Newsletter: Where Service Meets Reader Approval.
TMI Tax Updates - e-Newsletter
February 11, 2021
Case Laws in this Newsletter:
GST
Income Tax
Customs
Insolvency & Bankruptcy
PMLA
Service Tax
Central Excise
CST, VAT & Sales Tax
Indian Laws
TMI SMS
News
Notifications
Circulars / Instructions / Orders
Highlights / Catch Notes
GST
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Provisional attachment of escrow bank account - shares of the petitioner / contractor - Joint Escrow account opened by the Principal - GST Evasion - we lift the provisional attachment in so far as petitioner No. 1’s share in the escrow account is concerned subject to maintaining credit balance of ₹ 5,00,000.00 by petitioner No. 1 out of its share and direct that respondent No.4 would be at liberty to transfer / remit the proportionate amount due to petitioner No. 1 to the account of petitioner No.1 and maintain balance of ₹ 5,00,000.00 till the aforementioned decision is taken. - HC
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Grant of Bail - wrongful availment of input tax credit - When the material available on record is viewed from this angle it becomes clear that the contention raised on behalf of the petitioner regarding non-availability of provision in the CGST Act for clubbing the wrongful activities of distinct legal persons, by relying upon certain provisions of the Income Tax Act and other legislations, cannot hold water and it cannot be said that respondent No. 2 wrongly exercised the power to arrest under Section 69 of the CGST Act, in the face of the material available on record at this stage with the said respondent - HC
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Detention of vehicle alongwith goods - mistake in E-way bill - E-way bill in which by mistake erroneously entered its own name in the column of consignee - The respondents are not justified in rejecting the appeal of the petitioner on the ground that the mistake committed while generating the E-way bill, was not a clerical error or a small mistake - HC
Income Tax
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TP Adjustment - tested party for the purpose of determination of Arm's Length Price - Revenue seeks to pin the assessee based upon the auditor's certification as filed in Form 3CED. As could be seen from the statutory form, it pertains only to the transactional claims and has got nothing to do with a tested party. The revenue cannot compare the case of the assessee with that of the assessee who fails to claim in his return of income a deduction or a benefit which he would be otherwise entitled to. - HC
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Validity of notice issued u/s 153C - recording of satisfaction note - In the satisfaction note, it has been recorded that the version put forth by the searched person that the Jewellery being given to the writ-applicant for job work was found not correct. Further, there was complete failure in producing the Forms 402 and 403 respectively of the GST which is a statutory requirement for the interstate transafer of goods for job work or sales. - We are convinced that we should not interfere at the stage of showcause notice under Section 153C of the Act, 1961. - HC
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Income accrued in India - PE in India - computers installed at the premises of the subscriber constitute a PE of the assessee in India in terms of Article 5 (1) of Indo-Spain Treaty. - since the Amadeus India is functionally dependent upon the assessee, it also constitute an agency PE in India in terms of Article 5 (iv) of the Indo-Spain Treaty.- AT
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TP Adjustment - re-computing the Arm’s Length price (ALP) of Salary payments made to related parties - payment of remuneration to the related persons - the employees have rendered service ranging from seven months to five years which provide a wide variance and thus, for comparability purposes, it would be appropriate to consider comparable cases who have rendered services for minimum three years and exclude other cases who have rendered services for a lesser period. - AT
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Penalty levied under section 271AAB of the Act on cash advances - the deeming fiction so envisaged in section 69 and 69B cannot be extended and applied automatically in context of section 271AAB which contains a specific definition of undisclosed income - Levy of penalty on cash advances deleted as the same doesn’t satisfy the requirement of undisclosed income as so defined U/s 271AAB. - AT
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Valuation of closing stock - Because the assessee is playing this direction/clarification in order to get the matter stated under the Vivad-se-Vishwas Scheme, in the absence of any dispute as to the principle involved in this, we are of the considered opinion that there is no harm in issuing such clarification and we accordingly direct the authorities to treat the closing stock of the assessment year 2013-14 as the opening stock for the assessment year 2014-15. - AT
Customs
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Grant of Bail - Evasion of Customs Duty - undervaluation of imported goods - fabricated invoices - the charge is yet to be filed and one of the accused persons namely Uttam is still at large, it would not be appropriate for this Court to release the applicant at this stage of investigation - This Court is of the considered opinion that at this stage, no case for grant of bail is made out. - HC
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Extension of period of seizure beyond 6 months - Principles of Natural Justice - Jurisdiction - whether power under the first proviso under Section 110(2) of the Act of 1962 is quasi-judicial in nature and requires a judicial approach? - The authorities were required to give an opportunity of hearing to the person from whom the goods were seized before exercising power under Section 110(2) of the Act of 1962 which they did not do while issuing the impugned order - Simply on the ground of breach of principles of natural justice, the impugned order is set aside. - The authorities are at liberty to take steps in accordance with law. - HC
Indian Laws
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Dishonor of Cheque - The Magistrate at the stage of taking cognizance and summoning is required to only consider whether a prima facie case has been made out for summoning the accused persons or not and is not required to go into the merits of the case or material placed on record. - Whether petitioner who had issued the post dated cheques in the capacity of Director of the accused company, had already resigned on the date of presentation of cheque or whether there was sufficient balance in the account to honour the legally enforceable debt or what shall be petitioner’s liabilities after being re-appointed as the Director of the Company, are the questions which cannot be gone into at this stage - HC
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Seeking waiver of Ground Rent and port charges - Delay in Removal of goods from the Port premises within 30 days of their arrival - In the event the writ court concludes that the Port’s claim of ₹ 45 lakh was exaggerated, the Port will be required to pay interest at the rate of 10% per annum on the balance quantum of the deposit from the date of such bills being raised till the balance quantum of the deposit is taken back by the writ petitioners. - HC
IBC
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Initiation of CIRP - Cut of date for deferring IBC provisions due to COVID-19 - Financial Distress or not - The date of the initiation of the CIRP is the date on which a financial creditor, operational creditor or corporate applicant makes an application to the adjudicating authority for initiating the process. On the other hand, the insolvency commencement date is the date of the admission of the application. This distinction is also evident from the provisions of sub-section (6) of Section 7, sub-section (6) of Section 9 and sub-section (5) of Section 10. - SC
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TDS liability during the pendency of CIRP proceedings - Whether the provisions of u/s 194-IA of the Income Tax Act, 1961 are inconsistent with Section 53 (1) (e) of the Insolvency and Bankruptcy Code, 2016? - For filing of return, the financial statements are required to be annexed but the Code/IBBI (Liquidation Process Regulation 2016) does not assign a duty on the Liquidator to prepare financial statements - the Liquidator of a Company in liquidation under the Code is not required to file Income Tax Return, then there is no question of claiming refund of TDS deducted under Section 194 IA of the IT Act. - Section 53(1)(e) of the Code shall have overriding effect on the provisions of the Section 194 IA of the IT Act. - AT
Service Tax
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SVLDRS - Eligibility of the declarant for making a declaration under the category of ‘investigation, enquiry or audit’ - acknowledgment or admission by the petitioner was before the cut-off date of 30.06.2019. - Though the final audit report may be post 30.06.2019, the admission of the petitioner was certainly prior to 30.06.2019 - rejection of the declaration of the petitioner dated 02.12.2019 by the designated committee on 12.02.2020 is not justified. - HC
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Refund of Service Tax - time limitation - If there was any difficulty in submission the application, the appellant could have sought the help of the help desk but the appellant has not stated that he made an attempt to seek help - In the absence of any provision for condoning the delay in filing the application, the Commissioner (Appeals), committed no illegality in upholding the order passed by the Assistant Commissioner rejecting the application filed by the appellant for refund of service tax on the ground that it was not filed within the time stipulated - AT
Central Excise
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Special Audit u/s 14AA - Principles of Natural Justice - In interpreting Section 142 (2A) of the Income Tax Act, 1961, the Supreme Court had held that a special audit is more or less in the nature of an investigation and in some cases may even turn out to be stigmatic. In any event, even if the obligation to pay the auditor’s fee is taken over by the Central Government, still civil consequences would ensue on the passing an order for special audit. Ordinarily, a post decisional hearing is no substitute for a pre-decisional hearing. - the Courts have categorically and repeatedly held that it is important to give an assessee a right of hearing before any order under Section 14AA is passed. - HC
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CENVAT Credit - supplementary invoice - Suppression of facts on the part of Supplier of goods or not - There is merit in the submission made by the appellant that in case where goods are not sold and supplementary invoice is raised above Rule 9 (1) (b) of Cenvat Credit Rules, 2004 cannot be invoked in such circumstances - Credit cannot be denied - AT
Case Laws:
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GST
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2021 (2) TMI 392
Provisional attachment of escrow bank account - shares of the petitioner / contractor - Joint Escrow account opened by the Principal - seeking to direct the Respondent No.4 to transfer 97% of the amount lying in escrow account to the account of the Petitioner No.1 as per instruction dated 25.07.2017 - Section 83 of the CGST Act - HELD THAT:- From Section 83 it is discernible that such power can be exercised only if any proceedings under mentioned provisions of the act have been initiated against the taxable person. In the present case, the 'taxable person' is respondent No.3 and it appears that proceedings under the CGST Act have been initiated against the said respondent. As part of the said proceedings, the escrow account which stood in the joint names of respondent No.3 being the first holder and petitioner No.1 (second holder) was provisionally attached vide order dated 27.09.2019. Petitioners have pleaded that since no proceedings have been contemplated and / or initiated under any of aforesaid provisions of the CGST Act against petitioners, the provisional attachment of the escrow account to the extent of 97% of the receipts received in the account belonging to the petitioners is not justified and is ex-facie arbitrary. It is an undisputed and admitted position that in view of the contractual arrangement between respondent No.3 and petitioner No.1, the receipts received in the escrow account belonged to the respective parties in the proportion as agreed upon by the parties. These receipts have been in respect of the amounts deposited by the MSPGCL into the escrow account pertaining to the running account (RA) bills of the work done / completed. In the past, receipts of amounts pertaining to 11 RA bills had been apportioned in the agreed manner. The receipt of amounts pertaining to the 12th RA bill into the escrow account has been provisionally attached due to proceedings initiated against respondent No.3 by respondent Nos. 1 and 2. Since respondent No. 3 has not raised any grievance, we may not go into the proceedings initiated under the provisions of Section 74 of the CGST Act against respondent No.3 in the present petition. Case of the petitioners, needs to be considered as admittedly petitioner No. 1 is not the taxable person. Petitioners have filed their statutory objections under Rule 159(5) of the CGST Rules in response to the fresh provisional attachment order dated 22.09.2020 before respondent No.2. Respondent No.2 shall give a hearing to the petitioners and decide their objections in accordance with the provisions of the CGST Act and the CGST Rules. Considering the admitted fact that no proceedings have been initiated against the petitioners and no inquiry has been contemplated against the petitioners under the provisions of the CGST Act, we direct that until decision is taken on the objection filed by the petitioners by respondent No.2, petitioner No.1 shall maintain a balance of ₹ 5,00,000.00 in the escrow account out of the share belonging to the petitioner No.1 - we lift the provisional attachment in so far as petitioner No. 1 s share in the escrow account is concerned subject to maintaining credit balance of ₹ 5,00,000.00 by petitioner No. 1 out of its share and direct that respondent No.4 would be at liberty to transfer / remit the proportionate amount due to petitioner No. 1 to the account of petitioner No.1 and maintain balance of ₹ 5,00,000.00 till the aforementioned decision is taken. Petition disposed off.
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2021 (2) TMI 387
Transfer of the Input Tax Credit to the existing GSTIN number - Section 18 of the Act, 2017 read with Rules 41 and 41A of the Rules, 2017 - HELD THAT:- This writ-application is disposed off with a direction to the respondents that once the writ-applicant comes forward with a request for transfer of the Input Tax Credit in accordance with the provisions contained in Section18 of the Act, the request shall be immediately look into and needful shall be done. For this purpose, if some assistance of the GSTN is required, the same may be availed from the GSTN. The GSTN is directed to cooperate and see to it that the problem is solved. Let this exercise be completed at the earliest. Application disposed off.
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2021 (2) TMI 386
Grant of Bail - wrongful availment of input tax credit - specific contention raised on behalf of the petitioner is that in the present case, this Court needs to exercise its extraordinary writ jurisdiction under Article 226 of the Constitution of India since the right of the petitioner under Article 21 of the Constitution of India has been allegedly violated - HELD THAT:- Section 132 (1) (i) of the CGST Act specifies that in cases where the input tax credit wrongly availed exceeds ₹ 5 crores, such an offence would be punishable with imprisonment which may extend to five years and with fine, the offence being cognizable and non-bailable. Thus, the central requirement for application of the said provision is that the input tax credit wrongly availed must exceed ₹ 5 crores. The whole endeavour of the petitioner in the present petition is to demonstrate that the figure of ₹ 5 crores is not exceeded, even if the facts as claimed to have been discovered by respondent No.2 during investigation are to be accepted. It is for this reason that much emphasis has been placed on the definition of person under Section 2 (84) of the CGST Act and it is emphasized that since each of the said firms or business establishments has a different registration number, the alleged wrongdoing of these four firms cannot be clubbed together to exceed the figure of ₹ 5 crores. The material available on record, including the figures stated in the affidavit filed on behalf of respondent No.2, would show that the figure of ₹ 5 crores stands exceeded, if the amount of input tax credit allegedly wrongly availed by at least two or more of the aforesaid firms, is put together. A perusal of the material on record shows that according to the facts that have emerged at this stage on the basis of investigation carried out by respondent No. 2, it is only the petitioner, who is effectively running and controlling all the four aforesaid firms or business establishments. Although the petitioner has retracted his statement given under section 70 of the CGST Act, the other statements on record show that the aforesaid four firms and their activities are carried out and controlled by the petitioner himself. In fact, even as per the statements made in the writ petition itself, the petitioner is sole proprietor of the entity M/s Shree Ganesh Textiles and he is the Karta of the Hindu Undivided Family that does business in the name of M/s Yash Fabrics . Section 137 (3) of the CGST Act, quoted above, clearly states that where an offence under the said Act is committed by a Hindu Undivided Family, the Karta shall be deemed to be guilty of that offence and he shall be liable to be proceeded against and punished. Whether in the peculiar facts of the present case it could be said that under Section 69 of the CGST Act, the Commissioner had reasons to believe that a person had committed the offences specified in section 132 thereof, thereby justifying authorization of an officer to arrest such a person? - HELD THAT:- The material presently available on record prima facie indicates that not only was the petitioner alone responsible for the activities of the aforesaid four firms and that the entire KYC details and other information for registration of the said four firms pertained only to the petitioner, but the petitioner had indulged in prima facie fake claims regarding addresses of the said four firms. This is evident from the fact that respondent No. 2 has affidavits in its possession during the course of investigation from landlords and owners of premises from where the said four firms were purportedly conducting business, stating that no lease deeds were ever signed by such landlords and owners, thereby indicating that such wrongful and illegal activities of claiming input tax credit were undertaken by creating fake entities stated to be carrying out business activities from fake addresses. At the present moment, the material on record prima facie indicates that the petitioner alone indulged in all such activities. In tax frauds the modus operandi of creating fictitious entities to get around the rigours of law is not unknown. When the material available on record is viewed from this angle it becomes clear that the contention raised on behalf of the petitioner regarding non-availability of provision in the CGST Act for clubbing the wrongful activities of distinct legal persons, by relying upon certain provisions of the Income Tax Act and other legislations, cannot hold water and it cannot be said that respondent No. 2 wrongly exercised the power to arrest under Section 69 of the CGST Act, in the face of the material available on record at this stage with the said respondent. It cannot be said that the petitioner has been able to make out such a strong prima facie case that his arrest under the provisions of the CGST Act can be said to be in violation of procedure established by law, thereby violating his right under Article 21 of the Constitution of India - the petitioner has not been able to make out a case for exercising jurisdiction of this court under Article 226 of the Constitution of India. Therefore, the prayers made in the present writ petition cannot be granted. Petition dismissed.
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2021 (2) TMI 381
Detention of vehicle alongwith goods - mistake in E-way bill - E-way bill in which by mistake erroneously entered its own name in the column of consignee - levy of tax and penalty - HELD THAT:- A circular was issued, vide No.CBEC/20/16/03/2017-GST, dated 14-9-2018 by the Ministry of Finance, appended as Annexure-P/15 to the writ petition, specifically stating that it has been informed that proceedings under Section 129 of the GST Act are being initiated for every mistake in the documents mentioned in para 3 of the said Circular. It is clarified that in case, a consignment of goods is accompanied with an invoice or any other specified documents and not with an E-way bill, proceedings under Section 129 of the GST Act may be initiated. Para 5 of the Circular further clarifies, that in case a consignment of goods is accompanied with an invoice or any other specified document and also with an E-way bill, proceedings under Section 129 of the GST Act may not be initiated. It is strenuously urged that the respondent/Appellate Authority is not justified in rejecting the appeal on the ground that the petitioner has not discharged its liability of payment of IGST Tax at the time of import. It is put forth that the point raised on behalf of the respondents, is totally incorrect because at the time of making of a Bill of Entry for home consumption, vide No.8870378, dated 15-11-2018, the IGST for a sum of ₹ 1112134/- was paid accordingly along with Custom Duty. The respondents are not justified in rejecting the appeal of the petitioner on the ground that the mistake committed while generating the E-way bill, was not a clerical error or a small mistake - the impugned orders passed by the respondents, confirming the tax and penalty to the tune of ₹ 2224268/-, are hereby quashed - Petition allowed.
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2021 (2) TMI 372
Detention of goods alongwith vehicle - allegation is that the transportation in question was not accompanied by a valid e-way bill - HELD THAT:- The transportation in question was not accompanied by a valid e-way bill - it is directed that if the petitioner furnishes a bank guarantee for the said amount, then the respondent shall permit the petitioner to clear the goods and the vehicle. The respondent shall thereafter, proceed to pass the final order under Section 129(3) in FORM GST MOV- 9. Petition disposed off.
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2021 (2) TMI 341
Rejection of application for revocation of cancellation of registration - rejected due to not discharge of interest liability on late payment of taxes - Rule 23 of the CGST Rules, 2017 - circular No.99/18/2019-GST dated 23.04.2019 - HELD THAT:- The adjudicating authority/proper officer has rejected the application for revocation of cancellation of registration through Form GST REG-05 as appellant did not discharge their interest liability on late payment of taxes. The appellant has now been complied with the above said provisions, therefore, I am of the opinion that the registration of appellant may be considered for revocation by the proper officer. Accordingly, I order to the appellant to file the revocation application in the prescribed form through Common portal. Further. I order to the proper officer to consider the revocation application of the appellant after due verification of payment particulars, filing of returns and compliance of the provisions of CGST Act and rules made thereunder. Appeal disposed off.
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Income Tax
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2021 (2) TMI 384
Deduction on account of amortization of expenditure u/s 35D - Addition being the estimated disallowance out of general expenses - disallowance of interest when the assessee had not produced any evidence to show that the loan on which the interest was paid was taken for the purpose of business of the assessee - addition under the head information and processing charges - Tribunal deleted addition - HELD THAT:- The issues involved in the present appeal is only question of fact and the Income Tax Appellate Tribunal and the Commissioner of Income Tax (Appeals) have given a categorical and substantial finding with regard to all the issues. We do not find any ground much less any substantial question of law to interfere with the order of the Income Tax Appellate Tribunal. The appeal is liable to be dismissed
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2021 (2) TMI 382
Computation of deduction u/s 10A - Tribunal held that the expenses incurred in foreign exchange should be excluded from the export turnover for the purpose of computing deduction - whether Tribunal was right in holding that the export turnover consisting exclusively of consideration received in foreign exchange should be reduced by expenditure incurred on telecommunication? - HELD THAT:- The issue involved in the present appeal is covered by the decision of this Court made in M/s.Polaris Consulting Services Ltd. [ 2018 (11) TMI 1553 - MADRAS HIGH COURT ]. In view of the submissions made by the learned counsel on either side, while leaving the substantial questions of law open, we are remitting the matter back to the Assessing Officer for fresh consideration. The Assessing Officer shall decide the matter, on merits and in accordance with law, after taking into consideration the judgment above.
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2021 (2) TMI 380
Stay of demand - on the basis of coded language diary entries and retracted uncorroborated statement of an alleged beneficiaries, additions made by the assessing officer - whether the two impugned orders dated 22.01.2020 and 09.03.2020 are liable to be interfered with by granting complete stay of demand till disposal of the appeal or liable to be upheld ? - HELD THAT:- Additions have been made primarily on the basis of the statement made by Shri. Nilesh Bharani and also on the basis of certain entries in the telephone diary - materials on record that though summons was issued to Shri. Nilesh Bharani for cross-examination by the petitioner, Shri. Nilesh Bharani did not appear on the date fixed and therefore he could not be cross-examined. Thus, we are prima-facie of the view that reliance placed on such uncorroborated and untested statement of Shri. Nilesh Bharani while making the additions to the income of the petitioner is highly questionable, that too, when for the previous assessment year i.e., the assessment year 2011-12 he had retracted the statement. In such circumstances, it cannot be said that petitioner does not have a good prima-facie case on merit. That apart, petitioner has pleaded financial hardship to meet the demand even to the extent of 20%. We direct that till disposal of the appeal by the CIT (Appeals), the demand raised pursuant to the assessment order dated 21.12.2019 for the assessment year 2012-13 shall be kept in abeyance. CIT (Appeals) shall make an endeavour to dispose of the appeal within a period of four months from the date of receipt of an authenticated copy of this order. We make it clear that observations made in this order are only for considering the prayer for stay and the same should not in any manner be construed as final observations or findings on merit.
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2021 (2) TMI 378
TP Adjustment - tested party for the purpose of determination of Arm's Length Price - whether the assessee Company has to be taken as tested party for the purpose of determination of Arm's Length Price or by applying the least complex theory, the AE outside the Country has to be taken as the tested party? - HELD THAT:- Interestingly in the case of in the case on hand the TPO rejected the data placed by the assessee in their TP documentation and undertook a fresh search for external comparables and arrived at a final list of 12 comparables - when the TPO himself has not attached any sanctity to the TP documentation as submitted by the assessee, could not have foreclosed the assessee from canvassing the issue that the subsidiaries are least complex entities which should be taken note of. Revenue seeks to pin the assessee based upon the auditor's certification as filed in Form 3CED. As could be seen from the statutory form, it pertains only to the transactional claims and has got nothing to do with a tested party. The revenue cannot compare the case of the assessee with that of the assessee who fails to claim in his return of income a deduction or a benefit which he would be otherwise entitled to. In fact the TPO was rightly aware of his role when he has made an observation in paragraph 17.2 of the order dated 29.01.2015, wherein he would state that his office is responsible to ensure sufficiency of information/data and accordingly cannot be precluded to conduct a fresh search - When such is the legal position, as rightly understood by the TPO, the assessee should not have been foreclosed. Therefore, we are of the clear view that the findings rendered by the TPO, DRP and the Tribunal foreclosing the assessee's claim to refer to the foreign AEs as tested party is legally not sustainable. Tax case appeal is allowed, the orders passed by the Tribunal, DRP and the TPO are set aside. The issue regarding the assessee's plea to consider foreign AE as tested party to determine the Arm's Length nature of the underlying international transaction stands remanded to the Transfer Pricing Officer for a fresh decision on merits and in accordance with law having due regard to the orders passed by the Transfer Pricing Officer in the assessee's own case for the subsequent assessment years.
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2021 (2) TMI 373
Validity of notice issued u/s 153C - recording of satisfaction note - whether the impugned notice under Section 153C of the Act should be quashed? - proper or satisfactory explanation for gold found in search or not - whether the materials collected at the time of the search at the Rajkot Airport falls within the ambit of the expression belongs to or pertains to or relates to ? - HELD THAT:- An exhaustive reading of the satisfaction note referred to above would indicate that the Assessing Officer was satisfied and it is specifically mentioned therein that the gold belongs to the writ-applicant and was not sent by Chhunnumal for the purpose of job work and the documents so seized pertains to the writ-applicant / other persons, therefore, it cannot be said that the mandatory requirement of Section 153C of the Act in the facts and circumstances of the case have not been complied with. The satisfaction note referred to above reveals that initially i.e. 27.10.2017, it was a case of survey, which was converted to search. In the instant case, therefore, it is case of the department that Jewellery or other valuable article or things seized 'belongs' to the petitioner and also document 'pertains' to and that any information contained therein 'relates' to the petitioner. The ingredients of Section 153(1)(a) and (b) both are complied with. In the satisfaction note, it has been recorded that the version put forth by the searched person that the Jewellery being given to the writ-applicant for job work was found not correct. Further, there was complete failure in producing the Forms 402 and 403 respectively of the GST which is a statutory requirement for the interstate transafer of goods for job work or sales. We are convinced that we should not interfere at the stage of showcause notice under Section 153C of the Act, 1961. Ultimately, if the assessment order goes against the writ-applicant (assessee), he/it shall avail and exhaust the remedies available to him/it under the Act, 1961 - writ-applications fail and are hereby rejected.
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2021 (2) TMI 363
Rectification of mistake u/s 254 - Estimation of income - bogus purchases - Tribunal had restricted the disallowance on expenses to the extent of 20% - HELD THAT:- No mistake, much less any apparent mistake that warrants rectification in the order of Tribunal dated 03.01.2019. The Tribunal in its own wisdom after considering the decisions of the Hon‟ble Jurisdictional High Court had adjudicated the appeal of the assessee. Therefore, we are of the considered view that the Tribunal has rightly adjudicated the issue in confirming 20% of the total expenses and therefore, prayer for making it as 100% of such expenses is not warranted within the scope of power as envisaged u/s.254(2) of the Act wherein only mistake apparent from record could be rectified. Accordingly, Miscellaneous Application filed by Revenue is dismissed.
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2021 (2) TMI 362
Penalty u/s. 271(1)(b) - notices u/s. 143(2) and 142(1) was issued and on that date fixed for hearing i.e. 14.09.2015, the assessee has neither attended nor has furnished any written reply - assessee has also neither attended nor filed any explanation in response to the show cause notice issued u/s. 271(1)(b) r.w.s. 274 - HELD THAT:- Assessee referring to the paper book wherein as regards the date of hearing fixed on 14.09.2015 submitted that the assessee had sought an adjournment and therefore, it is the contention of the assessee that they have responded to the notice of the Department. However, when we peruse the penalty order, we find there is no mention in respect of these submissions of the assessee. Therefore, we are of the considered view, in the interest of justice, one more opportunity may be granted to the assessee so that he may justify his stand before the Assessing Officer and the Assessing Officer will decide the case after bringing on record all the submissions placed forth by the assessee while complying with the principles of natural justice. Appeals of the assessee allowed for statistical purposes.
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2021 (2) TMI 361
Validity of Proceedings u/s 153C - unaccounted transactions recorded in computer system in the name of M/s.Vikas Bearing and Wires was belonged to Mr. Dinesh R Mehta and the transactions recorded in regular books of account was carried out by him as proprietor of M/s.Vikas Bearing and Wires - protective addition made by Assessing Officer towards unaccounted closing stock and unaccounted receivables of M/s. Vikas Bearing and Wires, Coimbatore, proprietary concern of assessee - HELD THAT:- Transactions undertaken in the name of M/s. Vikas Bearing and Wires, Coimbatore happened through paper company M/s. A N Engineering Company is fully controlled and operated by Mr. Dinesh R Mehta and assessee had no control on transactions which happened outside books of account, since as per seized documents and corroborative statements, transactions were not undertaken by assessee. All documentary evidences show that transactions happened outside books are maintained separately by Mr. Dinesh R Mehta in the name of fictitious entity M/s. A N Engineering Company. Mr. Dinesh R Mehta also maintained separate ledger for unaccounted transactions. The entries found in M/s. A N Engineering Bearing ledger account maintained by Mr. Dinesh R Mehta were tallied - unaccounted transactions maintained in the computer system under the name of M/s. A N Engineering Company is not at all belonged to the assessee. Further, data found in computer was kept in the premises of Mr. Dinesh R Mehta and was seized during course of search from his premises. In this case, documents found during the course of search from the premises of Mr. Dinesh R Mehta clearly indicate that unaccounted transactions recorded in the name of M/s. Vikas Bearing and Wires was carried out by Mr. Dinesh R Mehta and assessee has no role on it. This fact is further strengthened by bank account opened by Mr. Dinesh R Mehta at City Union Bank, Coimbatore with account no.3067 which coincides with registration of M/s. Vikas Bearing and Wires, Coimbatore. The said bank account has deposits by way of clearing and withdrawal by cash. The transactions recorded in HDFC bank account are part of regular returns filed by assessee. Further, during the course of search, it was found that transactions recorded in M/s. A N Engineering Company relatable to account No.3530 maintained with City Union Bank, Coimbatore and operated by Mr. Dinesh R Mehta. Thus, it could be seen that all transactions that are routed through M/s. A N Engineering Company and maintained in computer found during the course of search are transactions not relatable to the assessee. AO during third round of litigation without recording any change in facts and circumstances of the case and also bringing on record any new evidence suggests unaccounted stock in trade was originally added in the hands of Mr. Dinesh R Mehta would belong to the assessee and taxable in the hands of Mr.Raju P Mehta . In our considered view, the Assessing Officer has exceeded his power in going beyond the directions of Tribunal without any findings regarding issue of ownership of business and consequent unaccounted stock in trade and receivables, more particularly, when Mr. Dinesh R Mehta, himself has owned up and admitted business right from date of search while recording statement u/s. 132(4) and also subsequent confirmation by way of letter to the Assessing Officer. Assessing Officer has erred in making additions even on protective basis in the hands of assessee towards stock in trade and receivables, when various evidences coupled with statement of Mr. Dinesh R Mehta recorded during the course of search clearly established the fact that Mr. Dinesh R Mehta is owner of M/s. Vikas Bearing and Wires, Coimbatore and unaccounted transactions recorded in computer system in the name of M/s. A N Engineering Company, a fictitious entity is not belonged to assessee. Protective addition made on account of balance with M/s. A N Engineering Company - AO has made addition spread over three assessment years starting from assessment year 2002-03 on the basis of incriminating materials found during the course of search in the name of M/s. A N Engineering Company on the ground that under the account titled RPM outstanding amount lying unpaid to the assessee - HELD THAT:- ao has erred in making addition towards balance with M/s. A N Engineering Company on the basis of single side entry made in the books of M/s. A N Engineering Company on which assessee does not have any control. It is not the case of Assessing Officer that in the books of assessee corresponding credit entry to justify debit balance of ₹20,06,686/- under the account titled RPM in the books of M/s. A N Engineering Company. Therefore, we are of the considered view that additions made by Assessing Officer towards balance with M/s. A N Engineering Company on the basis of incriminating materials found during the course of search in the hands of assessee on protective basis is incorrect. Hence, we direct the Assessing Officer to delete addition made. Addition made towards cash credit in bank account - HELD THAT:- We find that assessee has failed to explain source of income for remaining cash deposit although assessee claims that source of cash deposits is out of liquidation of debtors, but failed to file any evidence to prove that cash deposit is out of realization of debtors. Hence, we are of the considered view that there is no error in the findings recorded by learned CIT(A) to sustain additions made by Assessing Officer towards cash deposit. We reject grounds taken by assessee. Addition of cash credit in bank account - HELD THAT:- At the time of hearing, learned AR for assessee except making argument that additions made by Assessing Officer towards credit found in capital account is not made out of seized material has failed to file any evidence to prove source of income for credit amounting to ₹1,10,000/- . Therefore, we are of the considered view that there is no error in the findings recorded by learned CIT(A) to sustain addition made by A.O towards credits found in capital account. Unexplained cash deposits in bank account - HELD THAT:- We find that except stating that additions made by Assessing Officer towards cash deposit is not made out of seized material and is on the basis of return of income filed by assessee has not filed any evidence to prove source of income for cash deposit of ₹5,00,000/- made in Union Bank of India. Therefore, we are of the considered view that there is no error in the findings recorded by learned CIT(A) to confirm additions made by Assessing Officer towards cash deposit with Union Bank. Addition towards compounding fee, cash credit in bank account , credit in personal trial balance, credit in personal book and remuneration received - HELD THAT:- There is no error in the findings recorded by learned CIT(A) to confirm additions on various accounts. We are inclined to uphold findings of learned CIT(A) and reject grounds taken by assessee. Additions made towards depreciation on car and finance charges on car loan - HELD THAT:- Once the transactions recorded in books of account of M/s. A N Engineering Company is held to be not taxable in the hands of assessee, depreciation on car and finance charges cannot be taxed on protective basis in the hands of assessee, when substantive addition was made in the name of Mr.Dinesh R Mehta. CIT(A), without appreciating the facts simply confirmed additions made by Assessing Officer. Hence, we direct the Assessing Officer to delete protective addition made towards depreciation on car and finance charges on car loan in the hands of assessee for both assessment years. Addition of cash credit in bank account, credit in personal book and difference in remuneration - HELD THAT:- Assessee at the time of hearing except stating that additions made by Assessing Officer are not based on any incriminating material found during the course of search, has failed to file any evidence to prove source of income for credits found in SB account and personal account and also failed to explain difference in remuneration . We are, therefore of the considered view that learned CIT(A) was right in confirming additions made by Assessing Officer towards cash credit in bank account, credit in personal book and difference in remuneration. Cash found during the course of search, profit from M/s.Vikas Bearing and Wires, new sundry creditors and sundry creditors with transactions - HELD THAT:- Once protective addition made towards stock in trade receivables is held to be not taxable in the hands of assessee , the other protective additions made towards cash found during the course of search, profit from M/s.Vikas Bearing and Wires and new sundry creditors and sundry creditors with transactions cannot be sustained in the hands of assessee. Therefore, we are of the considered view that learned CIT(A) has erred in confirming additions made by Assessing Officer on protective basis towards cash found and other additions. We reverse findings of learned CIT(A) and direct Assessing Officer to delete protective addition made towards cash found during the course of search, profit from VBW and new sundry creditors and sundry creditors with transactions. However, in respect of additions made towards cash credit in bank account of Union Bank of India, assessee has failed to explain source of income for cash deposits amounting to ₹3,67,900/- with any evidences. Addition of interest received - HELD THAT:- It is admitted that assessee has not admitted interest income in the return filed for relevant assessment year. Therefore, addition made towards interest income is upheld.
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2021 (2) TMI 360
Interest received from bank deposits/balances - mutuality claim on interest on investments made in nationalised banks - whether is covered by Principles of mutuality or not? - assessee is a housing co-operative society and has claimed certain incomes as exempt on Principles of mutuality - HELD THAT:- As decided in own case [ 2015 (9) TMI 543 - ITAT HYDERABAD] we therefore adopt judicial consistency and partly confirm both the lower authorities' action disallowing the assessee's mutuality claim on interest on investments made in nationalised banks. The other issue of mutuality relief pertaining to transfer fee stands accepted in view of the foregoing detailed reasoning adopted mutatis mutandis herein.
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2021 (2) TMI 359
Unrealized disputed rent - Addition being disputed income not realized - Addition as bed debts - assessee company leased out its premises to International Institute of Planning and Management and the assessee received license fees - it is the contention of the assessee that they have still not recovered during the FY 2012-13 relevant to the assessment year 2013-14, the amount of ₹ 64,80,000/- and therefore, the assessee has treated the amount as bad debts - HELD THAT:- As in M/S ESSAR TELEHOLDINGS LTD. [ 2015 (5) TMI 810 - BOMBAY HIGH COURT] while analyzing Section 36(1)(vii) of the Act has held that it does not require the assessee to establish that the debt written off was bad and all that is required is it being written off as such. Meaning thereby, no evidence or other things needs to be sought by the Department from the assessee when he is treating such amount as bad debts. The only consideration is that such amount has been treated as bad debts in the books of accounts of the assessee. This is only the requirement to the provision. The Ld. DR also could not place any evidence before us to demonstrate that the amount of ₹ 64,80,000/- was already recovered by the assessee. No addition should be sustained in the hands of the assessee on this issue of treatment of amount as bad debts. Therefore, we direct the Assessing Officer to delete the addition from the hands of the assessee. Appeal of the assessee is allowed
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2021 (2) TMI 358
Income accrued in India - PE in India - as per revenue computers installed at the premises of the subscribers constitute a PE of the taxpayer in India in terms of Article 5(1) of India Spain Tax Treaty - case of the Revenue that that computers provided to the travel agent through which sales are constituted amounts to Fixed Place PE of the taxpayer in India under Article 5 (1) of the India-Spain Tax Treaty and likewise held the taxpayer to be dependent agency PE in terms of Para 5(4) of the Indian Spain Tax Treaty - HELD THAT:- AR for the taxpayer fairly conceded that this issue has been decided by Hon ble High Court against the taxpayer in its own case for AYs 1996-97 to 2006-07 and held that computers installed at the premises of the subscriber constitute a PE of the assessee in India in terms of Article 5 (1) of Indo-Spain Treaty. It is also held that since the Amadeus India is functionally dependent upon the assessee, it also constitute an agency PE in India in terms of Article 5 (iv) of the Indo-Spain Treaty. Aforesaid appeals bearing the identical facts of the taxpayer s case in which it is held that the assessee constitutes an agency PE - Decided against assessee Attribution of 75% of the income earned in India to the PE after adding development cost, distribution fees, etc. - HELD THAT:- As decided in own case [ 2020 (11) TMI 206 - ITAT DELHI] we are of the considered view that since there is no change in the business model and facts of the cases at hand and the extent nature of the activities of the PE in India and abroad, and the assets employed and risk assumed is same as in the earlier years, distribution fee paid in those years @ 33% approximately of the booking fee per segment, no further addition can be made during the year under assessment. Disallowance of expenditure claimed to have incurred by the taxpayer under the head distribution fee while computing the income attributed to the taxpayer s PE in India - HELD THAT:- Following the order passed by the coordinate Bench of the Tribunal in taxpayer s own case vide order [ 2020 ( 11) TMI 206 - ITAT DELHI] we are of the considered view that the AO has erred in treating the export of processed data/software as distribution fee and has also erred in disallowing development cost and marketing cost incurred for earning revenue from booking made from India. All these expenditure have been allowed by the coordinate Bench of the Tribunal in earlier years. So, the claim of the taxpayer raised allowed. Characterization of income - Booking fee received by the taxpayer is to be taxed as business income and not under the head royalty . Ad hoc basis taxed the amount of Euro 50 million as royalty in respect of Altea system, inventory management and hosting system development - HELD THAT:- Following the order passed by the coordinate Bench of the Tribunal in AYs 2007-08 to 2012-13, we are of the considered view that payment received by the taxpayer from British Airways in relation to alleged use of Altea system cannot be characterized as royalty either under the Act or under the Indo-Spain Treaty because Altea system was installed at the airport and was accessed only by the airlines and not by the Amadeus s agents viz. Resbird, Amadeus India and that during the year, the said system was available to British Airways for the aforesaid purpose and that too only at the airport counter and the said software was not available outside the Indian airport or to any of the agents of the taxpayer since the agents were booking the tickets only through the CRS of the taxpayer. Levy of interest u/s 234B - HELD THAT:- Provisions contained below section 209(1)(d) of the Act introduced by Finance Act, 2012 w.e.f 01.04.2012 would apply only in a situation where persons responsible for tax has paid or credited such income without deduction of tax. In the instant case, since the income has been received by the taxpayer after deduction of tax at source, the proviso is not applicable as has been held by the coordinate Bench of the Tribunal in BG International Ltd. vs. DCIT [ 2021 (2) TMI 265 - ITAT DELHI] .
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2021 (2) TMI 357
TP Adjustment - re-computing the Arm s Length price (ALP) of Salary payments made to related parties - comparable cases selected by the TPO for the purposes of determining the arm s length price of the transactions entered into by the assessee company in terms of payment of remuneration to the related persons while applying the CUP method - HELD THAT:- Both the related persons as well as comparable cases selected by the TPO are holding non-teaching faculty role, and are holding and discharging administrative functions in terms of supervising and managerial role in their respective administrative fields - besides the requisite educational qualification which each of them possesses, what is more relevant is the experience and period of service of such personnel discharging their respective functions which would provide a better and rationale basis for benchmarking analysis. In the instant case, we find that each of the related persons have rendered services of three years as on 1.04.2014 and thus carry the desired experience and skill set developed over such period of three years with the assessee company of supervising and managerial activities in their respective administrative fields whereas in cases of comparable cases selected by the TPO, we find that in these cases, the employees have rendered service ranging from seven months to five years which provide a wide variance and thus, for comparability purposes, it would be appropriate to consider comparable cases who have rendered services for minimum three years and exclude other cases who have rendered services for a lesser period. Case of Shri Prashant Varma who has rendered service of 4 years and that of Shri Yashwant Sharma who has rendered service of 5 years would be taken as comparable cases and rest all cases shall be excluded for the purposes of comparability analysis. The average salary of these two comparable cases comes to ₹ 618,500/- which shall be taken as ALP of salary paid to related persons as against current salary of ₹ 696,600/- resulting in transfer pricing adjustment of ₹ 546,700/- in hands of the assessee company. The AO/TPO is accordingly directed to restrict the TP adjustment to ₹ 546,700/- and the ground of appeal is thus partly allowed.
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2021 (2) TMI 356
Estimation of income - Bogus purchases - AO instead of disallowing the entire purchases has restricted the disallowance to the profit element embedded therein by estimating it @ 12.5% - HELD THAT:- Before us assessee has submitted that the assessee has declared gross profit rate of 6.79% in assessment year 2010-11 and 9.68% in assessment year 2011-12. It is also a fact that as per industry norms the profit rate on the goods traded is normally between 2% to 4%. Considering the fact that the assessee was not able to prove the source of purchase and also keeping in view the gross profit declared by the assessee, disallowance @ 4% of the non-genuine purchases would be fair and reasonable. Accordingly, direct the Assessing Officer to restrict the disallowance to 4% of the non-genuine purchases in both the assessment years under dispute.
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2021 (2) TMI 355
Estimation of income - bogus purchases - assessee neither could produce the concerned parties nor could furnish transportation bills, weighment bills, etc. - Commissioner (Appeals) restricted the addition to 12.5% of the alleged non-genuine purchases - HELD THAT:- The very fact that the Assessing Officer did not disallow the entire purchase but has restricted the disallowance to 15% of the alleged non-genuine purchases indicates that the Assessing Officer also believes that the assessee had purchased the goods, though, may not be from the declared source. Therefore, he has proceeded to add the profit element embedded in such purchases. Considering the nature of business carried on by the assessee and keeping in view the decision of the Tribunal in similar nature of cases, learned Commissioner (Appeals) decision to restrict the disallowance to 12.5% of the alleged non genuine purchases is fair and reasonable. Therefore, the order of learned Commissioner (Appeals) is upheld by dismissing the grounds raised by the Revenue.
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2021 (2) TMI 354
Reopening of assessment u/s 147 - Validity of reasons to believe - whether the assessee is entitled to deduction u/s 80-IB(10) on the expenses which have been disallowed due to non compliance of certain provisions of the Income Tax Act, 1961 was never examined by the Assessing Officer in the course of the original assessment proceedings - HELD THAT:- On a perusal of the records, we find that the A.O in the course of the original assessment proceedings had queried as regards the aforesaid issues, and only after being satisfied with the reply filed by the assessee had accepted the same. As can be gathered from a letter dated 28/12/2011 the assessee on being queried by the A.O had duly demonstrated that the additions/ disallowances made in its computation of income duly formed part of its eligible profits‟ for the purpose of quantification of its deduction u/s 80IB(10). On a similar footing, we find that the assessee vide its letter dated 26/12/2011 had after giving the bifurcated details of its other incomes had therein explained that as to on what basis the said amounts were eligible for deduction u/s 80IB(10). It can safely or in fact inescapably be gathered that the A.O while framing the original assessment had queried on the issues in question, and only after considering the reply of the assessee, had opined, that the assesee‟s claim for deduction u/s 80IB(10) was in order. Accordingly, we are of a strong conviction that the A.O backed by a mere change of opinion on the same set of facts as were there before his predecessor while framing the original assessment u/s 143(3), dated 27.12.2011, had therein in his attempt to recast the assessee‟s entitlement for deduction u/s 80IB(10) reopened its concluded assessment, which as noticed by us hereinabove in absence of any fresh tangible material is not permitted under law. See M/S. KELVINATOR OF INDIA LIMITED [ 2010 (1) TMI 11 - SUPREME COURT] as held a mere change of opinion cannot per se be a reason to reopen the case Now when the assessee‟s claim for deduction u/s 80-IB(10) was after exhaustive deliberations and specific queries as regards the issues in question accepted by the A.O, then, backed by a mere change of opinion on the basis of the very same material he could not have reopened the concluded assessment. Accordingly, finding no infirmity in the view taken by the CIT(A) who in our considered view had by way of a well reasoned order quashed the reassessment order passed by the A.O u/s 143(3) r.w.s. 147 for want of jurisdiction, we uphold the same. - Decided against revenue.
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2021 (2) TMI 353
TP Adjustment - applicability of TNMM at entity level for computing the margin - assessee has raised objections against the comparables selected by the TPO - HELD THAT:- As decided in own case [ 2013 (8) TMI 735 - ITAT MUMBAI] [ 2013 (8) TMI 735 - ITAT MUMBAI] Considering the various discrepancies as well as infirmities in the approach adopted by both the parties we consider it appropriate that a fresh transfer pricing study be undertaken for selecting proper comparables after careful study of functional profile of the assessee so as to arrive at proper TP adjustment. There is no difference in the factual position in the impugned assessment year. Therefore, respectfully following the aforesaid decision of the co-ordinate bench, we restore the issue to the Assessing Officer for fresh adjudication keeping in view the observations of the co-ordinate bench reproduced hereinabove. Appeal filed by the assessee is allowed, for statistical purpose.
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2021 (2) TMI 352
TP adjustment to the arm's length price of sale of raw materials and goods - HELD THAT:- As relying on own case [ 2019 (6) TMI 1577 - ITAT MUMBAI] we direct the Assessing Officer to compare the export segment of the assessee as per the segmental P L accounts with the profit margin of the comparables selected by TPO by applying any allocation key and determine the ALP accordingly. This ground is allowed, as indicated above. Disallowance of additional depreciation claimed under section 32(1)(iia) - Unclaimed additional depreciation - asset put to use - HELD THAT:- The facts on record clearly reveal that in Assessment Year 2012-13 the assessee had purchased new plant and machinery on which additional depreciation @20% is allowable. However, since the plant and machinery were put to use for a period of less than 180 days in Assessment Year 2012-13, the additional depreciation was restricted to 50% of the admissible amount. In other words, depreciation was allowed @10%. The balance unclaimed additional depreciation was claimed by the assessee in the impugned assessment year. Now, the law is fairly well settled that the balance unclaimed amount of additional depreciation has to be allowed to the assessee in the immediately succeeding assessment year. As decided in M/S RITTAL INDIA PVT. LTD. (NO. 1) [ 2016 (1) TMI 81 - KARNATAKA HIGH COURT] , SHRI T.P. TEXTILES PRIVATE LIMITED [ 2017 (3) TMI 739 - MADRAS HIGH COURT] and M/S. GODREJ INDUSTRIES LTD., [ 2018 (12) TMI 64 - BOMBAY HIGH COURT] the amendment made to section 32(1)(iia) by Finance Act, 2015 being clarificatory in nature would apply retrospectively. - Decided in favour of assessee.
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2021 (2) TMI 351
Estimation ofincome - Bogus purchases - CIT-A sustained the addition @ 12.5% made by AO - HELD THAT:- Assessee has already declared GP ratio @ 2.11% from the purchases made from Prakash Steel Allies and others respectively during this year - CIT(A) has sustained the addition made by the AO by estimating @ 12.5% of the alleged bogus purchases, in our view, which is too high considering the fact that assessee is dealing in trading activities. Assessee has declared margin this assessment year @ 2.11% and in previous assessment year @ 1.42%. On an average, assessee has declared margin of 2% (approx). In the trading activities, it is expected to earn around 3-5%. Taking the higher margin that assessee might have earned in the alleged transaction and as per the decision of HEERAMANECK SON GF case [ 2018 (12) TMI 1830 - ITAT MUMBAI] and SIMIT P SHETH [ 2013 (10) TMI 1028 - GUJARAT HIGH COURT] we are inclined to direct the AO to estimate the income @ 3% (5% - 2%) of the alleged purchases. Accordingly, the grounds raised by the assessee are partly allowed.
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2021 (2) TMI 350
TP Adjustment - comparable selection - excluding the comparable M/s. 'Cosmic Global Ltd.' in support service segment - HELD THAT:- Since exclusion of the company has been sought first time before the Tribunal, and in order to verify the exact nature 'translation work' and the 'expenses on translation' whether the same are in the nature of outsourcing or incurred by the assessee in developing employees, we feel it appropriate to restore the issue of exclusion of the company from the set of the comparables to the file of the Learned AO/TPO for verifying from the Annual Report or by way of issuing notice under section 133(6) of the Act to the company. It is needless to mention that the assessee shall be provided copy of the information gathered by the AO/TPO from the company and also provide adequate opportunity of being heard on the issue. The additional ground No. 1 of the appeal is accordingly allowed for statistical purposes. Adopting correct margin of comparable M/s. R Systems International Ltd. under the ITeS segment - In transfer pricing, comparability of the assessee has to be made with other companies in identical environment. Therefore, same financial period of both the assessee and the comparable should be considered for comparison. In view of the above facts and circumstances, we direct the learned TPO to compute the margin of this company after taking into consideration the financial results of four quarters, which have been considered in the case of the assessee. The relevant ground of the appeal ground is accordingly allowed for statistical purposes Under ITES Segment inclusion of 'M/s. Vishal Information Technologies Ltd.' in set of comparables - Testing of products and services in the field of the pollution-control are functionally different from the providing marketing support services. For providing testing services higher technical skills and experiences are required whereas support services can be provided using comparatively less technical persons. In view of different nature of services, we hold the company as functionally dissimilar and accordingly direct the Learned AO/TPO to exclude the company from the final set of the comparable. Exclusion of companies being functionally dissimilar with that of assessee. CIT(A) has excluded the company on the ground of related party transactions being more than 25% of the sales - Comparing the total related party transaction with the sales reflect a distorted view of the measure of related party impact on the margin of the company. The Learned Counsel was directed to provide any binding judicial precedent where a company was rejected on the basis of filter of ratio of total RPT to sales being more than 25%, however no such information was provided by him. In the facts and circumstances, we are of the opinion that the company cannot be rejected on the ground of RPT filter. The direction of the Learned CIT(A) on the issue in dispute are set aside and the Learned AO/TPO is directed to retain the said company as comparable in the final set of the comparables. Exclusion of M/s. Mold-Tek Technologies Ltd. - CIT(A) is justified in excluding the company because of extraordinary event of merger/demerger. The Learned CIT(A) has also noted that the TPO himself has not included the company as comparable in subsequent year. Accordingly, we uphold the order of the Ld. CIT(A) on the issue in dispute.
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2021 (2) TMI 349
Condonation of delay in filing appeal before the CIT(A) - Eligible reason for delay - HELD THAT:- CIT(A) had given sufficient opportunities to the assessee to explain the reasons for the delay and furnish evidence for the same. Since, the assessee could not convincingly explain the reasons for delay in filing the appeal, the Ld. CIT(A) was left with no other option except to dismiss the appeal. We do not find much strength in the arguments advanced by the ld. AR. Considering the prayer of the Ld. AR before us that the delay was not caused intentionally or negligently as he was seeking advice from various Counsels as per the insistence of his family members due to which the delay had occurred, in the interest of justice, hereby condone the delay in filing the appeal before the Ld. CIT(A) and remit the matter back to the file of Ld. CIT(A) in order to consider the appeal afresh on merits by providing one more opportunity to the assessee of being heard. Hereby caution the assessee to promptly co-operate before the Ld. CIT(A) in the proceedings failing which the Ld. CIT(A) shall be at liberty to pass appropriate order in accordance with law and merits based on the materials on the record.
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2021 (2) TMI 348
Additional long term capital gain earned on sale of agriculture land - assessee adopted cost of land as on 01.04.1981 @ ₹ 110/- per Sq mtr on the basis of report of Government Approved Valuer, which is higher to the alleged fair market value suggested by DVO - AO disregarded the working of the assessee and computed LTCG, on the basis of information gathered from the officer of Sub- Registrar Surat about the value of land in the area in 1981 in Vesu area of Surat, at ₹ 6.45/- per Sq mtr. - Commissioner (Appeals) made reference to the DVO - whether the Assessing Officer was empowered to make reference to the DVO when he was of the view that the value adopted by assessee for computing LTCG is at variance with its fair market value ? - HELD THAT:- As decided in Jignesh Kumar N Modi HUF [ 2019 (6) TMI 1571 - ITAT SURAT] when the transaction of the land taken place during the financial year 2011-12 relevant the assessment year 2012-13, the amended provisions of section 55A(a) would not be applicable and one shall be guided by the erstwhile provisions of section 55A(a) of the Act. It was also held that in order to refer the matter to the valuation officer as per under erstwhile provisions of section 55A(a) of the Act would be applicable - value so claimed by assessee is less than its Fair Market Value in the opinion of Assessing Officer, matter can be referred to valuation officer. In a scenario, where the value so claimed by the assessee is more than its fair market value, the matter could not be referred to the valuation officer. It was ultimately held that the Assessing Officer was not empowered to refer the matter to the valuation officer, even as per the erstwhile provisions of section 55A(a) prior to amendment by the Finance Act, 2012. Also see M/S. PUJA PRINTS [ 2014 (1) TMI 764 - BOMBAY HIGH COURT] Thus we hold that reference made to the DVO by Assessing Officer for determination of Fair Market Value was not valid. Therefore, respectfully following the same, we accept the legal submissions of the ld. AR of the assessee and held the reference to the DVO for determination of fair market value is not valid. No contrary facts or law is brought to our notice to take other view. Penalty u/s 271(1)(c) - No sufficient opportunity of hearing given to assessee - HELD THAT:- No notice on the address provided by assessee was sent to the assessee and that the assessee has good case on merit and is likely to succeed, if the assessee is given opportunity of hearing on merit. We find merit in the submissions of the ld. AR for the assessee that the assessee was prevented by sufficient cause in non-appearance before ld. Commissioner (Appeals). Moreover, the ld. Commissioner (Appeals) has not passed order as per the mandate of section 250(6) of Income Tax Act. Therefore, we restore the appeal to the file of ld. Commissioner (Appeals) to consider the grounds of appeal raised by the assessee afresh. We find that the additional grounds of appeal is purely legal in nature and will not require to bring additional facts on record, thus, the additional ground of appeal is admitted and is also restore back to the file of ld. Commissioner (Appeals)
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2021 (2) TMI 347
Penalty u/s 271AAB - Undisclosed income - assessee had admitted undisclosed income in its statements u/s 132(4) paid the taxes together with interest thereon and filed his return of income before specified date - HELD THAT:- Merely because the quantum of penalty varies from 10% to 30% subject to compliances with the ancilliary conditions, it cannot be said that where the AO has initiated the penalty under section 271AAB, there is any ambiguity in the charge or there is any lack of application of mind on part of the Assessing officer. In the instant case, where the notice dated 28.12.2016 was issued to the assessee to show-cause why penalty should not be levied u/s 271AAB in respect of undisclosed income of the specified previous year, the assessee was made aware of the specific charge against him and an opportunity has thus been given to him to rebut such charge and therefore, we donot see any infirmity in the initiation of the penalty proceedings and consequent penalty order so passed by the AO. In the instant case, we find that while passing the penalty proceedings, the Assessing officer has given a clear finding as reflected in the penalty order that the assessee is liable for penalty U/s 271AAB(1)(a) which provides for levy of penalty @ 10% of the undisclosed income. As held by the Co-ordinate Bench SHRI RAJENDRA KUMAR GUPTA [ 2019 (1) TMI 1545 - ITAT JAIPUR] the uncertain charge at the time of initiation of penalty has been made good and substituted with a conclusive default at the time of passing the penalty order and that in such a case, no fault can be found in the penalty order. Therefore, the contentions advanced by the ld AR in this regard cannot accepted. Penalty levied under section 271AAB of the Act on cash advances - HELD THAT:- As mere notings in certain loose papers without any further corroboration cannot be held as conclusive to demonstrate any transactions which have been undertaken by the assessee and which have not been disclosed to the Revenue. In any case, an advance represents an outflow of funds and what has been envisaged by the legislature while defining undisclosed income in section 271AAB is an inflow of funds which has not been recorded in the books of accounts or other documents on or before the date of search and not an outflow of funds. Further, the deeming fiction so envisaged in section 69 and 69B cannot be extended and applied automatically in context of section 271AAB which contains a specific definition of undisclosed income - As relying on SHRI SURAJMAL BANSAL HUF case [ 2019 (4) TMI 1113 - ITAT JAIPUR] we delete the penalty levied under section 271AAB of the Act on cash advances as the same doesn t satisfy the requirement of undisclosed income as so defined U/s 271AAB. Cash physically found in possession of the assessee during the course of search - The fact that such cash has been found in possession of the assessee and remain undisclosed to the Revenue is not under dispute and thus represents undisclosed income as so defined. In the result, we confirm the levy of penalty @ 10% on the undisclosed income. Difference in valuation of stock and short stock found during the course of search - whether the difference in stock is arising out of and limited to valuation of stock, can the same qualify as undisclosed income? - HELD THAT:- We find that the department valuer has carried out the valuation of stock as per the market value as on the date of search and the same has resulted in difference in valuation which cannot be a basis to hold that it represent undisclosed income so defined in explanation to section 271AAB of the Act and the penalty levied thereon is hereby deleted. Appeal of the assessee is partly allowed.
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2021 (2) TMI 346
Maintainability of appeal of revenue on low tax effect - Revenue has pleaded that the assessment was reopened on the basis of the audit objection, and it has been provided in the circular that if the assessment has been reopened on the basis of audit objection, then that appeal against the order of the ld.CIT(A) would be decided on merit instead of dismissing it on tax effect - HELD THAT:- Simply the appeal would not be filed because the case falls within the exceptional clause of the CBDT Instruction for not filing the appeal where the tax effect by virtue of relief granted by the CIT(A) is less than the monetary limit for filing such appeals. In other words, the Department has to assess the merits of the dispute involved and they will not file further appeal against the order of the CIT(A) or ITAT in a mechanical manner. Department has not brought any substantial material on the record pointing out that appeal was filed after evaluation of merit on the issues involved. It sought to recall the order of the Tribunal merely on the basis of audit objection, which is not sufficient for recalling the Tribunal order. Therefore, we do not find any error in the order of the Tribunal. Thus the miscellaneous application is rejected.
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2021 (2) TMI 345
Capital gain computation - AO worked out Long Term Capital Gain on the basis of Stamp Valuation Authority -assessee s co-owner s case with respect to the property against the sale of which the assessee claimed Long Term Capital Gain, the AO in assessee s co-owner case allowed the similar Long Term Capital Gain - HELD THAT:- In view of the above aforesaid factual and legal discussion and respectfully following the decision of Madras High Court in Kumararani Meenakshi Achi [ 2006 (10) TMI 123 - MADRAS HIGH COURT] and the revenue cannot treat the assessee in different way, therefore, the addition to the Long Term Capital Gain added by the AO, confirmed by ld.CIT(A) is deleted. In the result the grounds of appeal raised by the assessee are allowed.
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2021 (2) TMI 344
Deduction u/s 80IB(10) - developing the housing project even though neither land nor development permission was in the name of builder - AO held that assessee failed to substantiate the necessary criteria for claiming deduction under section 80IB(10) as assessee simply engaged in the construction business and executed job on behalf of Co-operative Society - CIT(A) while granting relief to the assessee held that the assessee is a developer, the building plan was approved at the instance of the assessee, the area of development of housing project is more than one (01) acre, the project was completed before 31.03.2003 - HELD THAT:- The assessee firm paid the cost of land purchased from the seller. Expenses for the registration of land, stamp duty were borne by the assessee. All project cost were also borne by the assessee, all the buyers have confirmed about the sales of flats by the firm. Profit on the completion of project was retained by the assessee firm on the basis of aforesaid observation the ld.CIT(A) held that assessee is a developer who applied for approval of plan, constructed the project on more than one acre of land, construction was completed before 31.03.2003, commercial area was less than 3%. The assessee was having dominant control over the project. On the aforesaid observation, the ld.CIT(A) held that decision of Radhe Developers and other [ 2011 (12) TMI 248 - GUJARAT HIGH COURT] is squarely applicable on the case. In Radhe Developers (supra) the Hon'ble High Court held that neither the provision of section 80IB nor any other provisions contained in other relevant statues were brought to demonstrate that ownership of land would be condition precedent for developing housing project.It was perhaps not in the case of Revenue that under other law governing construction in Urban and Semi-urban area there was any restriction. Also in CIT vs Sahajanand Associates [ 2014 (4) TMI 76 - GUJARAT HIGH COURT] while relying on earlier decision of High Court in Radhe Developers (supra) held that assessee is entitled for deduction under section 80IB(10) in respect of developing the housing project even though neither land nor development permission was in the name of builder. Even though title of land had not passed on the assessee and development permission obtained in the name of original land owner, the deduction under section 80IB is admissible to the assessee. No illegality or infirmity in the order passed by the ld.CIT(A) - Decided against revenue.
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2021 (2) TMI 343
Valuation of closing stock - disallowance of forward losses basing on the closing stock for the assessment year 2013-14, which would be the opening stock for the assessment year 2014-15 - HELD THAT:- DR does not dispute the acceptability of the principal in accordance with which the Ld. AR seeks relief in this matter. The closing stock of the previous year has to be treated as the opening stock of the current year and there cannot be any quarrel to it. Because the assessee is playing this direction/clarification in order to get the matter stated under the Vivad-se-Vishwas Scheme, in the absence of any dispute as to the principle involved in this, we are of the considered opinion that there is no harm in issuing such clarification and we accordingly direct the authorities to treat the closing stock of the assessment year 2013-14 as the opening stock for the assessment year 2014-15. We accordingly clarify that the authorities may treat the closing stock of the Assessment Year 2013-14 as the opening stock for the assessment year 2014-15. With this observation we dispose of this appeal.
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2021 (2) TMI 342
Disallowance of interest on loan u/s 36(1)(iii) - assessee has not carried on any business activity in the year under consideration, thus interest was on loan obtained for construction of the building and purchase of equipment which is in the nature of capital asset as such they are not put to use - HELD THAT:- The usage of loan fund to be examined by the Assessing Officer by verifying the amount released by the Standard Chartered Bank. The Assessing Officer has to examine how the fund was utilized by the assessee and whether it was used for the purpose of business, such interest has to be allowed u/s 36(1)(iii) if the business of the assessee has been commenced. At this point, it is appropriate to note that the assessee is already in the business of medical profession and the assessee is offering income from the said business or profession and now it is not possible to hold that the assessee has not commenced business as it is also the plea of the assessee that depreciation has been granted on the assets purchased out of this loan. In such circumstances, the Assessing Officer has to see only utilization of funds whether the said fund is used for the purpose of business. We deem it fit to examine the claim of the assessee by the Assessing Officer, as such we remit to the file of Assessing Officer for fresh consideration as per law. The appeal of the assessee is allowed for statistical purposes.
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2021 (2) TMI 340
Addition u/s 14A - Whether no exempt income received by assessee? - Whether the provisions of Section 14A is applicable for maintaining tax free portfolio/investments in the absence of tax-free/divident income from such investments? - HELD THAT:- Issue decided in M/S. CELEBRITY FASHION LTD., CHENNAI-45. [ 2020 (9) TMI 1022 - MADRAS HIGH COURT] to apply the provisions of Section 14A AO should have recorded a finding as to how Sub-Section (1) of Section 14A would stand attracted. In the absence of any such finding, the disallowance made was not justifiable. AO straightaway proceeded to the second limb of Section 14(2) which is impermissible. The Tribunal rightly took note of the decision in the case of Redington India Ltd. [ 2017 (1) TMI 318 - MADRAS HIGH COURT] wherein it was held that the provisions of Section 14A r.w.r 8D cannot be made applicable in vacuum i.e in the absence of exempt income. Therefore, we find that the Tribunal was right in deciding the issue against the Revenue and in favour of the assessee.
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Customs
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2021 (2) TMI 391
Provisional release of goods - allegation is that the order of the appellate authority has not been complied with by the lower authority thereby causing serious prejudice to the petitioner - time limitation - HELD THAT:- The appellate order is dated 18.09.2020 and we are now in February, 2021. More than four months have gone by without compliance. In UNION OF INDIA VERSUS KAMLAKSHI FINANCE CORPORATION LTD. [ 1991 (9) TMI 72 - SUPREME COURT] , Supreme Court held and reiterated that the principles of judicial discipline require that the orders of the higher appellate authorities should be followed unreservedly by the subordinate authorities. The mere fact that the order of the appellate authority is not acceptable to the department, which in itself is an objectionable phrase, and is the subject matter of an appeal can be no ground for not following the appellate order unless its operation had been suspended by a competent court. If this healthy rule is not followed, the result will only be undue harassment to the assessee and chaos in administration of the tax laws. Adverting to the facts of the present case, all that the appellate authority has held is to allow amendment to the concerned bills of entry and thereafter has directed the original authority to take a decision on the request of the petitioner for provisional release of the goods within six weeks, which period had expired long back - there are no valid reason or justification for non-compliance to such order of the appellate authority. The respondent Nos.4 and 5 is directed to carry out the order-in-appeal passed by the Commissioner of Customs (Appeals) dated 18.09.2020 within seven days from the date of receipt of a copy of this order, if necessary, by giving a hearing to the authorized representative of the petitioner - petition allowed.
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2021 (2) TMI 389
Grant of Bail - Evasion of Customs Duty - undervaluation of imported goods - fabricated invoices - circular No.28/2015 dated 23.10.2015 - HELD THAT:- From the record, it appears that the allegations of evasion of huge amount of customs duty have been levelled against the applicants, as according to the respondent, actual value of goods imported by undervaluation on the basis of using fabricated invoices is ₹ 11,93,03,316/- and the value of miss-declared goods is around ₹ 1,07,29,025/- whereas the quantum of customs duty is ₹ 7,22,00,000/-. This Court is of the considered opinion that since the charge is yet to be filed and one of the accused persons namely Uttam is still at large, it would not be appropriate for this Court to release the applicant at this stage of investigation - This Court is of the considered opinion that at this stage, no case for grant of bail is made out. However, the applicants are at liberty to renew their prayer after the charge sheet is filed. Application dismissed.
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2021 (2) TMI 383
Maintainability of petition - petition is rejected on the ground that since none of the material submitted by the Petitioners has been considered, the final findings are liable to be set aside and the Respondent ought to be directed to consider the said material - HELD THAT:- This Court has been consistent in its view on challenges raised at the stage of final finding which is clear from perusal of judgment in M/S SUNCITY SHEETS PVT. LTD. VERSUS THE DESIGNATED AUTHORITY OTHERS [ 2017 (7) TMI 976 - DELHI HIGH COURT ] where it was held that the petition is premature since no notification has yet been issued by the Central Government consequent upon the Final Finding dated 4th July, 2017 and secondly, even if such a notification is issued, the Petitioner has an alternative statutory remedy of an appeal before the CESTAT. While the Petitioner may have a grievance that on a mere technical objection or a technical non-compliance, substantive material of the Petitioner has been ignored, the Petitioner would have to wait for the final notification, if any, issued by the Government in order to challenge the same in accordance with law. The final findings issued by the designated authority under Rule 17 of Anti-Dumping Rules, 1995 are submitted to the Central Government which `may impose anti-dumping duty under Rule 18 of the said rules. Unless and until the notification under Rule 18 is issued, the duty does not take effect - the writ petition is dismissed as being pre-mature, however leaving open the Petitioners right to avail its remedies.
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2021 (2) TMI 375
Validity of confiscation proceedings and subsequent sale - power to pass an order for restitution of the amount of value of goods which was illegally confiscated - Section 129B of Customs Act - HELD THAT:- The Tribunal has not considered the issue with regard to the validity of the confiscation of the goods and the consequent sale. The order passed by the Tribunal is cryptic and suffers from the vice of non-application of mind inasmuch as the Tribunal had not adverted to the rival submission made by the learned counsel for the parties. In fact situation of the case, we deem it appropriate to quash the impugned order passed by the Tribunal and remit the matter to the Tribunal to decide the issue afresh. The tribunal shall specifically advert to the issue of validity of the confiscation proceedings and the consequent sale by the respondent and thereupon, shall decide the issue with regard to restitution of value of goods to the appellant. The Tribunal is directed to decide the appeal within a period of two months from the date of receipt of certificate copy of the order passed today - Appeal disposed off.
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2021 (2) TMI 370
Merchandise Exports from India Scheme - export of scented candles - whether classified under Tariff Entry 3406 00 10 and are entitled to MEIS scrips under Entry 2290 and 2291 of the Foreign Trade Policy since Handicraft goods classified are entitled to higher reward rate? - HELD THAT:- It is not in dispute that the matter with regard to the eligibility of MEIS scheme has not attained finality. Hence, respondent No. 4 is not justified in proposing to reject the claim of the petitioner for refund of amount of ₹ 2,74,78,495/- as incomplete and premature as the investigation conducted by respondent No. 4 has not attained finality. Respondent No. 3 ought to have awaited the outcome of the investigation being conducted by respondent No. 4 before issuing the impugned show cause notice proposing to reject the claim for refund. The respondent No. 3 is directed to keep impugned show cause notice as well as the petitioner s application for refund in abeyance till the investigation is concluded by respondent No. 4 - petition disposed off.
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2021 (2) TMI 369
Extension of period of seizure beyond 6 months - Principles of Natural Justice - Jurisdiction - whether power under the first proviso under Section 110(2) of the Act of 1962 is quasi-judicial in nature and requires a judicial approach? - HELD THAT:- The customs authorities on receipt of specific intelligence from the Directorate of Revenue Intelligence, Kolkata Zonal Unit, that the writ petitioners were attempting exports of very inferior quality tobacco products by highly inflating their value with an intent to illegally claim IGST and Tobacco Cess, etc. initiated an investigation. The customs authorities seized the alleged offending goods. In the process of investigation, the impugned order dated June 24, 2020 was passed by the respondent No. 2. The order is an exercise of powers under Section 110(2) of the Act of 1962. The provision of Section 110(2) of the Act of 1962 was considered by the Supreme Court in Charan Das Malhotra [1971 (2) TMI 41 - SUPREME COURT] where the Supreme Court laid down that, the power under the proviso of Section 110(2) of the Act of 1962 is quasi-judicial and at any rate one requiring a judicial approach. It laid down that extension order is not required to be passed mechanically. Moreover, the power under sub-section (1) cannot be equated with the power under the proviso to sub-section (2) of Section 110 of the Act of 1962 - In Bibhuti Bhushan Bagh [ 1989 (5) TMI 60 - SUPREME COURT ], the Supreme Court held that notice was required to be issued to the person from whom goods were seized before expiry of six months. An adjudicating authority is required to adhere to the principles of natural justice in any adjudicating proceedings, unless permitted by the statute not to do so. Provisions of Section 110(2) of the Act of 1962, prior to the amendment of the first proviso were interpreted by the Supreme Court in Charan Das Malhotra to mean that the authorities were exercising quasi-judicial powers. Therefore, essentially the authorities were required to adhere to the principles of natural justice while exercising powers under Section 110(2) of the Act of 1962. The amendment introduced to the first proviso incorporates two additional burdens on the authorities. One of such additional burden is that the authorities are required to record reasons for the extension of time and the other burden is to inform the person from whom the goods were seized before the expiry of the period specified. The amendment does not obviate the requirement of adherence to the principles of natural justice while powers under Section 110(2) of the Act of 1962 are exercised. The amendment introduced also does not take away the character of quasi-judicial powers exercised and the requirement to take judicial approach while exercising powers under Section 110(2) of the Act of 1962. Thus, no doubt the authorities complied with the first proviso to Section 110(2) of the Act of 1962. However, in exercise of powers under Section 110(2) of the Act of 1962 as amended the authorities overlooked the fact that they were acting in a quasi-judicial manner and they were required to take a judicial approach and not otherwise. The authorities were required to give an opportunity of hearing to the person from whom the goods were seized before exercising power under Section 110(2) of the Act of 1962 which they did not do while issuing the impugned order - Simply on the ground of breach of principles of natural justice, the impugned order is set aside. No observation made by the Court in this order is to be considered as a decision of the merits of the rival claims before the authority. The authorities are at liberty to take steps in accordance with law. In the event the authorities issue notice in exercising powers under Section 110(2) of the Act of 1962 to the writ petitioners in addition to the notice issued to the writ petitioners, a notice to the electronic mail identity of the Learned Advocate appearing for the writ petitioner provided to the High Court Administration for the purpose of filing of the writ petition will be considered as sufficient notice upon the writ petitioners herein - petition disposed off.
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2021 (2) TMI 368
Maintainability of petition - availability of alternative remedy as provided under Section 128 of the Customs Act, 1962 - petition filed without waiting for the appeal period, the respondents are attempting to invoke Bank Guarantee and if it is permitted, the petitioner herein will have to suffer irreparable loss and hardship - HELD THAT:- The goods imported against 20 bills of entry are Raw Cashew Kernel Pieces and order that the subject goods to be appropriately classified under CTH 0801 32 10 and charged to duties accordingly. Petition disposed off.
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Insolvency & Bankruptcy
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2021 (2) TMI 394
Initiation of CIRP - Cut of date for deferring IBC provisions due to COVID-19 - Financial Distress or not - insertion of section 10A of the Insolvency and Bankruptcy (Application to Adjudicating Authority) Rules, 2016 - Whether the provisions of Section 10A stand attracted to an application under Section 9 which was filed before 5 June 2020 (the date on which the provision came into force) in respect of a default which has occurred after 25 March 2020? - HELD THAT:- The onset of the Covid-19 pandemic is a cataclysmic event which has serious repercussions on the financial health of corporate enterprises. The Ordinance and the Amending Act enacted by Parliament, adopt 25 March 2020 as the cut-off date. The proviso to Section 10A stipulates that no application shall ever be filed for the initiation of the CIRP for the said default occurring during the said period . The expression shall ever be filed is a clear indicator that the intent of the legislature is to bar the institution of any application for the commencement of the CIRP in respect of a default which has occurred on or after 25 March 2020 for a period of six months, extendable up to one year as notified. The explanation which has been introduced to remove doubts places the matter beyond doubt by clarifying that the statutory provision shall not apply to any default before 25 March 2020. The substantive part of Section 10A is to be construed harmoniously with the first proviso and the explanation - it is evident that Parliament intended to impose a bar on the filing of applications for the commencement of the CIRP in respect of a corporate debtor for a default occurring on or after 25 March 2020; the embargo remaining in force for a period of six months, extendable to one year. Acceptance of the submission of the appellant would defeat the very purpose and object underlying the insertion of Section 10A. For, it would leave a whole class of corporate debtors where the default has occurred on or after 25 March 2020 outside the pale of protection because the application was filed before 5 June 2020. The correct interpretation of Section 10A cannot be merely based on the language of the provision; rather it must take into account the object of the Ordinance and the extraordinary circumstances in which it was promulgated. It must be noted, however, that the retrospective bar on the filing of applications for the commencement of CIRP during the stipulated period does not extinguish the debt owed by the corporate debtor or the right of creditors to recover it - Section 10A does not contain any requirement that the Adjudicating Authority must launch into an enquiry into whether, and if so to what extent, the financial health of the corporate debtor was affected by the onset of the Covid-19 pandemic. Parliament has stepped in legislatively because of the widespread distress caused by an unheralded public health crisis. It was cognizant of the fact that resolution applicants may not come forth to take up the process of the resolution of insolvencies (this as we have seen was referred to in the recitals to the Ordinance), which would lead to instances of the corporate debtors going under liquidation and no longer remaining a going concern. The date of the initiation of the CIRP is the date on which a financial creditor, operational creditor or corporate applicant makes an application to the adjudicating authority for initiating the process. On the other hand, the insolvency commencement date is the date of the admission of the application. This distinction is also evident from the provisions of sub-section (6) of Section 7, sub-section (6) of Section 9 and sub-section (5) of Section 10. Section 7 deals with the initiation of the CIRP by a financial creditor; Section 8 provides for the insolvency resolution by an operational creditor; Section 9 provides for the application for initiation of the CIRP by an operational creditor; and Section 10 provides for the initiation of the CIRP by a corporate applicant. Appeal dismissed.
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2021 (2) TMI 366
Right to participate in the Corporate Insolvency Resolution Process - case of the Appellant is that the Appellant is a financial service provider and a Category II- Alternate Investment Fund registered with the Securities and Exchange Board of India (SEBI) and floated by UTI Structured Debt Opportunities Trust having SEBI Registration as per the applicable laws - HELD THAT:- The Appeal is disposed off with the following directions. i) Resolution Professional is permitted to receive the Resolution Plan but he will not open Resolution Plan and will not take any decision. The status quo prevailing as on today, shall be maintained till one week after the Ld. third Member decide the matter. ii) The Ld. third Member of the Adjudicating Authority is directed to hear the I.A. No. 1628 of 2020 I.A. No. 1746 of 2020 and decide the same on such as expeditiously as possible. iii) This Appeal is disposed of accordingly. iv) The Registry is directed to send the copy of this order to the Ld. Adjudicating Authority, National Company Law Tribunal, Court-V, Mumbai Bench for compliance.
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2021 (2) TMI 364
TDS liability during the pendency of CIRP proceedings - Interpretation of statute - Whether the provisions of u/s 194-IA of the Income Tax Act, 1961 are inconsistent with Section 53 (1) (e) of the Insolvency and Bankruptcy Code, 2016? - HELD THAT:- Hon ble Supreme Court in the case of Imperial Chit funds (P) Ltd. Vs. Income Tax Officer [ 1996 (3) TMI 397 - SUPREME COURT ] considered Section 178 of the IT Act, in relation to the preferential payments covered by Section 530 of the Companies Act, 1956. The Supreme Court took the view that the Income Tax Department is to be treated as a secured creditor in the light of the words occurring in Sections 178 (3) and (4) of the IT Act to the effect that the liquidator shall set aside the amount notified by the Income Tax Officer and if it is not so done, the liquidator is personally liable to pay the amount of Tax. With this proposition, the Income Tax Department is to be treated as a secured creditor and in liquidation proceedings such dues shall get priority. Whereas, as per Section 53 (1) (e) of the Code, the legislature assigned the 5th position in the order of priority to government dues (including Income Tax Dues). Thus, in Section 53(1) (e) of the Code and in Section 178 of the IT Act for Government dues priority is different. Section 178 (6) of the IT Act and Section 53 of the Code both Sections start with non-obstante clause, therefore, legislature in its wisdom to give effect to the scheme of the Code amended Section 178(6) of the IT Act. By virtue of the amendment the whole of Section 178 has no application to the liquidation proceedings initiated under the Code. With the aforesaid, it was necessary to amend Section 178(6) of the IT Act - Section 194 IA of the IT Act provides that where the consideration for transfer of the immovable property is more than 50 Lakhs, then the transferee is responsible to deduct the amount which is 1% of the consideration as Income Tax. As per Section 194 IA of the IT Act 1% TDS is recovered on priority to other creditors of the transferor, which is partial capital gain tax, whereas, Section 53(1)(e) of the Code in waterfall mechanism provides that the Government dues comes fifth in order of priority. Thus, in regard to recovery of the Government dues (Including Income Tax) from the Company in Liquidation under the Code, there is inconsistency between Section 194IA of the IT Act and Section 53(1) (e) of the Code therefore, by virtue of Section 238 of the Code, Section 53 (1) (e) of the Code shall have overriding effect on the provisions of the Section 194 IA of the IT Act. Otherwise also Section 53 starts with a non-obstante clause, whereas Section 194 IA of the IT Act, does not start with a non-obstante clause, and it would necessarily be subject to overriding effect of the Code and therefore, there was no requirement to amend the Section 194 IA of the IT Act. Thus, it is clear that when the Company is wound up under the orders of Court or otherwise the return shall be verified by the Liquidator referred to in Sub-Section 1 of Section 178 of the IT Act, during corporate insolvency resolution process under Section 7, 9 or 10 of the Code, the return shall be verified by the Insolvency Professional appointed by the Adjudicating Authority. However, there is no such provision in the IT Act, Code or IBBI (Liquidation Process Regulation, 2016) that the Liquidator of the Company in Liquidation under the Code is required to file Income Tax Return. For filing of return, the financial statements are required to be annexed but the Code/IBBI (Liquidation Process Regulation 2016) does not assign a duty on the Liquidator to prepare financial statements - the Liquidator of a Company in liquidation under the Code is not required to file Income Tax Return, then there is no question of claiming refund of TDS deducted under Section 194 IA of the IT Act. Ld. Adjudicating Authority has erroneously held that the deduction of Tax at source does not mean raising demand for collection of tax by the Department. Actually TDS under Section 194 IA, is an advance capital gain tax, recovered through transferee on priority with other creditors of the company. Hence, inconsistent with the provision of Section 53 (1) (e) of the Code and by virtue of Section 238 of the Code, the provision of Section 53(1) (e)shall have overriding effect. Thus, the impugned order is not sustainable in law - Respondent No.1 is directed to refund the amount of TDS to the Appellant which is deposited by the Respondent No. 2 with the department - Appeal allowed.
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PMLA
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2021 (2) TMI 390
Provisional attachment of the properties - while the implementation of the resolution plan was in process, the impugned order has been passed by the Directorate of Enforcement attaching the properties of Respondent No.4, including three properties already mortgaged to the Bank. It is the case of the Petitioner that this has had a negative impact on the CIRP and realization of the debt of the Petitioner from the Respondent No.4 - HELD THAT:- The ED s order of provisional attachment of the properties of Respondent No. 4 has been passed after the approval of the resolution plan by the NCLT, the said provisional attachment would prima facie be contrary to Section 32A of the IBC. The recent judgment of the Supreme Court in MANISH KUMAR VERSUS UNION OF INDIA AND ANOTHER [ 2021 (1) TMI 802 - SUPREME COURT] has extensively dealt with this issue in context of Section 32A of the IBC and held that S ignificantly every person who was associated with the corporate debtor in any manner and who was directly or indirectly involved in the commission of the offence in terms of the report submitted continues to be liable to be prosecuted and punished for the offence committed by the corporate debtor. The corporate debtor and its property in the context of the scheme of the code constitute a distinct subject matter justifying the special treatment accorded to them. Creation of a criminal offence as also abolishing criminal liability must ordinarily be left to the judgement of the legislature. Erecting a bar against action against the property of the corporate debtor when viewed in the larger context of the objectives sought to be achieved at the forefront of which is maximisation of the value of the assets which again is to be achieved at the earliest point of time cannot become the subject of judicial veto on the ground of violation of Article 14. Let copy of the resolution plan be placed on record by the Petitioner Bank. Counter affidavit be filed within four weeks. Rejoinder thereto, if any, be filed within four weeks thereafter. The ED is permitted to take the above objections, with respect to the jurisdiction of this court, in its counter affidavit. The same shall be heard as a preliminary objection - List for hearing on 18th May, 2021.
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Service Tax
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2021 (2) TMI 379
SVLDRS - Eligibility of the declarant for making a declaration under the category of investigation, enquiry or audit or maintainability of such declaration on the ground that the amount of tax dues was not quantified on or before 30.06.2019 - Rejection of Sabka Vishwas (Legacy Dispute Resolution) Scheme, 2019 - HELD THAT:- In THOUGHT BLURB VERSUS UNION OF INDIA AND ORS. [ 2020 (10) TMI 1135 - BOMBAY HIGH COURT] , this Court faced with a similar issue and it was held that there is a letter of respondent No.3 to the petitioner quantifying the service tax liability for the period 1st April, 2016 to 31st March, 2017 at ₹ 47,44,937.00 which quantification is before the cut off date of 30 th June, 2019 and on the other hand for the second period i.e. from 1st April, 2017 to 30th June, 2017 there is a letter dated 18th June, 2019 of the petitioner addressed to respondent No.3 admitting service tax liability for an amount of ₹ 10,74,011.00 which again is before the cut off date of 30th June, 2019. Thus, petitioner s tax dues were quantified on or before 30th June, 2019 and there are no hesitation to hold that petitioner was eligible to file the application (declaration) as per the scheme under the category of enquiry or investigation or audit whose tax dues stood quantified on or before 30th June, 2019. In the present case, the petitioner in its letter dated 10.05.2019 had clearly admitted service tax dues of ₹ 64,72,543.00 for the period under consideration. This acknowledgment or admission by the petitioner was before the cut-off date of 30.06.2019. In fact, in the final audit report dated 07.11.2019, reference has been made to this letter dated 10.05.2019 wherein petitioner had admitted service tax liability of ₹ 64,72,543.00. Though the final audit report may be post 30.06.2019, the admission of the petitioner was certainly prior to 30.06.2019 - rejection of the declaration of the petitioner dated 02.12.2019 by the designated committee on 12.02.2020 is not justified. Petition allowed.
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2021 (2) TMI 377
Maintainability of appeal after compliance with the pre-deposit - stay of the tax dues - Section 35F of the Central Excise Act - HELD THAT:- Since an order of adjudication has been passed by the competent authority/respondent no.2, petitioner should avail the remedy of appeal and make a pre-deposit for getting stay of the impugned demand. Needless to say, if such a request for supply of login ID has been made by the petitioner, the same should be considered by the competent authority / respondent no.2 in accordance with law, without any delay. The petitioner is granted liberty to approach the respondent no.2 after filing of the appeal and the necessary pre-deposit of 7.5% for seeking a recall of the notices at Annexure-2 and 5 respectively or for keeping it in abeyance, which may be considered in accordance with law as expeditiously as possible. Petition disposed off.
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2021 (2) TMI 367
Refund of Service Tax - time limitation - whether the appellant had submitted the application for refund of service tax within the stipulated time since the application filed for refund has been rejected for the sole reason that it was not submitted within the time prescribed? - Section 83 of the Finance Act - HELD THAT:- Though section 11B of the Excise Act has been mentioned in section 83 of the Finance Act, but what needs to be noticed is that the provisions of the Excise Act would apply, so far as may be, in relation to service tax as they would apply in relation to a duty of excise. Thus, if there is a specific provision in the Finance Act itself for claiming refund of service tax, the provisions of section 11B of the Excise Act dealing with refund would not apply. There cannot possibly be two time limits prescribed for making an application for refund of service tax. When the time limit prescribed in sub-section (3) of section 102 of the Finance Act or sub-section (3) of section 104 of the Finance Act is applicable, the time limit prescribed in section 11B of the Excise Act would not be applicable. Stipulation in section 83 of the Finance Act that the certain sections of the Excise Act shall apply so far as may be , in relation to service tax as they apply in relation to duties of excise have not been examined. Though section 102 or section 104 of the Finance Act do not prescribe any format but a procedure for filing an application for refund of service tax has been prescribed in the Trade Notice and the Circular. It is also not the case of the appellant that the appellant was not aware of the procedure since it is the appellant that had placed the Trade Notice and the Circular - Such being the position, it is not possible to hold that the limitation for making an application for refund of service tax would be that as provided in section 11B of the Excise Act. The Application for refund of service tax has to be made within the period stipulated in sub-section (3) of section 102 of the Finance Act. Whether the appellant had submitted the application for refund of service tax online on October 13, 2016? - HELD THAT:- In order to transact the business of ACES, a user has to first register through a process called Registration with ACES . Detailed steps for taking registration have also been provided. The system generates a registration number and it is only thereafter that an assessee can transact business through ACES. The appellant has enclosed a copy of the application, which the appellant contends was submitted online. Registration Number has, however, not been indicated by the appellant. The appellant, therefore, could not have transacted any business through ACES. This procedure for registration has also been prescribed in the Circular dated March 23, 2010, which has also been relied upon by the appellant - It also transpires that from a perusal of the Trade Notice that an assessee can electronically file a statutory return by either filing it online or downloading off-line return utilities which can be filled-in off-line and uploaded to the system through internet. The returns uploaded through this procedure are validated by the ACES before acceptance into the system and an assessee can track the status of the return by selecting the appropriate option in the sub-menu which would show the status as uploaded which means under process by ACES, or filed which means successfully uploaded. The appellant has not stated that the online application was successfully uploaded. It also provides that in case of any difficulty in accessing ACES application, an assessee can seek the help of the Service Desk. It is, therefore, clear that though an attempt was made by the appellant to submit the application online but the process that was required to be undertaken for making an application online was not complied to with as even the regulation was not done. The application cannot be treated to have been filed on time. If there was any difficulty in submission the application, the appellant could have sought the help of the help desk but the appellant has not stated that he made an attempt to seek help - appellant, therefore, cannot contend that the online application was actually made on October 13, 2016 as there is nothing on the record to substantiate that such an application was actually filed. The appellant filed a hard copy of the application only on December 20, 2016 in the office of the Assistant Commissioner and the records do indicate that correspondence did take place between the Department and the appellant in connection with this application. This Application was filed beyond the period prescribed in sub-section (3) of section 102 of the Finance Act. In the absence of any provision for condoning the delay in filing the application, the Commissioner (Appeals), committed no illegality in upholding the order passed by the Assistant Commissioner rejecting the application filed by the appellant for refund of service tax on the ground that it was not filed within the time stipulated - Appeal dismissed.
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Central Excise
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2021 (2) TMI 388
Special Audit u/s 14AA - Principles of Natural Justice - primary grievance of the petitioner is that the impugned proceedings have been initiated without giving the petitioner an opportunity of hearing - Special audit in cases where credit of duty availed or utilised is not within the normal limits - Section 14AA of the Central Excise Act - HELD THAT:- The legislative intent and object of introducing Section 14AA of the Act was to scrutinize cases of abnormally high availment of MODVAT credit. This section seeks to prevent misuse of MODVAT credit by providing for cost auditing of accounts. Under this section, the Commissioner of Central Excise is the cornerstone on which the whole scheme of cost audit is balanced. If the Commissioner is satisfied that credit has been availed on excisable goods by a manufacturer which is beyond the normal limits or has been availed on account of fraud, collusion or any willful misstatement or suppression of facts he may direct the manufacturer get his accounts audited by a cost accountant. The cost accountant is then required to submit a Report to the Commissioner within the time specified by the Commissioner. This audit is in addition to all other audits which may have been prescribed by any other law in force. The expenses of the audit as determined by the Commissioner are to be borne by the manufacturers which are subject to recovery proceedings as prescribed under the Act. The scheme of the section incorporates the observance of the principles of natural justice before any such material gathered in the audit is used against the assessee in any proceeding. In MOHINDER SINGH GILL ANR. VERSUS THE CHIIEF ELECTION COMMISSIONER, NEW DELHI ORS. [ 1977 (12) TMI 138 - SUPREME COURT] , explaining as to what is meant by civil consequences Krishna Iyer, J. had said Civil consequences undoubtedly cover infraction of not merely property or personal rights but of civil liberties, material deprivations and non-pecuniary damages. In its comprehensive connotation, everything that affects a citizen in his civil life inflicts a civil consequence . In interpreting Section 142 (2A) of the Income Tax Act, 1961, the Supreme Court had held that a special audit is more or less in the nature of an investigation and in some cases may even turn out to be stigmatic. In any event, even if the obligation to pay the auditor s fee is taken over by the Central Government, still civil consequences would ensue on the passing an order for special audit. Ordinarily, a post decisional hearing is no substitute for a pre-decisional hearing. In fact, in a number of decisions whilst interpreting Section 14AA of the Act, the Courts have categorically and repeatedly held that it is important to give an assessee a right of hearing before any order under Section 14AA is passed. The impugned notices and all steps and proceedings taken thereunder are set aside and quashed - Petition allowed.
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2021 (2) TMI 365
CENVAT Credit - supplementary invoice - Suppression of facts or not - Departments sought to deny the Cenvat Credit on the ground that there is a suppression of fact on the part ofSupply of goods in payment of duty, therefore, for availing Cenvat Credit by the appellant Rule 9 (1) (b) of Cenvat Credit Rules, 2004 gets attracted - HELD THAT:- In case where the supplementary invoice is issued by the manufacturer in respect of the additional amount of Excise Duty which has been paid which became recoverable on account of any non-levy or short levy by reason of fraud, collusion or any wilful misstatement or suppression of fact or contravention of any provision of the Excise Act or rule made there under with intent to evade payment of duty, the Cenvat Credit is not allowed of such supplementary invoice. There is merit in the submission made by the appellant that in case where goods are not sold and supplementary invoice is raised above Rule 9 (1) (b) of Cenvat Credit Rules, 2004 cannot be invoked in such circumstances - Also the issue is squarely covered in the decision in the case of KARNATAKA SOAPS AND DETERGENTS LTD. VERSUS COMMISSIONER OF CENTRAL EXCISE [ 2010 (2) TMI 524 - KARNATAKA HIGH COURT] as well as COMMISSIONER OF CUS. C. EXCISE, HYDERABAD-IV VERSUS JAIRAJ ISPAT LIMITED [ 2008 (2) TMI 440 - ANDHRA PRADESH HIGH COURT] where it was held that even if differential duty was paid on account of intention to evade duty the credit cannot be denied to recipients when the goods were not sold to them but only stock transferred. There is no allegation or finding in the impugned order that such goods were sold to the appellant by M/s Nirayu Pvt Ltd on which the disputed credit was availed. Credit allowed - Appeal allowed - decided in favor of appellant.
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CST, VAT & Sales Tax
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2021 (2) TMI 374
Violation of principles of natural justice - no personal hearing was granted after the evidence and documents were filed by the appellant/writ petitioner pursuant to the notices issued by the respondent proposing to revise the assessment - Section 27 of the TNVAT Act - HELD THAT:- The Hon'ble Division Bench in SRC Projects Private Limited vs. Commissioner of Commercial Taxes, Chennai Anr. [ 2008 (9) TMI 914 - MADRAS HIGH COURT ], has considered as to why opportunity of personal hearing is to be afforded - Therefore, opportunity of personal hearing especially, in matters relating to taxation is a very effective tool where the dealer and the Assessing Officer have an opportunity to interact and certain facts will emerge during the interaction, which may not be apparent on print. That apart, we have also noted that the current situation is not very conducive both for the appellant as well as the state exchequer and the appellant has also claimed for refund, which according to them, they are rightfully entitled. This Court deems it appropriate to modify the ultimate conclusion arrived at by the learned Single Bench by directing an opportunity to be granted to the appellant, which shall be subject to certain conditions. The writ appeals are allowed and the ultimate conclusion arrived at by the learned Single Bench for dismissing the writ petitions is set aside and the appellant is directed to remit 15% of the disputed tax for each of the assessment years on or before 29.03.2021. If the appellant complies with the said condition within 7 days there from, the appellant shall file their objections by treating the impugned assessment orders dated 25.02.2019 as show cause notices, file the documents which they propose to rely upon. The Assessing Officer upon going through the same and familiarizing himself with the subject, shall afford an opportunity of personal hearing to the authorized representative of the appellant, hear the appellant in full and pass a speaking order on merits and in accordance with law.
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Indian Laws
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2021 (2) TMI 393
Levy of Charges - Port Trust on a consignment of logs lying within the docks - HELD THAT:- The grievance of the Port Trust against the order of the Division Bench is legitimate. The Port Trust has a statutory lien on the goods, for unpaid charges under the provisions of Sections 58 and 59 of the Act. The decisions of this Court in International Airports Authority of India v. Grand Slam International [ 1995 (2) TMI 70 - SUPREME COURT ] and in Om Shankar Biyani v. Board of Trustees of Port of Kolkata [ 2002 (2) TMI 104 - SUPREME COURT ] have authoritatively recognized this principle. The Port Trust was in appeal against the order of the Single Judge directing the release of half the cargo against a payment of ₹ 25 lakhs. The Division Bench in appeal directed the release of the entire cargo against a payment of ₹ 50 lakhs, placing the Port Trust in a position which is worse off than under the interim order. We are hence constrained to interfere with the order of the Division Bench, though it arises in interlocutory proceedings because of the evident error. The Division Bench has ignored the statute, the binding precedents of this Court and acted contrary to judicial norms. Instead of remanding the proceedings back to the Division Bench for reconsideration of the appeal and since the writ petition has been directed to be disposed of, this Court has heard the rival submissions on an appropriate interim arrangement. Mr. Dave submitted that the consignment of goods may be allowed to be cleared, since the goods were imported for business, subject to the first and second respondents being put on terms. Mr. Rohatgi submitted that if the entire consignment is sought to be cleared, this has to be against the payment of port charges and dues for the entire consignment. There is merit in the submission of the Port Trust. The Port Trust cannot be relegated to pursue the importer for the recovery of its dues after the goods have been cleared and removed from the dock premises. The charges payable to the Port Trust have to be duly paid before clearance in view of the statutory lien over the goods. The error of the High Court was precisely because the interim directions fail to secure the interest and lien of the Port Trust. The issue of whether the first and second respondents are entitled to any remission or waiver in terms of the Circulars of the Ministry of Shipping will be decided in the course of the hearing of the writ petition. If they succeed, consequential directions for refund with interest can follow. It is directed that the first and second respondents shall pay to the Port Trust an amount of ₹ 1.35 crores as a condition precedent for the release of the goods. This shall be subject to the first and second respondents complying with all other formalities, including obtaining customs clearance. In the event that the first and second respondents are held entitled to any refund under the final directions of the High Court after the petition is heard, the High Court would be at liberty to direct the refund of the excess amount collected, if any, together with interest. Appeal allowed - decided in favor of appellant.
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2021 (2) TMI 385
Dishonor of Cheque - Condonation of delay in filing appeal - Time Limitation - Liability of Directors who has resigned from the company - impugned orders dated 16.3.2017 and 25.06.2018 simply noted that the complaints filed are within the limitation period, petitioner claims that the Demand Notices were served upon him on 26.05.2016 and the complaints in question were filed on 14.07.2016 and so, there is a delay of 04 days in filing the complaints - HELD THAT:- The respondent/complainant was right in affecting service of Demand Notice upon the accused company and its erstwhile and current Directors as well. The accused company has been served on 30.05.2016, therefore, complaints having been filed on 14.07.2016, are well within the limitation period. It is a matter of record that at the time when Builder Buyer Agreement and Agreement to Sell, dated 27.03.2015 were entered into between the parties, petitioner was the Director of the company. In terms of Buy Back Option, as spelt out in the aforesaid Agreements, petitioner handed over four post dated cheques dated 27.03.2016, out of which two cheques of higher value were signed by him in the capacity of Director. It is not the case of petitioner that the two cheques in question did not bear his signatures or that at the time of issuance of cheque, he was not the Director of the accused company. The stand taken by petitioner is that at the time of presentation of cheques in bank, he was not on the role of Board of Directors and has placed on record copy of Form DIR 12 in support of his claim, which shows that he had resigned on 11.09.2015. However, this Court cannot lose sight of the fact that he was the Director/Promoter of the accused company at the time of issuance of cheques and was also signatory on two cheques. In the present case, there are specific allegations in the complaint against the petitioner that he was the Director of the accused company, who had acted as a Promoter to induce petitioner to invest his money in the project and allured him of higher returns if money is paid in one instalment and issued the post dated cheques under his signatures, which shows that petitioner was authorised to make financial transaction of the accused company and was therefore, responsible for business of the accused company - It is pertinent to mention here that the four cheques in question, which were handed over to respondent/complainant on 27.03.2015, were bearing dates of 27.03.2016 and could be presented in the bank only thereafter, and in between petitioner had resigned from the Board of Directors. But, this by itself would not dilute the responsibility of petitioner or accused company to fulfil their responsibility to honour the cheques. It is settled law that a Magistrate at the stage of taking cognizance and summoning is required to only consider whether a prima facie case has been made out for summoning the accused persons or not and is not required to go into the merits of the case or material placed on record. However, since petitioner has also sought dismissal of the complaints on merits, this Court while exercising its extra ordinary inherent jurisdiction under Section 482 Cr.P.C. heard the parties at length on the merits of the case as well - What has shocked the conscience of this Court is that for purchase of one residential unit, respondent/complainant had paid a sum of ₹ 45,25,331/- to the accused company through RTGS, whereas the total sum value of four post dated cheques in question is ₹ 11,4,74,703/- which were given to respondent by the petitioner s company. It appears that the accused company guaranteed significant returns to the customers/ investors who paid the entire amount in one instalment for the properties which were yet to be developed. Attention of this Court has been drawn to copy of charge sheet filed in FIR No. 114/2016, registered at police station Sarita Vihar, Delhi, in which petitioner herein is also an accused. Whether petitioner who had issued the post dated cheques in the capacity of Director of the accused company, had already resigned on the date of presentation of cheque or whether there was sufficient balance in the account to honour the legally enforceable debt or what shall be petitioner s liabilities after being re-appointed as the Director of the Company, are the questions which cannot be gone into at this stage - the correctness of allegations levelled by the parties, have to be tested at trial and therefore, in my opinion Metropolitan Magistrate while framing notices under Section 251 Cr.P.C. has rightly rejected petitioner s prayer for discharge while observing that the points raised by the parties are triable issues which can be agitated during trial. Petition dismissed.
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2021 (2) TMI 376
Grant of Bail - wrong interpretation of the provisions of Drugs and Cosmetics Act, 1940 - it is contended that it is not necessary that only the complainant can file a bail cancellation application - offence under Sections 420, 467, 468, 471, 476, 120-B of I.P.C. read with Section 17B(e), 18(a)(i), 18(a)(vi), 18(c), 18A, 18(b), 27A, 27(b)(ii), 27(c), 27(d), 28, 28A of the Drugs and Cosmetics Act, 1940 - HELD THAT:- The Court below was swayed by the fact that the purchases were made by bills and the payment was made in the account of the seller. The Court below failed to consider the provisions of Section 19 of the Act of 1940 wherein it is provided that a person, who is dealing with the spurious drugs, is equally liable as a person who is the manufacturer thereof. The Court below clearly failed to take into account the fact that the entire purchase bills were not available with the accused-respondent and that he had not purchased the drugs from a licensed manufacturer, distributor or dealer thereof. The bail application was thus granted misreading Section 19 of the Act of 1940 and ignoring the relevant material. The drug in question is Losar-H, which is a life saving drug, the entire sale and purchase documents were not available with the accused-respondent. The drugs were found to be spurious and the strips were having the same code whereas each strips have different code. Taking into account that the main accused, who is the manufacturer, is still at large and there is specific allegation in the charge-sheet against the accused-respondent of being part of the drugs racket, I deem it proper to allow the present bail cancellation application. The bail cancellation application is accordingly allowed.
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2021 (2) TMI 371
Seeking waiver of Ground Rent and port charges - Delay in Removal of goods from the Port premises within 30 days of their arrival - it is the submission of the Port that the last bills raised on the writ petitioners indicated that a sum in excess of ₹ 45 lakh was due on account of ground-rent and the like - HELD THAT:- There is no doubt that the goods must be taken away from the Port premises so that the Port s land is unblocked. Equally, the writ petitioners cannot be allowed to remove the goods unconditionally and the Port be left to chase the writ petitioners for the Port s dues. There is a statutory lien which may be exercised by the Port and, to the extent that the Port s dues remain unpaid, the goods are liable to be detained. However, a balance has to be struck, particularly considering that the initial situation was brought about for reasons beyond the control of the writ petitioners. The Port may also not have been liable for the delay; but the lockdown made the delay inevitable. At the time of final adjudication, the writ court will go into the question as to whether the writ petitioners were entitled to a complete or partial waiver of ground-rent and what would be the exact quantum of the Port s claim. In the event the writ court concludes that the Port s claim of ₹ 45 lakh was exaggerated, the Port will be required to pay interest at the rate of 10% per annum on the balance quantum of the deposit from the date of such bills being raised till the balance quantum of the deposit is taken back by the writ petitioners. The Port s further charges will come out first from the deposit made. In the event the Port s charges are ultimately discovered to be in excess of the quantum of deposit, the writ petitioners will be liable to make good the same. For such purpose, an unconditional letter of undertaking should be issued by the first writ petitioner duly signed by the principal person in control thereof and made over to Advocate for the Port within a week from today. Application disposed off.
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