has charged the unrecovered portion to the profit and loss account and reduced the amount in the debtors balances, therefore the facts are exactly similar to the facts in the above case, accordingly, we allow the claim of the assessee. Disallowance of club membership fees - HELD THAT:- Aforesaid issue raised in the assessment year 1993-94 is covered in favour of the assessee by the decision of the jurisdictional High Court in Otis Elevator CO. (India) Ltd.,[ 1991 (4) TMI 53 - BOMBAY HIGH COURT] Respectfully following the same, we dismiss the ground raised by the department. Interest received from the Income-tax Department - HELD THAT:- As in own case the Coordinate Bench of the Tribunal [ 2014 (10) TMI 994 - ITAT MUMBAI] issue decided in favour of assessee. Deduction u/s. 80HHC as claimed, interest received cannot be reduced from business profits as interest paid is higher than interest received - HELD THAT:- We observe from the record that identical issue in own case the Coordinate Bench of the Tribunal [ 2014 (10) TMI 994 - ITAT MUMBAI] decided in favour of the assessee as direct the A.O. to exclude the excess of interest income over interest expenditure from the eligible profit of the company while computing deduction u/s 80HHC. Rent should not be reduced from the profits of business for computing deduction u/s.80HHC - HELD THAT:- We observe from the record that identical issue in own case the Coordinate Bench of the Tribunal [ 2014 (10) TMI 994 - ITAT MUMBAI] as held net rent expenditure and net commission expenditure is required to be reduced from eligible profit rather than the gross rent and gross commission for the computation of deduction u/s 80HHC - decided in favour of the assessee. Loss on export of traded goods not to be adjusted against profit on export of manufactured goods - HELD THAT:- As in own case the Coordinate Bench of the Tribunal [ 2014 (10) TMI 994 - ITAT MUMBAI] as find no infirmity in the order of the lower authorities adjusting the loss on export of traded goods against profit on export of manufactured goods for computing deduction u/s 80HHC. Appropriation of HO expenses in computing deduction u/s. 80-O - HELD THAT:- As in own case the Coordinate Bench of the Tribunal [ 2014 (10) TMI 994 - ITAT MUMBAI] held that AO has only allocated the expenses but no income was allocated - there is no need for allocation of any expenses when the expenses are directly connected with periods - we are of the considered opinion that there is no necessity for allocating the head office expenses to the units claiming deduction u/s. 8OHH, 801, 80M and 80-0. The order of the CIT(A) on this issue is accordingly set aside and the grounds raised by the assessee are allowed. Deduction u/s. 80-IA on gain arising on sale of machinery - HELD THAT:- We observe from the record that identical issue is decided in favour of the assessee by the Hon ble Bombay High Court by relying on the decision of Hon ble Delhi high Court in the case of CIT v. Eltek SGS P Ltd [ 2008 (2) TMI 17 - DELHI HIGH COURT] . Sales tax exemption benefit being capital receipt not chargeable to tax - HELD THAT:- As in own case the Coordinate Bench of the Tribunal [ 2014 (10) TMI 994 - ITAT MUMBAI] remit this issue back to the file of AO for deciding the issue afresh after proper verification. It is needless to say that assessee may be given proper opportunity of being heard. Royalty and interest on royalty u/s. 43B, contribution to various organizations - HELD THAT:- As in own case the Coordinate Bench of the Tribunal [ 2014 (10) TMI 994 - ITAT MUMBAI] decide this issue in favour of the assessee. Disallowance of tax exempt dividend received - HELD THAT:- As in own case the Coordinate Bench of the Tribunal [ 2014 (10) TMI 994 - ITAT MUMBAI] wherein the disallowance was restricted to 1.5% of the exempt income. As the facts and circumstances during the year under consideration are same, we direct the A.O. to restrict the disallowance to 1.5% of the exempt income Expenses towards family welfare activities, sewing centre, supply of seeds, teachers training, Agarbatti making, temple expenses, drama expenses, taxi hire for pulse polio, well dipping expenses, electrification of Gram Panchayat, distribution of material to children and rural sports, leprosy camp expenses, medical camps, balwadis, carpet weaving training, farmers training programme etc . - HELD THAT:- As in own case the Coordinate Bench of the Tribunal [ 2014 (10) TMI 994 - ITAT MUMBAI] decided issue in favour of assessee. Exchange fluctuation loss - HELD THAT:- As in own case the Coordinate Bench of the Tribunal [ 2014 (10) TMI 994 - ITAT MUMBAI] decided issue in favour of assessee. Capitalized in its books of account debenture interest in respect of amount borrowed for setting up of grinding unit at Bhatinda - HELD THAT:- As in own case the Coordinate Bench of the Tribunal [ 2014 (10) TMI 994 - ITAT MUMBAI] decided issue in favour of assessee allowing debenture interest as business expenditure under section 36(1)(iii) Debenture issue expenses - HELD THAT:- As in own case the Coordinate Bench of the Tribunal [ 2014 (10) TMI 994 - ITAT MUMBAI] decided issue in favour of assessee. Payment towards PF and ESIS contribution after the normal due date but within the grace period allowed by the relevant Statute / Authorities - CIT-A allowed the claim of assessee - HELD THAT:- As decided in FLUID AIR (INDIA) LTD. [ 1997 (2) TMI 557 - ITAT MUMBAI] none of the payments in question were hit by the provisions of section 43B or section 2(24)(x) read with section 36(1)(va), as the case may be, and the additions made by invoking these provisions are hereby deleted. Provisions of section 43B should be construed in a liberal way keeping in view the Legislative intention so that absurdity and the interpretation which leads to injustice may be avoided. Thus, we do not find any reason to interfere with the order of the Ld.CIT(A) and dismiss the ground raised by the revenue. Allowable revenue expenditure - Payment made for earning an income assessable during the year - HELD THAT:- As assessee has to let go the huge labour force and their huge liability of employee accumulation of their services, it has the option to settle directly to the employees or select the indirect settlement through the acquiring company. It is wrong to say that this liability is not ascertained, it is mutually agreed liability that the assessee will compensate certain amount of liability and accordingly, it has made provision to settle the liability. On a perusal of the Ld.CIT(A) order, we do not find any infirmity in the order of the Ld.CIT(A) in allowing the claim of the assessee. Ground raised by the revenue are dismissed. Expenses on production of film to be used for advertisement purposes - HELD THAT:- As in own case the Coordinate Bench of the Tribunal [ 2014 (10) TMI 994 - ITAT MUMBAI] find no infirmity in the order of the ld. CIT(A) deleting the disallowance by observing that advertisement film was made only for advertisement and its useful life is very short and such films do not add to the capital structure of the company. Expense incurred on implementation of software and ERP - HELD THAT:- We observe that this issue is dealt by the Hon'ble Jurisdictional High Court in the case Raychem RPG Ltd [ 2011 (7) TMI 953 - BOMBAY HIGH COURT] - thus we do not find any infirmity in the order of the Ld.CIT(A) in allowing the claim of the assessee. Ground raised by the revenue are dismissed. We order accordingly. Excluding the excise duty and sales tax in the total turnover for computing the deduction u/s 80HHC - HELD THAT:- As decided in own case [ 2014 (10) TMI 994 - ITAT MUMBAI] no infirmity in the order of the ld. CIT(A) in directing the A.O. to exclude the amount of excise duty and sales tax from the total turnover of the assessee while computing deduction u/s 80HHC. Appropriated gross expenses of Head Office on an estimate basis and reduced the amount of eligible deduction u/s 80IA - HELD THAT:-As in own case the Coordinate Bench of the Tribunal [ 2014 (10) TMI 994 - ITAT MUMBAI] decided issue in favour of assessee. Deduction u/s 80IA in respect of profit of Vikram Power Unit allowed. Levy interest u/s 234D - HELD THAT:- Considered the submissions and material placed on record, we observe that this issue is considered by the Hon ble jurisdictional high court and decided against the assessee. 2022 (2) TMI 375 Revision u/s 263 by CIT - Unaccounted turnover - AO completed the assessment of all these 3 years u/s 143(3) r.w.s. 153A of the Act, consequent to the search operations conducted in the hands of the assessee - HELD THAT:- It is nobody s case that the cash payment represents unaccounted purchases as presumed by Ld PCIT. In that case, the AO could not have computed gross profit on the basis of entries noted in the seized materials. Under these set of facts, one of the courses of action available with the AO is to estimate profit from the unaccounted sales. Since the assessee could not have sold materials without purchasing them, only profit element may be assessed. Thus, the AO has estimated the income and assessed the same in the hands of the assessee in all the three years. Thus, we notice that the AO has adopted one of the possible views in this matter. As held by Hon ble Supreme Court in the case of Malabar Industrial Company [ 2000 (2) TMI 10 - SUPREME COURT] if the AO has taken one of the possible views, then the same would not make the assessment order prejudicial to the interests of revenue. PCIT has held the assessment orders to be erroneous for the reason that the AO should have estimated income from unaccounted sales at a higher figure. Thus it is case where Ld PCIT is having a different view on the manner of estimation of income from unaccounted sales. As held in the case of Gabriel India Ltd (supra), the view so entertained by Ld PCIT would not give him power u/s 263 of the Act to initiate revision proceedings, since the view of the AO cannot be termed as erroneous. The impugned assessment orders cannot be termed as erroneous and prejudicial to the interests of revenue. Accordingly, Ld PCIT was not justified in invoking revision proceedings in all the three years under consideration. Accordingly we set aside the revision orders passed by Ld PCIT in all the three years under consideration. - Decided in favour of assessee. 2022 (2) TMI 374 Undisclosed business profit - Variation in the inventories physically found during the search with that recorded in books of accounts - HELD THAT:- The figure of inventories as per regular books of account taken by both lower authorities is ₹ 19,85,00,000/- which is an approximate figure and the actual figure of the inventories as per the books is ₹ 19,62,74,025/- which is duly supported by the details of quantity rate and value given in the submissions. We find that if this actual figure of inventories as per regular books of account is applied in the computation sheet mentioned in the impugned order as well as in the finding of Ld. AO, the resultant gross profit @ 13.87% will need to be worked out on the figure of ₹ 9,37,46,093/- and the same will be ₹ 1,30,02,583/- which is the same figure that the assessee has disclosed in the return of income. In other words there will remain no difference to make addition for low gross profit as all the necessary reconciliation has been proved to our satisfaction by the ld. counsel for the assessee. We, accordingly set aside the finding of Ld. CIT(A) and held that Ld. AO erred in making the addition for undisclosed cost profit of ₹ 9,43,234/-. Ground No.1 of the assessee s appeal is allowed. Claim of education cess and secondary higher education cess - HELD THAT:- The Hon'ble High Court of Bombay in the case of Sesa Goa Ltd.[ 2020 (3) TMI 347 - BOMBAY HIGH COURT] was pleased to hold that the Education Cess is an allowable expenditure as per the provision of the I.T. Act - Thus we allow this ground of the assessee claiming the deduction for payment of Education Cess as business expenses u/s 37(1) - Decided in favour of assessee. 2022 (2) TMI 373 Revision u/s 263 by CIT - NP Estimation - CIT issued the notice alleging that AO should have taken 7% as net profit of the assessee in should of 6.52% - HELD THAT:- Once the due verification was made by the assessing officer as is clear from the paragraph 3 of the assessment order, then the income was required to be estimated by the assessing officer. We do not find any error in the estimation made by the assessing officer whereby the gross profit of the assessee on calculation came to 6.859% whereas the net profit as claimed by the PCIT should have been 7%. In our view once two views are possible to estimate the income of the assessee, then the view taken by the assessing officer cannot be faulted with - we are also of the opinion that there is no loss to the revenue while computing the GP rate at 6.859% as against NP rate of 7%. PCIT has neither complied with one of the essential conditions that how the Assessment Order passed was prejudicial to the interest of the revenue - In our view, the order passed by the PCIT was without any direction and accordingly the same is required to be quashed. We quash the same. Accordingly, the appeal of the assessee is allowed. Customs 2022 (2) TMI 372 Excess duty drawback - overvaluation of goods - principal allegation against the respondent was that he had not complied the obligations arising under the Regulations 11(b), 11(d), 11(e) and 11(n) of the Customs Brokers Licensing Regulations, 2013 - Regulation 17 of the C.B.L.R., 2018 - HELD THAT:- In the case on hand, the inquiry report is filed on 15.07.2019 and the order of revocation of licence and levying of penalty as provided under Regulation 17(7) and 17(8) has been passed on 15.10.2019. It cannot be disputed that the order under Regulation 17(7) and 17(8) has been passed beyond the period of 90 days. To be precise, the order has been passed on the 92nd day after receipt of the inquiry report. Whether the time limit for issuing the show cause notice and for completion of the inquiry report and passing of orders after receipt of the inquiry report are mandatory or directory? - HELD THAT:- It is a settled position of law that whenever a statute prescribes or provides that a particular act has to be done within a time frame in a particular manner and also further provides that failure to comply with the requirements of the provision, would lead to a specific consequence then while interpreting such a provision of law, it has to be held that the compliance of the said provision of law is mandatory and not directory and this interpretation is required to be given for the simple reason that the specified consequence would follow if there is no compliance of the provision of law - A reading of Regulation 17 of the C.B.L.R., 2018 makes it very clear that though there is a time limit stipulated in the Regulations to complete a particular act, non-compliance of the same would not lead to any specific consequence. A reading of the Regulation 17 would also go to show that the Inquiry Officer during the course of his inquiry is not only required to record the statement of the parties but also to give them an opportunity to cross-examine and produce oral and documentary evidence. In the event of the respondents not co operating, it would be difficult for the Inquiry Officer to complete the inquiry within the prescribed period of 90 days, as provided under Regulation 17(5) - though the word shall has been used in Regulation 17, an overall reading of the said provision of law makes it very clear that the said provision is procedural in nature and non-compliance of the same does not have any effect. If there is no consequence stated in the Regulation for non-adherence of time period for conducting the inquiry or passing an order thereafterwards, the time line provided under the statute cannot be considered as fatal to the outcome of inquiry. The provisions of Regulation 17 of the C.B.L.R., 2018 is required to be considered as directory and not mandatory - having regard to the finding of fact recorded by the Tribunal to the effect that the department has failed to provide sufficient evidence to show that the respondent had lent the IEC without proper verification and thereby he had violated Regulation 11(d) of C.B.L.R., 2013, the substantial question of law No.4 becomes only academical in the present case, because the respondent cannot be held guilty on the merits of the case for want of sufficient evidence as recorded by the Tribunal. The substantial questions of law Nos.1 to 3 answered in favour of the appellant, the finding of fact recorded by the Tribunal on the merits of the case cannot be interfered with for want of sufficient evidence on record and therefore, the appeal has to fail - appeal stands dismissed. 2022 (2) TMI 371 Violation of principle of natural justice - effective opportunity of personal hearing not provided to the petitioner in spite of request for personal hearing - no opportunity was given to the petitioner to cross-examine the person concerned - no legible copies of some of the documents upon which respondent concerned wanted to rely, were provided to the petitioner in spite of its request - HELD THAT:- There is a gross violation of principle of natural justice in the case of the petitioner in course of impugned adjudication proceedings and at the time of passing the impugned adjudication order and keeping this writ petition pending and calling for affidavit from the respondents will be a futile exercise and this writ petition is disposed off by setting aside the impugned adjudication order dated 21 st September, 2021 being Annexure P-9 to the writ petition on the ground of violation of principle of natural justice alone. Matter remanded back to the officer concerned to reconsider the case of the petitioner and pass a fresh adjudication order after giving effective opportunity of hearing to the petitioner or its authorised representative after supplying the eligible copies of the relevant documents upon which the respondent concerned wants to rely and also shall allow the petitioner to cross-examine the witnesses upon whose statement the respondent concerned wants to rely in the impugned adjudication proceedings - petition allowed by way of remand. 2022 (2) TMI 370 Undervaluation of imported goods - Paper Cup machines and Blankets - rejection of transaction value - redetermination of value - admissible evidence or not - documents in the form of computer printouts / extracts of WhatsApp messages/ images and load port documents/papers submitted by the shipping agents - Confiscation - penalty - HELD THAT:- There is difference in the models as mentioned in the proforma invoices and the commercial invoice, Learned Adjudicating authority proceeds to confirm the value reflected in the proforma invoice, relying on the statement dt. 20.6.2017 of Shri Raghuveer Swamy (an outsider). It is found further that the Learned Commissioner takes a peculiar stand that nevertheless, once the notice is issued alleging such a serious charge based on certain sets of evidences, the onus to prove otherwise shifts upon the importer and they were under obligation to rebut the allegation with cogent documentary evidence to substantiate their claim and corroborate with evidence, which they have failed to do. Rather, importer has questioned the allegation and evidences on mere technical grounds. The argument by the adjudicating authority is not only specious but also not legally tenable. The allegations, if any, have to be proved by the Revenue authorities alleging the same. It is incorrect to say that the appellant has to disprove the allegations with cogent evidence. Such an argument runs against the settled position of law and as such the same is not acceptable. The Courts and Tribunals have consistently held that proforma invoices cannot be evidence, at least in themselves. What is material is the transaction value. Revenue is required to prove with evidence that the payments over and above, the price reflected in commercial invoices are actually made. In the instant case the same is absent - the adjudicating authority himself observes that there is a difference in the particulars mentioned in proforma invoice, and the invoices submitted along with bills of entry. In the instant case, the investigation has revealed the actual transaction value based on cogent evidences. Therefore, the actual price taken being the transaction value under Section 14 of the Customs Act, 1962, we find that the observations of the Learned Commissioner are very curious. Once the goods are assessed and cleared, there was no reason for rejecting the declared value and redetermining the same following the CVR, 2007 sequentially. First of all, the declared transaction value needs to be rejected and the value requires to be redetermined in terms of CVR, 2007, and it was incumbent upon the investigation and the adjudicating authority to show reasons for rejection of the declared assessable value and the results as to how the price adopted for rejecting the value is determined. This is a settled principle of valuation as held by this Tribunal as well as various Courts. The show cause notice and the OIO are not maintainable and that the OIO is liable to be set aside - Appeal allowed - decided in favor of appellant. 2022 (2) TMI 369 Benefit of Notification NO. 89/2005-Cus dated 4.10.2005 - Import of Crude Palmolein Oil (of edible grade) - edible oil - DEPB scheme - amount not paid in cash has been debited to their DEPB account - Revenue neutral situation - Whether the Crude Palmolein Oil (Edible grade) imported by the appellant is eligible for full exemption or exemption to the extent of 50% under the notification 89/2005? - HELD THAT:- Edible oils will be an oxymoron because, with few exceptions (such as olive oil), oils cannot be consumed as such but must be cooked with other things such as, vegetables. Rice and wheat are not edible crops because they require a lot of processing such as threshing, de-husking, polishing, milling, washing, cleaning, kneading and rolling (in case of wheat) and cooking for them to be edible. Even vegetables such as cauliflower and potatoes are inedible until they are cooked. Except fruits and a few others, there are no edible crops. Thus, edible can only mean fit to be eaten and cannot mean fit to be eaten or consumed as such . It is for this reason, undisputedly, the oil imported by the appellant was described as Crude Palmolein oil (edible grade) which is evidently edible oil and not one which is fit only for industrial or other uses. The fact that it needs to be refined being consumed makes no difference and it is still edible such as rice and wheat are edible. It is now a well established legal principle that the Chapter Notes, Section Notes and Rules of Interpretation of the Customs Tariff are meant to interpret the tariff and they cannot be applied to interpret exemption notifications. The description of the goods in any exemption notification must be interpreted as they are commonly understood. Of course, if the exemption notification indicates both the Description of goods and the Customs Tariff heading, it needs to be decided if the goods fall under the Customs Tariff heading for which purpose, the Chapter Notes, Section Notes and Rules of Interpretation must be applied. The description of the goods must be taken as are commonly understood. In this case, the documents show that the imported goods were understood to be of edible grade. After assessing the Bill of Entry, a Show Cause Notice demanding duty under Section 28 of the Customs Act was issued by the adjudicating officer, although for only half the quantity. Assessment of Bill of Entry is a quasi-judicial function and once assessment is completed, it can either be appealed against before the Commissioner (Appeals) under Section 35 of the Customs Act or a Show Cause Notice can be issued under Section 28. The nature of power under Section 28 is a power to re-open and reassess. Thus, in this case, the Bill of Entry has been reopened by the Revenue. If the same goods imported, described and classified identically and cleared through the same ex-bond Bill of Entry are now sought to be assessed as a single lot instead of two lots by the appellant claiming benefit of the notification for the entire quantity, there are no good reason not to allow it when the assessment has been re-opened by the Revenue by issuing a notice under section 28 of the Customs Act. The appellant would be entitled to get benefit of the exemption notification for the entire quantity of the goods imported in the Ex- bond Bills of Entry which are the subject matter of these two appeals. As half the duty has already been paid in cash and debit in respect of the remaining half has already been made in the DEPB account, the demand of duty and interest cannot be sustained. Appeal allowed - decided in favor of appellant. 2022 (2) TMI 368 Valuation of imported goods - Old and used Digital Multifunctional Devices with standard Acc. And attachments - restricted goods or not - enhancement of declared value - demand based on NIDB data - Confiscation - Redemption Fine - Penalty - HELD THAT:- The admitted fact is that the appellant has accepted the enhanced value at the time of clearance of goods, the said issue has been examined by this Tribunal in the case of COMMISSIONER OF CUSTOMS DELHI VERSUS M/S HANUMAN PRASAD SONS [ 2020 (12) TMI 1092 - CESTAT NEW DELHI] where it was held that the importers had in writing accepted the transaction value and it is perhaps for this reason that they did not require any show cause notice to be issued to them or a personal hearing to be granted to them. The respondent is, therefore, not justified in asserting that the transaction value has been determined on the basis NIDB data. It was their acceptance of the value that formed the basis for determination of the value. Redemption Fine - Penalty - HELD THAT:- The redemption fine imposed on the appellant is on higher side - Considering the fact that the value of imported goods declared by the appellant has already been enhanced on which the appellant has to pay more duty, therefore, the redemption fine reduced to 20% of the enhanced value and penalty in all the cases reduced to ₹ 10,000/- each. Appeal allowed in part. 2022 (2) TMI 367 Valuation of imported goods - Old and used digital multifunctional devices with standard acc. and attachments xerox - restricted goods or not - prohibited goods or not - goods were allowed to be imported under valid authorization which the appellant has failed to produce - HELD THAT:- The issue Whether the said goods are prohibited or not?, the said issue has been examined by the Hon ble Apex Court in the case of COMMISSIONER OF CUSTOMS VERSUS M/S. ATUL AUTOMATIONS PVT. LTD., AND PARAG DOMESTIC APPLIANCES [ 2019 (1) TMI 1324 - SUPREME COURT] wherein the Hon ble Apex court observed The MFDs were not prohibited but restricted items for import. A harmonious reading of the statutory provisions of the Foreign Trade Act and Section 125 of the Customs Act will therefore not detract from the redemption of such restricted goods imported without authorisation upon payment of the market value. The Foreign Trade Act and the Section 125 of the Customs Act does not make any bar from redemption of such restricted goods imported without authorization on payment of duty on retail market value and there is distinction between what is prohibited and what is restricted. In those circumstances, the goods cannot be held absolutely confiscated or cannot be restricted for clearance for home consumption, hence, the imported goods are allowed to be cleared for home consumption on payment of redemption fine and penalty. The adjudicating authority are directed to release the goods to the appellant on payment of duty on enhanced value at ₹ 17,35,647/- and on payment of redemption fine of ₹ 50,000/- and a penalty of ₹ 20,000 under Section 112A of the Customs Act during the pendency of the issue of valuation. Appeal allowed by way of remand. Corporate Laws 2022 (2) TMI 366 Seeking restoration of name of Appellant company in the Registrar of Companies, Coimbatore - section 252 of Companies Act - HELD THAT:- From the Order of the NLCT, it is seen that the Respondent i.e. the ROC filed its report by e-mail to the Registry of NCLT on 15.07.2020 and stated that the Appellant company has not filed its annual return and balance sheet since 2014 and hence the Respondent has initiated action under Section 248 of the Companies Act, 2013 and finally struck off the name of the Appellant company. The Appellant in the facts of the Appeal has not denied that the Appellant Company failed to file the Financial Statements and Annual Returns for the period of six financial years starting from the financial year ended 31.03.2014. Further, the Appellant also accepts that the Respondent initiated proceedings under Section 248 of the Companies Act, 2013 for the purpose of striking off the name of the company from the Register maintained by the ROC - the Appellant in the facts of the Appeal stated that the Appellant company for the financial year 2013-14 to 2018-19, the financial statements were prepared on time and duly approved in the respective Annual General Meetings by the shareholders, but the same could not be filed within the respective time frames due to clerical oversight on the part of the legal consultants and that there was no intentional delay in the filings of e-Forms on part of the appellant company. No documents have been shown or placed to establish that the Respondent company is carrying on business and filed the forms even belatedly. Further the appellant failed to establish that it has shown any bona fides to revive the company with any plans. During the course of arguments, this Tribunal pointed out the PCS regarding the functioning and carrying on the business by the Respondent Company and any steps taken by obtaining necessary permissions from the Authorities for revival of the Company. The Learned PCS stated that the company has not applied for any approvals. Further the PCS admits that the Company has not taken any steps for its revival. The ROC in its Show Cause Notice dated 08.06.2018 specifically stated and given a time of 30 days for the objections, if any, to be submitted/given to the Respondent. However, the Appellant company has not given any objections nor taken any action in that regard. In view of failure to give any reply/reasons, the Respondent rightly struck off the name of the company under Sub Section 5 of Section 248 of the Companies Act, 2013 - this Tribunal do not find any infirmity in the order passed by the NCLT dismissing the application filed by the Appellant. Appeal dismissed. 2022 (2) TMI 365 Seeking to restore the original status of the Appellant as if the name of the company has not been struck off from the Register of Companies - Section 252(3) of the Companies Act, 2013 - HELD THAT:- The ROC stated that on verification of the documents of the subject company it was found that the company had not filed Balance Sheets and Annual Returns since 2016. It had been defaulting in its Annual Returns and Financial Statements for the financial years ending 31/3/2017 and 31/3/2018. Hence notice in Form STK-1 under Section 248(1) read with Rule 3 of the Companies (Removal of Names of Companies from the Register of Companies) Rule 2016 was issued to the company and its directors on 10/7/2019. Even though notice was issued by registered post, to the company and all its directors giving 30 days notice period, no positive response had been received from them - It can be seen that the name of the subject company had been struck off under Section 248 after complying with all the procedural requirements and formalities as contemplated under Section 248 of the Act and relevant Rules made thereunder. The ROC stated that the action initiated by the Registrar of Companies for striking off of the name of the subject company was triggered due to negligence and lack of due diligence on the part of the Directors of the Company for not discharging their statutory duties in filing the statutory returns within the due date stipulated under the Companies Act and also for not responding to the several periodical notices within the notice period. Therefore, the action of strike off of the name of the company is fully substantiated within the authority under the Provisions of Section 248 of the Act and deserves the protection of this Tribunal. The provisions of Companies Act, 2013, it would be just and equitable to order restoration of the name of the Company in the Register of Companies - the name is restored - application allowed. Insolvency & Bankruptcy 2022 (2) TMI 364 Wilful Defaulter - squaring off of debt - proceedings under wilful defaulter guidelines are covered under the moratorium under Section 96 of the Act or not - HELD THAT:- The argument that the bank having instituted proceedings under the wilful defaulter guidelines could not and/or should have instituted proceedings under Section 95 of the IBC is fallacious. There is, in fact, no bar to proceed parallelly under the two laws. The purpose of the two proceedings is completely different. It is essentially for a creditor to take a call when and what proceedings it wants to take against a borrower constituent. A plain reading of the two Sections would clearly indicate that the Moratorium U/s. 14 aims at protecting the Corporate Debtor and none else. The object and purpose is to protect the image of the juristic person to enable smooth passage of a Resolution Plan. The value of the Corporate Debtor must be protected and kept away from the acts and omissions of its promoters and shareholders. This would make the CD more attractive and would generate more interest in prospective suitors - The very purpose of separation of corporate insolvency under Part II of the IBC from individual insolvency under Part III must be understood. They are separate and distinct and aim to achieve different ends. The principles applied the incorporate insolvency cannot be applied to personal insolvency. It is essentially for this purpose that this Legislature has applied the moratorium under Section 14 to the corporate debtor as a whole and moratorium under Section 96 is restictively applied only to the debt. The object and purpose of a moratorium is to invite resolution applicants for revival of corporate debtors under Part II. Under Part III however the purpose of moratorium is to facilitate repayment/resolution of the debt to all categories of debtors. The object and purpose of the Master Circular for willful default is dissemination credit information of the willful defaulter so that other lenders are cautioned and do not lend any further money. It is also aim at preventing further fraud and loss of public money. A willful defaulter proceeding is not for recovery of debt. The repayment of debt will not ipso facto extinguish the default. This has to be assist and applied in the facts of the instant case - this Court is inclined to accept the argument of Mr. Rai for the bank that the moratorium in respect of debt is restricted to proceedings of recovery of any debt against the respondent in person . Recovery proceedings or proceedings under Section 96 of the IBC, 2016, or the borrower s success therein, would not absolve the borrower who has been found to be a wilful defaulter. The willful defaulter proceedings only aims at dissemination of information. The bank s responsibility to institute criminal proceedings would also be interfered with if the arguments of the petitioners are accepted - this Court is not inclined to entertain the writ petition. Petition dismissed. 2022 (2) TMI 363 Maintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its dues - Financial creditors - existence of debt and dispute or not - HELD THAT:- It is clear that the BDH Industries as financial creditor had sought repayment of the full financial debt given to the Corporate Debtor Mars Remedies Private Limited (MRPL). The section 7 application submitted to the Adjudicating Authority (attached at pp. 115-120 of Appeal paperbook Vol. I). clearly states the above mentioned demand notices. However, the amounts mentioned in the Demand Notices Part-IV of section 7 application are different. We are not concerned with the exact amount of debt at the stage of admission of section 7 application. It would suffice for the purpose of admission of section 7 application, if the debt is above threshold value of ₹ 1 lakh. Therefore, we find that the debt is in excess of ₹ 1 lakh of threshold value and also in default. Hence the debt owed to the Financial Creditor by the Corporate Debtor is above the threshold value and payable in default and it satisfies the definition under section 3(12) of the IBC regarding default - It is considered sufficient for admission of a section 7 application that the Applicant/Petitioner is able to establish the existence of a Debt and the Corporate Debtor s default, and if the Application is complete in all aspects. This debt is in default and payable to the Appellant, and hence section 7 application ought to have been admitted - Appeal allowed. PMLA 2022 (2) TMI 362 Provisional attachment of the property - orders confirming the attachment of properties of the respondents lapsed due to the operation of the provisions of the PMLA Act - applicability of time limitation as per period specified under Section 8 (3) of the PMLA Act - scheduled offences or not - HELD THAT:- It is evident from the operation of Sections 5 and 8 of the PMLA Act that under Section 8(3), as it stood at the relevant time, the order passed by the Adjudicating Authority confirming the attachment of the properties would remain in operation during the period of investigation, not exceeding 90 days. It is admitted position that in the present case, not even the complaint contemplated under Section 44 of the PMLA Act was instituted by the concerned Authority within the period of 90 days and eventually it came to be filed on 03/05/2019. Merely because the Delhi High Court had passed the above quoted interim order in Writ Petition filed by Mr. Vinod Phadke, the respondent in Appeal bearing No. 2509 of 2019, it would not ipso facto mean that the period specified under Section 8 (3) of the PMLA Act stood extended. Nothing prevented the concerned Authority from filing the complaint and investigating into the matter. It is also worth noting that a subsequent amendment was brought into the PMLA Act in the year 2019, whereby explanation was added to Section 8 (3) of the said Act. This further assists this Court in appreciating the contentions raised by the rival parties. The explanation appended to Section 8(3) by way of amendment of 2019 specifically states that for the purposes of computing the period relevant to Section 8(3) of the PMLA Act, the period during which investigation is stayed by any Court shall be excluded. Although the said explanation is not relevant in the facts and circumstances of the present case since the amendment came in the year 2019, it does show that even post amendment the period specified under Section 8 (3) would stand extended only if there is stay to the investigation by any Court. In the present case, a perusal of the above quoted interim order of the Delhi High Court would show that there was, in fact, no stay of the investigation. This is another reason why the contention raised on behalf of the appellant Directorate of Enforcement cannot be accepted. The Writ Petition is partly allowed. Service Tax 2022 (2) TMI 361 Levy of Service tax - Business Auxiliary Service - commission amount to the tune ranging from 11% to 12% paid to commission agent located outside the India - case of the department is that said commission shown in the shipping bills/ export invoices is nothing but commission paid to the commission agent towards export of goods, therefore said commission amount is chargeable to service tax under the head Business Auxiliary Service - HELD THAT:- Firstly, there is no commission agent exist who provided the service for export trading of the goods exported by the appellant. When no service provider is in existence it cannot be said that the appellant have received the commission agent service. Secondly, it is also fact that the appellant have not paid the commission to any person in the foreign country. Therefore, in absence of any consideration paid for the alleged commission agent services no service tax can be demanded. In the export invoice the appellant have deducted an amount in the nomenclature of commission from the gross sale price thus, the deduction was passed on to the buyer of export goods which is nothing but a discount given to the Foreign Buyers of the goods - neither any service provider exist nor was any consideration paid to any service provider. Therefore, the department s contention is baseless and not sustainable. From various judgments it can be seen that on the identical issue this tribunal has taken a consistent view that merely because in invoice commission is mentioned that alone is not sufficient to treat it as a commission but the same should be treated as discount only. Consequently no service exist hence no service tax can be demanded - reliance can be placed in the case of LAXMI EXPORTS AND OTHERS VERSUS COMMISSIONER OF CENTRAL EXCISE ST, SURAT [ 2020 (9) TMI 838 - CESTAT AHMEDABAD ]. The appellant is not liable to service tax on the so called commission mentioned in the invoice of the export - appeal allowed - decided in favor of appellant. 2022 (2) TMI 360 Levy of VAT / sales tax - works contract Service - liability of service tax on the amounts on which the appellant has paid VAT - Department entertained a view that value adopted by the appellant for payment of VAT was not the actual value of the goods supplied while providing lift / escalators and that it was only a notional value - HELD THAT:- The composite activity of design, supply, erection, testing, commissioning of lift / elevators fall under the category of WCS both under VAT law and Finance Act, 1994. The appellant has to design, and supply the materials involved in providing the lift / elevator. Since the activity is composite in nature involving both supply of materials and rendering of service, including labour of construction of pit etc., the Tamil Nadu VAT Act provides for arriving at a notional value for payment of VAT. The appellants have paid VAT on 85% of the contract value as per the category of invoices issued for supply of material. The department is of the view that this is only notional and not the actual value of materials supplied. The SCN proposes to levy service tax on 40% of the entire contract value. This means levying service tax on the amounts on which the appellant has paid VAT. The appellants have also filed VAT returns periodically complying with the mandate in the State Act. It is settled position that VAT and service tax are mutually exclusive and cannot be simultaneously levied. The demand of service tax cannot sustain - Appeal allowed - decided in favor of appellant. Central Excise 2022 (2) TMI 359 Clandestine removal - suppression of exact quantity of raw materials used in manufacturing activity - wilful misrepresentation of own production and conversion job as well as consumption of raw material and spending of the by-products - HELD THAT:- The assessee has filed appeal before the Tribunal challenging the said order and explained that their manufacturing activities as to how they were engaged in manufacture for themselves as well as they have been carrying on conversion job for another third party. After nothing the facts the Tribunal held that LABSA and Spent Sulphuric Acid are of the same quality and the processing tank is also common in the factory as it is not possible to manufacture goods separately. Further, the Tribunal analysed the total consumption of LAB and Sulphuric Acid during the material period and took note of the ratio adopted and on facts held that there is hardly any difference between the ratio adopted for their own manufacture and conversion job - the Tribunal concluded that without any evidence on record the allegation of clandestine removal cannot be made. The Tribunal rightly granted the relief to the assessee as allegation of clandestine removal is a very serious charge and the onus of establishing the same is first on the department and upon the onus being discharged in the manner common to law, then and then only the burden of proof shifts to the assessee. In the instant case, admittedly there was no material on record establishing the charge of clandestine removal and such charge was made against the assessee by way of an inference taking note of the ratio adopted in the manufacturing process. Appeal dismissed - decided against Revenue. 2022 (2) TMI 358 CENVAT Credit - input services - Goods Transport Agency Service, for despatching their finished goods (outward transportation) on FOR destination basis to their buyers - place of removal - HELD THAT:- In the facts and circumstances of this case, the place of removal is the premises of the buyer, not the factory gate of the sellor/appellant, as the finished goods are cleared by the appellant on FOR destination basis . Accordingly, the appellant is entitled to cenvat credit on the GTA service for outward transportation of the goods on FOR destination basis. Appeal allowed - decided in favor of appellant. 2022 (2) TMI 357 Classification of goods - branded chewing tobacco - to be classifiable under Central Excise Tariff Heading 24039910 or as Jarda Scented Tobacco classifiable under 24039930 - basis of capacity of production as per Section 3A of Central Excise Act read with Chewing Tobacco and Unmanufactured Tobacco packing Machines (Capacity Determination and Collection of Duty) Rules, 2010 - HELD THAT:- It is evident from the test report dated 14.07.2015, that there is no presence of any odiferous substance. Accordingly, we find that the product is branded chewing tobacco , there is no scope for Revenue for drawing any other conclusion. The findings is also fortified by the Larger Bench ruling of this Tribunal in the case of M/S. FLAKES-N-FLAVOURZ VERSUS COMMISSIONER OF CENTRAL EXCISE, CHANDIGARH [ 2014 (9) TMI 664 - CESTAT NEW DELHI (LB)] , wherein it has been held that the products jarda scented tobacco and flavoured chewing tobacco are different. It is further found that the Court below have erred in obtaining opinion of the chemical examiner subsequently in the year, 2019 behind the back of the appellant assessee, and have relied on the same in a mechanical manner without application of mind and without giving proper opportunity to the appellant. The appellant have manufactured branded chewing tobacco classifiable under heading 24039910 w.e.f. 01.06.2015. Further, the duty shall be payable accordingly with respect to number of packing machines operated from time to time, for which there is no dispute - appeal allowed - decided in favor of appellant. 2022 (2) TMI 356 Denial of benefit of Notification No. 88/88-C.E. dated 01.03.1988 - Denial on the ground that the registration certificate under the Tamil Nadu Societies Registration Act did not contain the name of M/s. SAC Industry - scope of Rural area - society was fake or otherwise? - HELD THAT:- The tenor of the Show Cause Notices, inter alia, that the name of the Women‟s Society does not figure in any of the statutory documents, does not figure in the website of Sabari Soaps, that the labels and packing do not contain the name of the Women‟s Society, etc., are the reasons for denying the benefit of the Notification No. 88/88-C.E. - On perusal of the primary evidences / documents like registration certificate under the Tamil Nadu Societies Registration Act, 1975, certificate issued by the Tehasildar, etc., and by these alone it is satisfied that the appellant is a society, and is located in the rural area. To be specific, the appellant is registered as a cooperative society in the rural area, which is manufacturing one of the goods which is described in the table given in the Notification ibid., namely, laundry and carbolic soaps and thereby, the appellant satisfies the primary condition. The Women‟s Society comes under the inclusive clause including women‟s societies and by this, it is found that the appellant has even satisfied the inclusive part of the definition as well. By these, it can safely be concluded that the denial of benefit of exemption is patently wrong and unsustainable. When the appellant is focussing on achieving its objective by keeping a low profile, the allegations in the Show Cause Notices, which tantamount to publicity, is not the requirement of the Notification and to deny a benefit consequently, is arbitrary and unsustainable. When primary documents issued by Government agencies like the certificate of registration under the Tamil Nadu Societies Registration Act, certificate of the Village Officer and that of the Tehasildar speak for themselves, we do not need more than these basic documents to establish the status or location of the appellant. Unfortunately, only grave allegations are made, but no supporting documentary evidence is relied upon by the authority who issued the Show Cause Notice - there are no contrary findings based on any supporting material piece of evidence, to demolish the contentions of the appellant, which are duly supported by concrete evidences. The denial of benefit of Notification No. 88/88-C.E. dated 01.03.1988 has been made on whims and fancies and without there being the support of any documentary evidences and hence, the same cannot be sustained - Appeal allowed - decided in favor of appellant. Indian Laws 2022 (2) TMI 355 Seeking grant of bail - Dishonor of Cheque - de-facto complainant did not lodge any complaint contemporaneously - ingredients under Sections 420 and 406 of the Indian Penal Code (IPC) satisfied or not - HELD THAT:- The materials in the case diary discloses that, the petitioner received a sum of ₹ 10,00,000/- in aggregate from the de-facto complainant through NEFT payment, cheque payment and cash payment. It is the case of the petitioner that the petitioner issued two cheques dated May 11, 2016 and May 15, 2016 aggregating to a sum of ₹ 10,00,000/- and that those two cheques were dishonoured them. It is the case of the petitioner that in view of the provisions of the Act of 1881, the prayer for anticipatory bail should be granted. The two cheques are admittedly of 2016 with no notice under Section 138 of the Act of 1881 being placed on record. In LALITA KUMARI VERSUS GOVT. OF UP. ORS. [ 2013 (11) TMI 1520 - SUPREME COURT] , the Supreme Court is of the view that where information received does not disclose cognizable offence a preliminary inquiry may be conducted. In the facts of the present case, the police complaint lodged by the de-facto complainant against the petitioner, in substance, cannot be said not to disclose commission of a cognizable offence. Section 406 of the IPC is a continuing offence. It cannot be said with any certitude that there is no dishonest intention of the petitioner to deceive the de facto complainant. Considering the gravity of the offence and the involvement of the petitioner therein and considering the fact that the petitioner did not respond to the notices issued under Section 41A Cr.P.C., the requirement of the prosecution for custodial interrogation of the petitioner cannot be ruled out - anticipatory bail cannot be granted to the petitioner - application rejected. 2022 (2) TMI 354 Dishonor of Cheque - owner of the cheque - joint owner of the cheque - joint liability or not - main contention of the petitioner/accused is that the cheque in question is not belonging to her and the same belongs to her husband Saravanavel - HELD THAT:- In the case on hand, it is evident from the records that the disputed cheque is not belonging to the petitioner and the same was not drawn by the petitioner on an account maintained by her. It is not the case of the complainant that the petitioner and her husband were jointly liable or that they were holding joint account in the Indian Overseas Bank. As per the legal dictum of the Honourable Supreme Court in ALKA KHANDU AVHAD VERSUS AMAR SYAMPRASAD MISHRA ANR. [ 2021 (3) TMI 381 - SUPREME COURT] , even assuming that they were holding of the joint account, the Hon'ble Supreme Court has specifically held that Section 138 of the Negotiable Instruments Act does not speak about the joint liability and even in case of a joint liability, in case of individual persons, a person other than a person who has drawn the cheque cannot be prosecuted for the offence under Section 138 of the Negotiable Instruments Act. Moreover, as rightly contended by the learned Counsel for the petitioner, the respondent in his complaint has not averred that the petitioner had committed an offence of cheating under Section 420 I.P.C., and admittedly, the learned Magistrate has taken cognizance of the case only for the offence under Section 138 r/w 142 of the Negotiable Instruments Act. Since the cheque in question was not drawn by the petitioner on an account maintained by her, the question of considering the contention of the respondent that the petitioner had purposely and wantonly put a different signature in the cheque and thereby cheated the respondent does not arise at all. It is pertinent to note that even after coming to know that the disputed cheque was not drawn in the bank account maintained by the petitioner, the respondent in his complaint has raised allegations against the petitioner as if the cheque was belonging to her and she had purposely put a different signature in the disputed cheque - this Court is of the view that the very complaint lodged by the respondent for the offence under Section 138 of the Negotiable Instruments Act against the petitioner can only be considered as an abuse of process of law and the same is liable to be quashed. Petition allowed. 2022 (2) TMI 353 Dishonor of Cheque - legally enforceable debt or not - cheque issued towards the legal fees - allegation of the complaint clearly shows that one cheque was issued towards L.I.C. Policy and the other is for legal fees - HELD THAT:- It is pleaded in the complaint that one of the cheques was issued towards the L.I.C. Policy commission and the another one is for legal fees. Therefore, whether there is a legally enforceable debt or not, has to be seen only at the time of trial. Though the legal notice was replied raising disputed question of facts, the same have to be seen only at the time of evidence. The onus is only on drawer of the cheque to dislodge the legal presumption. Though, there may not be any direct evidence to dislodge the presumption, even the circumstances can be brought on record by the drawer to prove the case before the trial Court. In such view of the matter, the disputed facts cannot be gone into at this stage while deciding the petition filed under Section 482 Crl.P.C. Petition dismissed. 2022 (2) TMI 352 Dishonor of Cheque - complainant for an amount of ₹ 2,50,000/- in discharge of his liabilities which was subsequently dishonoured for closure of the bank account of the accused - complainant presented the same for encashment and that after receipt of appropriate legal notice, the accused failed to repay the amount within the stipulated period - Section 138 of the Negotiable Instruments Act - HELD THAT:- On plain reading of Clause (b) of Section 138 of the NI Act, it becomes aptly clear that it mandates the payee or the holder in due course of the cheque to raise a demand for payment of the said amount of money by giving a notice in writing, to the drawer of the cheque, within 30 days of the receipt of information by him from the bank regarding the return of the cheque as unpaid. The Legislatures in their own wisdom employed the language in Clause (b) that the notice had to be served to the drawer of the cheque. Now, if I read Clause (b) of Section 138 of the NI Act with the expression used in Section 27 of the General Clauses Act, then, it comes to fore that where any Central Act made after the commencement of the General Clauses Act authorizes or requires any document to be served by post, whether the expression serve or either of the expressions give or send or any other expression is used, then, unless a different intention appears, the service shall be deemed to be effected to the addressee unless the contrary is proved. Here the language employed by the Legislature that unless a different intention appears appears to be very significant. In the instant case, admittedly the wife, but, not the drawer of the cheque had received the notice issued by the holder of the cheque i.e. the complainant. Thus, the presumption of receipt of notice by the addressee as contemplated under Section 27 of the General Clauses Act cannot have any application in regard to presumption of service of notice and receipt of the same by the drawer of the cheque as contemplated in Clause (b) of Section 138 of the NI Act. Appeal dismissed.
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