Newsletter: Where Service Meets Reader Approval.
TMI Tax Updates - e-Newsletter
February 11, 2022
Case Laws in this Newsletter:
GST
Income Tax
Insolvency & Bankruptcy
Service Tax
Central Excise
CST, VAT & Sales Tax
Indian Laws
Articles
News
Notifications
Circulars / Instructions / Orders
Highlights / Catch Notes
GST
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Refund of IGST - goods exported zero rated supplies - in an earlier decision the Court in detailed has discussed this very issue and held that respondents are directed to immediately sanction the refund of the IGST paid in regard to the goods exported, i.e. 'zero rated supplies', with 7% simple interest from the date of the shipping bills till the date of actual refund. - As the issue raised before this Court is identical, no separate or independent discussion would be necessary to be made before this Court. Therefore, the request of refund so far as the three shipping bills are concerned will need to be permitted. - HC
Income Tax
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Amortisation of expenditure incurred under voluntary retirement scheme - Question framed by this Court is answered in favour of the Assessee and against the Department by holding that allowance and deduction under the VRS scheme are to be based on the entire accrued liability incurred and not just of the amount actually paid during the relevant AY. - HC
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Validity of Faceless Assessment u/s 144B - What comes out loud and clear is that liberty of being heard was offered to the petitioner. The decision taken by the impugned order may or may not be correct is not for this Court to dwell upon especially when the statutory appeal preferred by the petitioner is pending consideration. More so, since the petitioner did not make any specific express demand for a personal hearing, the non grant of personal hearing by the Assessing Officer cannot lead to a case of breach of principles of natural justice (audi alteram partem) thereby enabling the petitioner to directly approach this Court under Article 226 of the Constitution especially in the face of pending statutory appeal. - HC
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Plea of res judicata - Tribunal rightly noted the law that rule of res judicata is not applicable to income tax proceedings but the principle of consistency will definitely apply. In the preceding paragraphs we have set out the facts to show as to how the department has examined the returns filed by the assessee for the previous assessment year and the subsequent year. Therefore, we find that there cannot be different yardstick for the assessment year under consideration when facts and circumstances are identical. - Decided against revenue - HC
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Disallowance of additional depreciation claimed u/s 32(1)(iia) - We are convinced with the alternative contention of the assessee. We have earlier noticed that the A.O. has allowed additional depreciation on machineries used for manufacture of butter, ghee, pedha, etc., which clarifies that the assessee is engaged in the business of manufacture or production of any article or thing. Hence, as per the ratio laid down by coordinate bench in the case of Texas Instruments Ltd. (supra), the assessee would be eligible for additional depreciation on other machineries also, even if those machineries are not used in the manufacture or production of article or thing. - AT
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Addition made u/s. 68 - Addition of agricultural income - admission of additional evidences - There should not be any dispute that the admission of additional evidences filed in support of the claim made in the return of income would promote the cause of justice. Accordingly, admit the additional evidences furnished by the assessee. Since both the issues required to be examined afresh duly considering the additional evidences furnished by the assessee,we set aside the order passed by Ld. CIT(A) on both the issues and restore them to the file of AO for examining them afresh. - AT
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Unexplained salary - search and seizure proceedings - The addition made by the Assessing Officer as relates to unaccounted salary does not sustain in the eyes of law as the salary vouchers which was presented before the Assessing Officer clearly shows the actual salary paid to the assessee which was verifiable from the records of the assessee's bank account and other relevant documents. Merely relying on the statement which the Assessing Officer as well as the CIT(A) though admitting that the said statement is vague and inconsistent cannot be the basis for addition. - AT
IBC
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Approval of Resolution Plan - The Adjudicating Authority has not taken cognizance of the award and rejected the application filed by the Appellant. Since the Appellants claim is also supported by an arbitration award, which has not been considered either by Adjudicating Authority or Resolution Professional. Therefore, it is appropriate that the claim of the Appellant should be reconsidered even based on the arbitration award - The Resolution Professional to consider the claims of the Appellant & to proceed further in accordance with the law. - AT
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Initiation of CIRP - Mere allegation without any supporting evidence would not help the Corporate Debtor - As far as the loan taken by the applicant is concerned the applicant has already adjusted that amount from salary dues claimed in demand notice. The corporate debtor has failed to establish the fact that there is any pre-existing dispute between the parties. The Corporate debtor has also failed to prove that the salary dues are not payable to applicant or has already been paid off. - it can be concluded that the applicant has established its claim which is due and payable by the corporate debtor. The present application is admitted - Tri
Service Tax
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Classification of goods - “fashion designing” services. or “design services” - Paragraph 3 does not limit the “fashion designing” services to articles made up of clothes. Infact, it specifically provides that a fashion designer may be involved in designing of any goods which are intended to be worn by human beings. Paragraph 4 deals only with a specific query raised as to whether tailors and jewellers will be covered under the service tax. It does not talk about a manufacturer of leather footwear for women. - Further, if services are entirely provided outside India, the proviso to rule 3(ii) of the Import Rules is not applicable and no tax can be levied on the same - AT
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Export of service or not - Since because the ultimate beneficiary is abroad, it cannot be claimed that the appellants are exporting services. Neither the place of rendering of the activity nor the type of service rendered by the appellants nor the recipient of such service are stationed abroad. Therefore, we are not inclined to consider such service as an export of service - the demand of service tax on the money transfer service rendered by the appellants requires to be upheld. - AT
VAT
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Service of notice - whether pre-revisional notices was served on the writ petitioner-dealer - This is a fit case to give the benefit of doubt to the writ petitioner-dealer. This means that it has not been conclusively established {vide explanation to Rule 19(1)(a) of TNVAT Rules} that the pre-revisional notices dated 18.08.2014 have been duly served on the writ petitioner-dealer on 31.08.2014. This further means that the impugned orders will have to be interfered with on this short point and the writ petitioner-dealer has to be given opportunity afresh to show cause.- HC
Case Laws:
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GST
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2022 (2) TMI 441
Refund of IGST - goods exported zero rated supplies - Refund withheld on the ground that since drawback is claimed at a higher rate of refund of the petitioner, the same cannot be sanctioned under Section 54 of the Central Goods and Service Tax Act, 2017 - inadvertently the Custom House Agent (CHA)failed to disclose the details of IGST paid of ₹ 17,30,468/- - HELD THAT:- The provision of Section 54 of the CGST Act read with Section 16 of IGST Act after the goods are exported, the shipping bills are treated as the application of refund of IGST paid in regard to the export goods and the respondents are required to refund the amount of IGST to the petitioner. In the matter on hand, the exports had been made on September, 2017, the refund has not been made available. It is though the contention raised by the respondents of the rate of higher and lower duty drawback, though is of 2% in the instant case, the Circular No. 37 of 2018 dated 09.10.2018 is applicable and the exporters, who had availed the option to take drawback at higher rate in case of IGST refund will need to punch accordingly in the EDI system and the mistake, which has been made by the petitioner in relation to the three bills where the refunds have not been given, the EDI system itself has not allowed the IGST refund. We are in complete disagreement with the respondents as not only the petitioner in subsequent correspondence with the respondents has made it completely clear that in the case of these exports the higher duty drawback and the lower duty drawback are the same, the case is covered by the decision of this Court rendered in case of M/S AMIT COTTON INDUSTRIES THROUGH PARTNER, VELJIBHAI VIRJIBHAI RANIPA VERSUS PRINCIPAL COMMISSIONER OF CUSTOMS [ 2019 (7) TMI 472 - GUJARAT HIGH COURT] where the Court in detailed has discussed this very issue and held that respondents are directed to immediately sanction the refund of the IGST paid in regard to the goods exported, i.e. 'zero rated supplies', with 7% simple interest from the date of the shipping bills till the date of actual refund. As the issue raised before this Court is identical, no separate or independent discussion would be necessary to be made before this Court. Therefore, the request of refund so far as the three shipping bills are concerned will need to be permitted. The respondent authority is required to sanction the refund of IGST paid in regard to the goods exported i.e. zero rated supplies made vide these three Shipping Bills No.8465051, 8459617 and 8455069 dated 05.09.2017, 05.09.2017 and 14.09.2017 respectively. The decision in case of Amit Cotton Industries has been delivered on 27.06.2019. The representation had been made by the petitioner in May, 2019 and the last one before this petition has been filed, was on 03.02.2021, when this decision had already become final. Assuming that there was nothing in respect of the interest so far as the IGST refund of the said shipping bills was concerned, it could have granted the same knowing fully well that the issue has been covered, the respondents have chosen not to abide by the decision - Considering the fact that the sanction of the refund towards the IGST paid in respect of the goods exported i.e. zero rated supplies , vide the shipping bills ought to have been completed as the two circumstances provided in sub clauses (a) (b) of Clause (4) of Rule 96 of Rules, 2017 do not exist. The shipping bills, as per Rule 96, exporter once file are deemed to be an application for refund of Integrated tax paid on the exports of goods and withholding of the same is made permissible under Rule 96 (4) when read with Section 54 as specified in the said decision of Amit Cotton Industries. The respondents are directed to sanction the refund towards the IGST paid in respect to the goods exported i.e. Zero Rated Supplies made vide the Shipping Bills No. 8465051, 8459617 and 8455069 dated 05.09.2017, 05.09.2017 and 14.09.2017 respectively - Petition allowed.
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Income Tax
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2022 (2) TMI 440
Revision u/s 263 - addition on account of share capital/premium can be made under Section 68 in the first year of incorporation/business - Whether reassessment order passed by the Assessing Officer is not erroneous as well as not prejudicial to the interest of the revenue on the issue of share capital/premium when no addition can be made under Section 68? - HELD THAT:- The very same substantial questions of law and the said appeal was dismissed by this Court in the case of Rajmandir Estates Private Limited -versus- Principal Commissioner of Income Tax [ 2016 (5) TMI 801 - CALCUTTA HIGH COURT] - excepting the substantial question of law no.(a), which was left open, all other questions of law are decided against the assessee. Substantial question no.(a) is left open - Whether the Learned Tribunal was justified in holding that the first proviso to Section 68 which has been inserted by the Finance Act, 2012 w.e.f.1.4.2013 applies to the Assessment Year:2009-10?
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2022 (2) TMI 439
Amortisation of expenditure incurred under voluntary retirement scheme - Disallowance for deduction under the Voluntary Retirement Scheme u/s 35DDA - Whether the allowance for deduction under the Voluntary Retirement Scheme is to be made on the basis of 1/5th of the liability for the payment of Voluntary Retirement Scheme incurred under the mercantile system of accounting or is to be allowed on the basis of 1/5th of the actual payment made during the relevant year? - HELD THAT:- Having heard learned counsel for the partiers, this Court is of the view that the ITAT erred in treating the liability under the VRS scheme not as an accrued one but in proceeding on the basis that only the amount actually paid during the AY in question can be allowed. The definition of paid under Section 43(2) of the Act contemplates an accrued liability . There is no dispute that the Appellant follows the accrual method of accounting. There is also no dispute regarding the actual amount that was incurred as liability by the assessee under the VRS scheme. As equally erroneous on the part of the CIT (A) to treat the expenditure towards the aforementioned liability as capital expenditure . There is no warrant for such a conclusion. It was not even the Department s case that liability incurred for settling VRS dues would be capital in nature. It needs to be borne in mind that the Assessee follows the mercantile accounting system and not the cash system and that its income is assessed under the head profits and gains and business of profession. Question framed by this Court is answered in favour of the Assessee and against the Department by holding that allowance and deduction under the VRS scheme are to be based on the entire accrued liability incurred and not just of the amount actually paid during the relevant AY.
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2022 (2) TMI 438
Validity of Faceless Assessment u/s 144B - Non grant of personal hearing or liberty of being heard - petitioner objected to the show cause notice and the proposed addition in draft assessment order and requested to complete the assessment on returned income - HELD THAT:- Both these notices were responded to by the petitioner-assessee. Both these responses were not found satisfactory and were rejected on reasons mentioned in detail in the impugned assessment order. Assessing Authority also found that the assessee failed to provide documents supportive of his stand, thereafter, final show cause notice was again issued on 27.01.2021 for proposed additions of ₹ 2,86,01,971/- treating it as unexplained income. The impugned order of the assessment further reveals that in response to this final show cause notice, the assessee/petitioner has submitted details with documents of capital increased which were considered and not found satisfactory, thereafter, another show cause notice was issued on 27.01.2021, in response to which assessee submitted certain details and documents with capital account. After having afforded liberty as aforesaid of being heard which appears to be not only reasonable but sufficient, the Assessing Authority passed the impugned order (Annexure P/1). What comes out loud and clear is that liberty of being heard was offered to the petitioner. The decision taken by the impugned order may or may not be correct is not for this Court to dwell upon especially when the statutory appeal preferred by the petitioner is pending consideration. More so, since the petitioner did not make any specific express demand for a personal hearing, the non grant of personal hearing by the Assessing Officer cannot lead to a case of breach of principles of natural justice ( audi alteram partem ) thereby enabling the petitioner to directly approach this Court under Article 226 of the Constitution especially in the face of pending statutory appeal.
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2022 (2) TMI 437
Correct head of income - gain on purchase and sale of shares and security had to be assessed under the head of capital gain or income from business - Tribunal treating the income from trading in shares as capital gains and not business income - proceedings initiated under Section 263 were dropped - HELD THAT:- We note that the contention of the revenue that the shares and mutual funds that were sold during the year which resulted in the income has been shown as stock in trade and not an investment is a factually incorrect submission.On going through the order passed by the Tribunal therein we find that the Tribunal has recorded that it has been held as an investment and not as a stock in trade. Similar finding has also been rendered by the CIT. Therefore, the said contention cannot be accepted. Volume of transaction - Volume of transaction cannot have any impact to consider as to whether the transaction would give rise to short-term capital gain or not. This aspect of the matter was rightly dealt with by the Tribunal by taking note of the fact that similar transactions were accepted by the department for the previous year and the subsequent assessment year as giving rise to capital gain and not as business income. In fact, for the subsequent investment year 2007-08, proceedings initiated under Section 263 were dropped by the CIT on being satisfied with the nature of the transaction. Hence, if the same volume of transactions were not the subject matter of any review by the authorities, a solitary stand cannot be taken for the assessment year under consideration alone. In any event, the volume of transaction cannot have any impact to assess as to whether it would give rise to short-term capital gain especially when the fact is not in dispute that the assessee is engaged in the business of making investment in shares, mutual funds and debentures etc. for several years. Therefore, the second contention raised by the revenue also is not tenable Plea of res judicata - Tribunal rightly noted the law that rule of res judicata is not applicable to income tax proceedings but the principle of consistency will definitely apply. In the preceding paragraphs we have set out the facts to show as to how the department has examined the returns filed by the assessee for the previous assessment year and the subsequent year. Therefore, we find that there cannot be different yardstick for the assessment year under consideration when facts and circumstances are identical. - Decided against revenue.
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2022 (2) TMI 436
Addition u/s 153A - unaccounted commission income received by the assessee from Rockland group for providing accommodation entries - HELD THAT:- No addition on account of commission allegedly received by the assessee can be made. In the case of PCIT vs. Anand Kumar Jain (HUF) [ 2021 (3) TMI 8 - DELHI HIGH COURT] wherein the Hon ble Court held that the statement recorded in search cannot be regarded as the incriminating document for assessment u/s 153A unless opportunity of cross examination of the witness is provided to the assessee. Declaration made by Mr. Prabhat Kumar Srivastava, the Director in his affidavit denying payment of any fees/ commission to the assessee has neither been considered nor specifically rejected by the AO by recording any reasons. Nothing has been brought on record to disbelieve the statement of the Director, Mr. Prabhat Kumar Srivastava. In fact his statement remained uncontroverted by the AO. CIT(A) has recorded a categorical finding that no adverse inference can reasonably be drawn from the entry against the word Ashwani appearing in seized documents. It has been explained by the assessee before the AO and the Ld. CIT(A) that such references relate to payment of remuneration to the assessee and not to any commission. Even where there is mention of 2 to 3% commission in seized documents, the name of the assessee does not appear at all therein. In fact we notice that the AO in his remand report has categorically admitted that the statements of Sri Anil Agarwal, Sri Vipul Jain and Sri Mahavir Jain do not mention the name of the assessee being a party to the accommodation entries to the Rockland Group. No adverse inference can be drawn against the assessee regarding receipt of commission by him. The addition is based on presumptions alone without any corroborative evidence brought on record in support thereof. - Decided against revenue.
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2022 (2) TMI 435
Assessment u/s 153A - investment made as a co-owner for purchase of the flat being unexplained income for assessment year 2012-13 - unexplained investment for 1/10th share in the renovation of 2 Mumbai flats - HELD THAT:- Addition has been made merely on the basis of statement of Shri Hitesh Mittal recorded during the course of search and seizure operation. When the Revenue has not brought on record any material, if any, seized during the search and seizure operation as to how and when the alleged renovation of the said flats were carried out no addition is sustainable on the basis of bald statement of the assessee. It is settled principal of law that when no incriminating material is found during the year under consideration, particularly when assessment for the year under consideration is completed one, no addition can be made. When we examine the statement of Shri Hitesh Mittal available it does not support the Revenue, because neither the flat was purchased during the relevant period nor any declaration has been made by the assessee during recording of statement. Hon ble Delhi High Court in the case of CIT Vs. Kabul Chawla [ 2015 (9) TMI 80 - DELHI HIGH COURT] held that in case of completed assessment no addition can be made under Section 153A of the Act when no incriminating material was found. Now this issue is no longer a res integra have been decided by various High Courts on the principle that no addition under Section 153A and 153C of the Act in the absence of no incriminating material found in the search - addition merely on the basis of a bald statement under Section 153A of the Act, hence order to be deleted - Decided in favour of assessee Unexplained investment in purchasing 50,000 equity shares - HELD THAT:- In order to make addition Assessing Officer has not relied upon any incriminating material alleged to have been seized during the search and seizure operation nor any such incriminating material was there to make such addition. So we are of the considered view that the addition made by the Assessing Officer and confirmed by the ld. CIT (Appeals) is not sustainable in the eyes of law, hence order to be deleted. Consequently, ground No. 6 is also decided in favour of the assessee. Unexplained investment made for half share in flat situated at Goodwill Apartments, Mumbai - HELD THAT:- Bank account of the assessee available shows that complete narration for making investment in purchasing the property in question is made and the entire money paid is appearing in the ledger account maintained by the HDFC Bank in the name of M/s. Satellite Exports. The property in question has been disclosed in the balance sheet the purchase price of which has been paid from disclosed bank account of M/s. Satellite Exports, a proprietorship concern of the assessee. Ledger account of Goodwill Apartments also shows the mode of payment through banking channels from the bank account of M/s. Satellite Exports. Conveyance Deed also shows the mode of payment through cheque drawn at HDFC Bank. Addition made by the Assessing Officer and confirmed by the ld. CIT (Appeals) by passing a cryptic order, without any incriminating material and is also not sustainable on merits is liable to be deleted. Consequently, Ground Nos. 4 and 5 are determined in favour of the assessee. Unexplained jewellery found from residence - HELD THAT:- When seized jewellery from the house of assessee worth had already been taxed being part and parcel of income declared by Shri S. C. Mittal, father in law of the assessee as undisclosed income as per findings returned by the co-ordinate bench of Tribunals in Ms. Pallavi Mittal [ 2021 (9) TMI 1335 - ITAT DELHI] case no separate addition against the assessee is sustainable, because the entire unaccounted jewellery seized was belonging to the entire family being subject matter of the same search and seizure operation. So we are of the considered view that the Assessing Officer as well as ld. CIT (Appeals) have erred in making separate addition against assessee on account of unaccounted jewellery, hence ground 5 is also determined in favour of the assessee. Unexplained cash found from the premises of the assessee - HELD THAT:- When the statement made by assessee during search and seizure operation that the cash of ₹ 50,000/- belongs to his uncle, Shri Yogesh Mittal, which stood corroborated from the fact of additional income declared by Shri Yogesh Mittal on account of search and seizure operation in assessment year 2014-15 to the tune of ₹ 77,00,000/- including cash of ₹ 6,00,000/-, no separate addition of ₹ 50,000/- in the hands of assessee is sustainable, hence order to be deleted.
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2022 (2) TMI 434
Assessment against company non existent - struck off company i.e. Mehta Air Travel Pvt. Ltd. was not in existence on the date of passing Assessment Order - HELD THAT:- It is matter of record that One Mr. Dhirajlal Terraiya vide letter dated 25.08.2015 in his reply to Show Cause Notice dated 18.08.2015, intimated the ITO Ward 2(1)(4) that the company was struck off from the records of Registrar of Companies (ROC), Gujrat, vide order dated 18.05.2011. Thus, the company is no longer in existence after being struck off from the Register of ROC. In absence of existing company, there cannot be any director who can sign the verification for the filing of Income Tax Return or making any compliances or replying to any notices from Income Tax Department. The struck off company i.e. Mehta Air Travel Pvt. Ltd. was not in existence on the date of passing Assessment Order. Hence, the present Assessment order is not valid and the same may be quashed - Appeal of assessee allowed.
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2022 (2) TMI 433
Disallowance of additional depreciation claimed u/s 32(1)(iia) - Proof of machinery to used in the business of manufacture or production - HELD THAT:- Assessee claiming additional depreciation u/s 32(1)(iia) of the Act should be engaged in the business of manufacture or production of any article or thing etc. It does not state that the new machinery or plant should itself be used in manufacture of any article or thing. The question whether the machinery itself is required to be used in the business of manufacture or production for allowing additional depreciation u/s 32(1)(iia) of the Act was examined by the coordinate bench in the case of Texas Instrument [ 2020 (3) TMI 1195 - ITAT BANGALORE ]. We are convinced with the alternative contention of the assessee. We have earlier noticed that the A.O. has allowed additional depreciation on machineries used for manufacture of butter, ghee, pedha, etc., which clarifies that the assessee is engaged in the business of manufacture or production of any article or thing. Hence, as per the ratio laid down by coordinate bench in the case of Texas Instruments Ltd. (supra), the assessee would be eligible for additional depreciation on other machineries also, even if those machineries are not used in the manufacture or production of article or thing. Claim of the assessee that the processing of milk would amount to manufacture, we notice that the decision rendered by the special bench in the case of B.G. Chitale [ 2008 (6) TMI 303 - ITAT PUNE ] goes against the assessee. Even under the definition of the term manufacture , processing of milk will not result in manufacture of article or thing, since the product milk remains as milk even after processing. Accordingly, we reject the above said contentions of the assessee. Since we have accepted the alternative contentions of the assessee, we hold that the assessee is eligible for additional depreciation on the plant and machinery used for processing of milk also and accordingly direct the A.O. to grant the same to the assessee. Deduction claimed u/s 80P(2)(e) - assessee had received rental income from letting out of milk parlours, which are selling products of the assessee - CIT-A confirming the rejection of deduction u/s 80P(2)(e) - HELD THAT:- We are of the view that the decision rendered by Ld. CIT(A) on this issue does not call for any interference as the milk parlours cannot be considered as godowns or warehouses contemplated u/s 80P(2)(e) of the Act. Accordingly, we confirm the order passed by Ld. CIT(A) on this issue. Appeal filed by the assessee is partly allowed.
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2022 (2) TMI 432
Depreciation claim on expenditure incurred for construction of model house, project office, marketing office, stores etc - According to the assessee, for the purpose of its business, these structures were put up and were destroyed/dismantled once the project was completed and the structure did not have life for more than three years and were temporary in nature and hence, entitled to 100% depreciation - HELD THAT:- The assessee has filed additional evidence in the form of a certificate of the Architect which clearly states that the expenditure incurred on construction amounting to ₹ 1,75,55,286 are temporary structures such as model house, project office, marketing office, storage of building material, etc. It is further stated in the Architect's letter that these were demolished immediately after the completion of the project. In the petition for admission for additional evidence, the assessee states that the assessee was under the bona fide belief that its explanation, ledger extracts and submissions would be sufficient to allow the claim. It was stated that for interest of justice and equity since the additional evidence goes to the root of the issue, the same may be admitted on record. We find that the additional evidence now sought to be admitted goes to the root of the issue. Therefore, for substantial cause and justice, we admit the same on record. The assessee has now claimed before the Tribunal that the expenditure incurred is revenue expenditure. Alternatively, it is submitted that the expenditure incurred is for putting up temporary structures and entitled to 100% depreciation. In the interest of justice and equity since the additional evidence has been admitted on record, it is necessary that the issue now raised before the Tribunal needs to be examined afresh by the A.O. Appeal filed by the assessee is allowed for statistical purposes.
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2022 (2) TMI 431
Addition made u/s. 68 - Addition of agricultural income - admission of additional evidences - HELD THAT:- The assessee has furnished additional evidences to prove that the hand land balance of ₹ 23 lakhs represents balance brought forward from earlier year and also copies of land holding and crop certificate in support of the claim of agricultural income. In the interest of natural justice, these evidences should be admitted and the matters may be restored to the file of the A.O. for examining both the issues afresh. There should not be any dispute that the admission of additional evidences filed in support of the claim made in the return of income would promote the cause of justice. Accordingly, admit the additional evidences furnished by the assessee. Since both the issues required to be examined afresh duly considering the additional evidences furnished by the assessee,we set aside the order passed by Ld. CIT(A) on both the issues and restore them to the file of AO for examining them afresh. Appeal filed by the assessee is allowed for statistical purposes
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2022 (2) TMI 430
Estimation of turnover - determining the income on estimate basis @ 1.25% of total turnover - addition of 1.25% sustained by the Ld. CIT(A) - HELD THAT- As the issue is squarely covered in assessee's own case, we accept this pray of the assessee and direct the Ld. AO to restrict the addition to 0.50%. Therefore, the Grounds are partly allowed.
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2022 (2) TMI 429
Unexplained salary - search and seizure proceedings - HELD THAT:- It is pertinent to note that during the search and seizure operation, the Revenue has not found any incriminating documents or any cogent document or evidence relating to the assessee directly or indirectly. The addition made by the Assessing Officer as relates to unaccounted salary does not sustain in the eyes of law as the salary vouchers which was presented before the Assessing Officer clearly shows the actual salary paid to the assessee which was verifiable from the records of the assessee's bank account and other relevant documents. Merely relying on the statement which the Assessing Officer as well as the CIT(A) though admitting that the said statement is vague and inconsistent cannot be the basis for addition. As no incriminating documents were found and the only basis for the addition was that of statement which was not confronted to the assessee at all. Thus, assessment itself is not just and proper. Therefore, the additional ground raised by the assessee is allowed.
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2022 (2) TMI 428
Deduction of employees' contribution to PF and ESI provided that the payments were made prior to the due date of filing of the return of income u/s. 139(1) - amended provisions of section 43B as well as 36(1)(va) - HELD THAT:- As in Bangalore Bench of the Tribunal in the case of M/s. Shakuntala Agarbathi Company [ 2021 (10) TMI 1196 - ITAT BANGALORE] by following the dictum laid down in the case of Essae Teraoka Pvt. Ltd Vs. DCIT [ 2014 (3) TMI 386 - KARNATAKA HIGH COURT] held that the assessee would be entitled to deduction of employees contribution to PF and ESI provided that the payments were made prior to the due date of filing of the return of income u/s 139(1) - Also further held by the ITAT that amendment by Finance Act, 2021, to section 36[1][va] and 43B of the Act is not clarificatory. Therefore, the amended provisions of section 43B as well as 36(1)(va) of the I.T.Act are not applicable for the assessment years under consideration. By following the binding decision in the case of Essae Teraoka Pvt. Ltd Vs. DCIT (supra), the employees contribution paid by the assessee before the due date of filing of return of income u/s 139(1) is an allowable deduction - Decided in favour of assessee.
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2022 (2) TMI 427
Addition in respect of cash deposited in the bank - Sources of deposit were loans shown taken from two persons - HELD THAT:- Once the advancement of loan was confirmed by the lenders and there was nothing adverse to suggest that either the lenders were bogus or the transactions were non-genuine or they did not have any credit worthiness, the explanation so tendered by the assessee deserved to be accepted. We fail to comprehend as to what sort of documentary evidence would be required to demonstrate that the loan was taken by the assessee for his daughter's further studies, when the persons advancing the loans are saying so in their respective confirmations, which have not been controverted. Next source of deposit as claimed as agricultural income assessee furnished Sale receipt of agricultural produce. CIT(A) did not accept the same on the ground that there was no corroborating evidence of agricultural operations and cultivation done. Again, the fact that the assessee was regularly into agricultural operations has not been denied - we are unable to comprehend the point of view canvassed by the ld. first appellate authority in the hue of the fact that the assessee did furnish sale receipt of agricultural produce which has not been found to be non-genuine or bogus and no contrary material has been placed on record by the Revenue. For the remaining source of deposit, the assessee stated that a sum as withdrawn from Dena Bank Agriculture Account of Sheela G. Bende, his spouse, which was an agricultural loan taken from the Government of Maharashtra. She withdrew the amount from her bank account on 15-03-2010. CIT(A) did not accept the amount as a source of deposit on the ground that it was withdrawn and subsequently re-deposited. Even though such amount was re-deposited, it cannot be held that the assessee was not in a position to manage the remaining amount of ₹ 4.89 lakh when he was an agriculturist and also in a service having salary of ₹ 3.94 lakh for the year. Here is a case in which a salaried person pooled his lifelong endeavour for the further studies of his daughter. In such a panorama, a holistic approach needs to be adopted. When we consider the facts of the instant case as a whole, there remains no doubt whatsoever that the assessee arranged the money from his known sources for depositing in the bank account which was meant for education of his daughter. The authorities below were not justified in getting too technical and taking a pedantic approach - we set-aside the impugned order and delete the entire addition. - Decided in favour of assessee.
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2022 (2) TMI 426
Validity of Reopening of assessment u/s 147 - HELD THAT:- We find that the assessment was reopened by issuing notice under section 148 of the Act on 27.03.2015 and after following due process, the assessment was completed u/s 143(3) r.w.s. 147 of the Act dated 11.03.2016, which is well within four years of time limit provided in the statute. Accordingly the ground raised by the assessee is dismissed being devoid of merits. 50% disallowance of depreciation - AO was of the opinion that the assessee was using only 50% of the balance factory building and thus, the assessee is eligible for 50% of depreciation on factory building - The entire income which accrued and was assessed was from letting out of these properties and there was no other income of the assessee except the income from letting out of these two properties. Therefore in M/S CHENNAI PROPERTIES INVESTMENTS LTD [ 2015 (5) TMI 46 - SUPREME COURT] has held that the rental income earned by the assessee cannot be treated as Income from the house property . Whereas, in this case, the assessee is engaged in manufacturing of automobile components and let out 50% of its factory building on lease and earned rental income. CIT(A) has rightly held the rental income as income under the head house property . Having the rental income held as income under the head house property , the assessee is not eligible for claim of depreciation on the let out portion. We find no infirmity in the order passed by the ld. CIT(A) and thus, the grounds raised by the assessee are dismissed.
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2022 (2) TMI 425
Disallowance of excess interest paid to related persons specified u/s 40A(2)(b) - AO restricted the interest payment @12% p.a. and made the disallowance - HELD THAT:- Assessee has paid interest to several parties and paid interest between 11.5% to 18% during this assessment year and assessee has taken loans from specified persons, viz. Dura Tech and Hemali Gada and paid interest to them @15% to 17%, respectively. Since the unsecured loan availed by the assessee from several parties, and agree that the risk to non specified persons is more than the specified persons and Ld.CIT(A) has pegged the rate @15% whereas assessing officer restricted it at 12%. Considering the information available on record, in our considered view, Ld.CIT(A) has pecked @15% which is reasonable when compared to the average rate of unsecured loan for the whole assessment year, it will be more or less 15%. Therefore, we do not see any reason to disturb the findings of Ld.CIT(A). Accordingly, ground raised by the assessee is dismissed. TDS on interest payment - HELD THAT:- We observe from the record and submissions made by Ld.AR and have gone through the forms which were filed by the recipients of interest which shows that these forms were filed specifically for assessment year 2014-15. The informations submitted before us indicate all the relevant informations required to make the claim of interest without deducting tax at source. We do not see any reason to reject of the claim of the assessee. Therefore, we direct the assessing officer to allow the claim of the assessee to the extent the amounts are mentioned in the above said form 15G / 15H. Accordingly ground raised by the assessee is allowed. Allowability of Expenditure incurred towards purchase, labour and site expenses - HELD THAT:- We observe that assessee has claimed the expenditure in the year of actual addition to the cost of the project. However, the bills were raised in the next assessment year i.e. in F.Y. 2014-15 (AY 2015-16). As a prudent method of accounting adopts the income and expenditure on matching principle. The cost is incurred but the actual bills were raised in the subsequent year. It does not change the character of the expenditure but only timing to record the bills. In actual, all the costs incurred are charged to work-in-progress. It does not make any difference when actual bills are recorded. The important thing is whether the cost is incurred for the project. Therefore, in our considered view, the addition sustained by the learned CIT(A) is not proper and accordingly, the ground raised by the assessee is allowed.
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2022 (2) TMI 424
Addition u/s 68 - addition of the cash deposited in the bank account - HELD THAT:- We have given a thoughtful consideration to the issue before us and are persuaded to subscribe to the claim of the ld. A.R that as the bank account or bank passbook of an assessee cannot be held as his 'books of account', hence, no addition in respect of a simpliciter cash deposit made in the said account could validly be made under Sec.68 of the Act. Our aforesaid view is fortified by the judgment of CIT Vs. Bhaichand H. Gandhi [ 1982 (2) TMI 28 - BOMBAY HIGH COURT ] - Decided in favour of assessee.
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2022 (2) TMI 423
Unexplained cash credits in bank accounts - unexplained income of the assessee u/s 69 - Case of the assessee was selected for scrutiny assessment u/s. 143(2) - as argued assessee was a semi-literate person who was earlier running a shop and was presently working with a company as an agent - HELD THAT:- We are of the considered view, that the claim of the assessee that the transactions in the assessee s bank account were managed and operated by Shri Jatinder Kumar a travel agent, could not have been summarily brushed aside, and in all fairness, considering the peculiarity of the facts involved in the case before us required a serious consideration on the part of the CIT(A), who we are afraid by loosing sight of the aforesaid material facts pertaining to the assessee, i.e., his limited financial means, family status etc., which prima facie revealed that he had no financial means to have made the aforesaid substantial amount of cash deposits of ₹ 45.50 lac, had in fact hushed through the matter and saddled the assessee with exorbitant taxes. We are of the considered view that the matter requires to be re-examined by the Assessing Officer, who is accordingly directed to carry out necessary verifications as regards the aforesaid claim of the assessee by conducting necessary enquiries from Shri Jatinder Kumar (supra) and from the bank i.e., State Bank of Patiala, Branch : Kanak Mandi, Hoshiarpur. Needless to say, the Assessing Officer while disposing off the appeal shall afford a reasonable opportunity of being heard to the assessee, who shall remain at a liberty to substantiate his aforesaid claim on the basis of fresh documentary evidences. We, thus set-aside the matter to the file of the Assessing Officer for the limited purpose of verifying the assessee s claim qua the cash deposits of ₹ 45.50 lac in his saving bank account with State Bank of Patiala, Branch: Kanak Mandi, Hoshiarpur. The Grounds of appeal nos. 1 to 3 are allowed for statistical purposes.
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2022 (2) TMI 422
Rectification of mistake u/s 154 - disallowing u/s.40A(3) of the assessee s claim for deduction of bonus as stated to have been paid in cash, i.e., in excess of the prescribed limit of ₹ 20,000/- - HELD THAT:- Though Section 40A(3) contemplates disallowance of certain expenditure which is incurred by an assessee in cash beyond the prescribed limit, however, Rule 6DD of the Income Tax Rules, 1962 carves out a set of exceptions wherein the payments despite having been made in cash beyond the aforesaid prescribed limit are not to be disallowed. In the backdrop of our aforesaid observations, we are of a strong conviction, that no disallowance u/s.40A(3) of the Act, even in a case where the payments had been made by the assessee in cash beyond the prescribed limit could validly be made by invoking the provisions of Section 154 of the Act. In our considered view, as the AO had grossly erred in invoking the provisions of Section 154 of the Act for the purpose of disallowing the aforementioned amount u/s. 40A(3) of the Act, therefore, the order therein passed by him cannot be sustained and is accordingly liable to be vacated. We, thus, not being able to persuade ourselves to subscribe to the view taken by the lower authorities set aside the order passed by the CIT(A) and quash the order passed by the AO u/s.154 of the Act. Grounds of Appeal Nos.1 to 4 are allowed in terms of our aforesaid observations.
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Insolvency & Bankruptcy
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2022 (2) TMI 421
Creation of fixed deposits from the monies received in the Escrow Accounts of RMGL and RMGSL with the relevant escrow bank (with whom the escrowed amounts are currently deposited) - Seeking direction that creation of such fixed deposits would not amount to an appropriation of the monies lying in the respective Escrow Account - HELD THAT:- The matter being pending, this Tribunal does not lack any jurisdiction to issue any direction but the question which we have to consider is as to whether the amount which is lying in the Escrow Account should be directed to be kept in the fixed deposits in a Nationalised Bank. As noticed above, after the judgment of the Hon ble Supreme Court on 26.03.2020, an Application was filed in the Hon ble Supreme Court seeking clarification to the same effect that the order does not prohibit keeping the account in the fixed deposits which Application was rejected. Since Applications are already fixed on 24.02.2022 for consideration of the interim distribution and appropriation, we see no necessity to direct that the amount to be kept in the fixed deposits in a Nationalised Bank. We recall our order dated 01.12.2021 for keeping the amount in fixed deposits and prayers in I.A No. 2404 of 2021 as on date cannot be granted - Application disposed off.
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2022 (2) TMI 420
Approval of Resolution Plan - claim of arbitration award was not considered - Appellant didn't invoke the 'Corporate Guarantee' and has filed incomplete information - time limitation - HELD THAT:- It is not in dispute that the loan has not been taken by the concerned party as stated and the 'Corporate guarantee' has not been given by the CD - It is also not in dispute that the 'Principal Debtor' has committed a 'default' leading to issue of 'Termination cum Arbitration notice' way back on 07.03.2015 to the 'Corporate Guarantor' and others including the 'Guarantors' were asked to repay the outstanding dues which has been 'defaulted' by the 'Principal Debtor'. From the details available on record, it is amply clear that the Appellant has invoked the 'Corporate Guarantee'. The Appellant has invoked the Guarantee well within the expiry of the term of 'Loan Agreement' concerned - Admittedly, there is undischarged live liability and the amount due to the Appellant has not been paid by the 'Principal Borrower'/'Principal Debtor'. For the undischarged live liability for which the Guarantor /corporate Debtor is obliged to pay in terms of Guarantee Agreements and accordingly, Guarantor is fully responsible for the liability of the Principal Debtor. It is very much clear that the Appellant has submitted its claim within due time frame and with relevant papers and Guarantee is a continuing guarantee - All this do not suggests that the amount is not due and payable in law and there is no default. The CD/Respondent was made aware of the same well in time. The Resolution Professional had rejected the claim of the Appellant mainly on the ground of non-invocation of the corporate Guarantee. The Resolution Professional further submits that the arbitration award was put on the Adjudicating Authority record during the pendency of the application for the first time. Therefore, Resolution Professional submits that he is not responsible for the non-consideration of the documents since the same was never placed on Form 'C' stage - Based on the facts of the case, it is undisputed that the arbitration award against the Corporate Debtor was not placed before the Resolution Professional. Accordingly, the rejection of the claim was made without considering the arbitration award. Instead, the said award was placed before the Adjudicating Authority. The Adjudicating Authority has not taken cognizance of the award and rejected the application filed by the Appellant. Since the Appellants claim is also supported by an arbitration award, which has not been considered either by Adjudicating Authority or Resolution Professional. Therefore, it is appropriate that the claim of the Appellant should be reconsidered even based on the arbitration award - The Resolution Professional to consider the claims of the Appellant to proceed further in accordance with the law. Appeal allowed.
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2022 (2) TMI 419
Maintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its dues - Financial Creditors - existence of debt and dispute or not - Arbitration proceedings proceeded ex parte against respondents - HELD THAT:- The Financial Creditor has properly placed the Loan Agreements, Sanction Letters, Disbursement Details, Loan Recall Notice, Last Payment details, Statement of Dues to establish the default and the Balance sheets for the corporate debtor which acts a proper acknowledgment within the meaning of Section 18 of the Limitation Act, 1963 - Once there is a proper Acknowledgment of the Debt in writing, a fresh limitation period starting from the date of acknowledgment begins i.e. 05.09.2018 (Balance sheet for the year 2017-18), 30.09.2017(Balance sheet for the Year 2016-2017). The petition is filed on 18.11.2019 which is under 3 years of the Limitation period from the last acknowledgment received. There exists a default and evidence of default has already been placed by the financial Creditor. According to Sec. 7(5) if the Adjudicating Authority is satisfied that a default has occurred and the Application is complete in accordance to Sec. 7(2) and 7(3), then Adjudicating Authority may admit such Application. The Application is complete in all respects and there is a failure on the part of Corporate Debtor to make the timely payments of the Loan and follow the repayment Schedule. The Financial Creditor had made several attempts to recover the due amount and served legal notice on the Corporate Debtor but Corporate debtor had never responded to those. Even after passing of the Arbitral Award in favour of the Financial Creditor, Corporate debtor failed to comply with it. Thus it is a fit case to admit CIRP against Corporate Debtor and the application is within the limitation Period - application admitted - moratorium declared.
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2022 (2) TMI 418
Financial Debt or not - amount claimed under the Promissory Note - whether the Board of Director of Corporate Debtor was authorized to borrow the loan from the applicant or note? - HELD THAT:- A bare perusal of the provision of Section 5 sub-Section 8 of IBC, 2016, any amount raised pursuant to any note purchase facility or the issue of bonds, notes, debentures, loan stock or any similar instrument comes under the definition of Financial Debt. On conjoint reading of the two provisions of Section 4 and section 13 of the Negotiable Instrument Act, show that Promissory note comes under category of any of similar instrument. Hence the Promissory Notes comes under the definition of Financial Debt under Section 5 sub-Section 8(5) of the IBC, 2016, hence, we are of the considered view that the Promissory note comes under the definition of Financial Debt. Non-submission of the Board Resolution regarding the authorization to borrow the loan - HELD THAT:- Admittedly, that has not been placed by the applicant but the applicant has referred to page 57 Annexure-A7 which shows that the confirmation of amount from 01st April 2019 to 31st March, 2020 is made by the authorized signatory of the Corporate Debtor and as per the books of account, the balance is of ₹ 1,77,46,750/- as on 31st March, 2020 - for the purpose of issuance of summons under Section 7, the Adjudicating Authority requires to establish this fact that whether an amount is a Financial Debt and is their any default in payment of the Financial Debt? Since the applicant has convinced the Bench that the Promissory note comes under the definition of Financial Debt, and there is default in payment of debt, therefore, we think it proper to issue a notice upon the Respondent - Notice be issued upon the Respondent by all modes including email id of the respondent, affidavit of service be filed within a week from today. List the matter on 11.03.2022.
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2022 (2) TMI 417
Maintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its dues - Operational Creditors - existence of debt and dispute or not - HELD THAT:- It is seen from the records that the applicant was relieved from its services w.e.f. 01.11.2018. From bare perusal of the relieving certificate it is revealed that there was no dispute pending between the applicant and the Corporate Debtor. The Corporate Debtor has not placed any documents establishing the fact that the applicant has breached the terms of its employment agreement. Mere allegation without any supporting evidence would not help the Corporate Debtor - As far as the loan taken by the applicant is concerned the applicant has already adjusted that amount from salary dues claimed in demand notice. The corporate debtor has failed to establish the fact that there is any pre-existing dispute between the parties. The Corporate debtor has also failed to prove that the salary dues are not payable to applicant or has already been paid off. It is clearly established that the default in payment of the operational debt has occurred by the corporate debtor - it can be concluded that the applicant has established its claim which is due and payable by the corporate debtor. The present application is admitted - Moratorium is declared.
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2022 (2) TMI 416
Maintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its dues - Financial Creditors - existence of debt and dispute or not - HELD THAT:- The financial creditor has furnished the receipts proving the payments, as per the directions given by the Hon'ble Supreme Court, has annexed the list of the 101 applicants and the amount claimed by them, and proof of the payments made by them and received by the Corporate Debtor, has placed various documents substantiating the demand by them. But Financial Creditor have not received any response from Corporate debtor - there exists a default and evidence of default has already been placed by the financial Creditor. According to Sec. 7(5) if the Adjudicating Authority is satisfied that a default has occurred and the Application is Complete in Accordance to Sec. 7(2) and 7(3) Then Adjudicating Authority may admit such Application. The Application is complete in all respects and there is a denial of the refunds of payment made by financial creditors and application is within the limitation Period - application admitted - moratorium declared.
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2022 (2) TMI 415
Liquidation of Corporate Debtor - Termination of Corporate Insolvency Resolution Process of Nesa India Producer Limited - discharge of applicant as an IRP of the Corporate Debtor - reimbursement of expenses incurred on the CIR process - IRP has not received any claim even after the expiry of the 365 days from the Corporate Insolvency Resolution Period - HELD THAT:- It is an admitted fact that CIRP was initiated on 25th November, 2019 and the applicant was appointed as IRP, and the present application is filed on 20th February, 2021, i.e. after more than one year from the date of initiation of the CIRP. If the IRP has not received any claim even by the applicant, on whose application, the CIRP was initiated against the Corporate Debtor, in that case, after the expiry of more than one year, can CIRP be terminated on the request of the IRP? - HELD THAT:- Under section 33 sub-Section 1, where the Adjudicating Authority before the expiry of the Insolvency Resolution Process or the maximum period permitted for completion of the CIRP under Section 12 of the fast track CIRP under Section 56, as the case may be, does not receive a resolution plan under sub-Section 6 of Section 30 or reject the resolution plan under Section 31 for non-compliance of requirement specified therein, in that case, the Adjudicating Authority shall pass an order for liquidation and under Section 33 sub-Section 2 of the IBC, the resolution professional at any time during the Corporate Insolvency Resolution Process but before the confirmation of resolution plan intimate the Adjudicating Authority of the decision of the CoC to liquidate the Corporate Debtor, then the Adjudicating Authority shall pass an order for liquidation - Here in the case in hand, admittedly, the CoC is not constituted even after the expiry of more than 365 days and the IRP has also not received any claim during the CIRP. Rather, the IRP has prayed for termination of the CIRP on the ground that he has not received any claim. There is no such provision under the IBC to terminate the CIRP once it is initiated, the only way is either to complete the CIRP by approval of the resolution plan or pass the order of liquidation under Section 33 of the IBC. Here in the case in hand, admittedly, there is no resolution plan as there was no claimant and the CoC was not constituted till the date of filing the application. Under such circumstances, in terms of Section 33 sub-Section 1, the Adjudicating Authority is empowered to pass the liquidation order after the completion of the maximum period. Since, 330 days has already been completed and no resolution plan is received even the CoC is not constituted, therefore, instead of termination in the CIRP on the request of the applicant, we think it proper to pass an order under Section 33 of sub-Section 1 of the IBC to pass the liquidation order. The Corporate debtor is liquidated with immediate effect in the manner provided under Chapter III Part II of the IBC 2016 - Application allowed.
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2022 (2) TMI 414
Proceedings against the Personal Guarantor - abatement of proceedings, consequent to the death of the Personal Guarantor - HELD THAT:- We concur with the reasoning given by the RP that the Personal Guarantor in this case is an individual, who stood guarantee to the Corporate Debtor and proceedings against him will have to be closed since on the death of the Persona Guarantor, proceedings will abate. It has been rightly pointed out that in a case of proceedings under Section 95 of the IBC, 2016, it is case for initiating Insolvency Resolution Process against the Personal Guarantor and it is not a case for recovery of any amount because that will go contrary to the scheme of IBC, 2016, in such situation on the demise of the Personal Guarantor, an individual who has given his guarantee in the favour of the Corporate Debtor, the question of continuing the proceedings against such a dead person will not arise. Since the proceedings abate, the Section 95 application also has to be closed. Taking the report filed by the RP under Section 95 of the IBC, 2016, we are inclined to accept his recommendation and the proceedings stand closed. The Ld. Counsel for the Creditor has also received the copy of the report and has given his consent for closure of the proceedings - application under Section 95 of the IBC, 2016 is therefore rejected.
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2022 (2) TMI 413
Maintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its dues - Operational Creditors - existence of debt and dispute or not - HELD THAT:- From the bare perusal of the file it can be inferred that admittedly there is no agreement entered into between parties submitted for supply of building material despite the fact both the applicant is alleged to have been dealing in supply of building material, whereas, the respondent is builder. Moreover, only one bill had been put on record, but the same was never endorsed by any authorized representative of the respondent - There is nothing on record to establish the fact that the respondent ever made any demand of supply of the bricks etc. to the applicant herein. These all facts shows that the bill raised is forged and fabricated to make out false ground to put the respondent under CIRP. These all act and omissions on the part of the applicant and respondent clearly shows that there is an active collusion between them to defraud the other creditors and to facilitate the respondent to enjoy the rigors of the IBC Code. Further, had there been any genuine admission on the part of the respondent, respondent might have paid the disputed amount despite the fact the said petition is pending before this Tribunal year and alleged amount is only of one lac. It is a well settled principle of law that NCLT can't be allowed to be played at the hands of the unscrupulous parties. This tribunal is of affirm view that the present petitioner failed to establish on record that he actually supplied the building material to the respondents and an amount of rupees one lac was due rather the petition is collusive in nature - the present petition deserves to be dismissed.
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2022 (2) TMI 412
Liquidation of Corporate Debtor - section 60(5) read with section 45 and section 66 of the Insolvency and Bankruptcy Code, 2016 - HELD THAT:- Despite the fact that as per clause 9 of the agreement of sale dated September 2, 2016 the respondent is entitled to three car parking spaces, the applicant-liquidator refused to mention the same in the revised agreement of sale to be registered by and between the applicant liquidator on behalf of the corporate debtor and respondent. The fact of dispute in relation to the allotment of car parking space in evident from the e-mail communications between the parties which are annexed to the Interlocutory Application No. 535 of 2021 filed by the respondent herein. Hence, it is evident that the only issue and dispute which stood between the parties was in relation to mentioning of car parking spaces in the agreement. Rest all of the terms and conditions including advances money paid and balance payable were finalized and agreeable to both the parties herein. The respondent herein along with the mentioned cheques had also issued cheques No. 000024 of ₹ 30,50,000, dated February 10, 2021 towards the full and final payment of the balance consideration as mentioned above. However, due to on-going disputes and refusal of the applicant liquidator to insert allotment of 3 car parking space in the revised agreement of sale, the respondent herein was constrained to issue directions to his bank to Stop Payment of said cheque of ₹ 30,50,000 - respondent, therefore, prays that applicant liquidator be hereby directed to register the agreement for sale in favour of the respondent at the earliest. The respondent undertakes to pay the balance consideration of ₹ 30,50,000 (after deducting necessary TDS) on the registration of the agreement. The respondent is directed to deposit balance amount with the liquidator within 15 days. On receipt of balance sale consideration liquidator shall go ahead for execution of sale agreement - If the respondent fails to deposit balance amount within the stipulated time liquidator is directed to take necessary steps for fresh sale of subject property of this application - application disposed off.
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Service Tax
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2022 (2) TMI 411
Classification of goods - whether footwear, in respect of which patterns and designs were received by the appellant, is an article intended to be worn by human beings? - fashion designing services would fall under rule 3(ii) of the Import Rules or not - HELD THAT:- There can possibly be no doubt that footwear is worn by human beings. The Tribunal in M/S VIROLA INTERNATIONAL VERSUS COMMISSIONER, CUSTOMS, CENTRAL EXCISE SERVICE TAX, KANPUR [ 2018 (8) TMI 23 - CESTAT ALLAHABAD] also examined this precise issue. The appellant therein had paid certain amount to an entity outside India towards collection and development of samples of footwear and footwear components, which samples were used by them for display before the overseas buyers for obtaining export orders. The appellant contended that it was manufacturing footwear and the service received by it would be fashion designing service since the activity was in relation to any other articles intended to be worn by human beings . The adjudicating authority accepted this contention of the appellant and further held, that in view of the provisions of rule 3(ii) of the Import Rules, it was not taxable under the reverse charge mechanism. What needs to be noticed is that in the earlier round of proceedings concerning the previous years for which the appellant had claimed refund of the amount paid as service tax under fashion designing services as it was not required to pay tax, the classification of the service received by the appellant as falling under fashion designing was not disputed by the Department. The Department cannot now be permitted to classify the same element of service provided to the appellant under a different head in subsequent proceedings - It is also not possible to accept the contention of the learned authorized representative appearing for the Department that footwear articles would be covered under consumer goods and, therefore, would fall in the definition of design services . When a footwear is worn by human beings it is specifically covered under any other articles intended to be worn by human beings and, therefore, any activity relating to footwear would be covered by fashion designing services. Paragraph 3 does not limit the fashion designing services to articles made up of clothes. Infact, it specifically provides that a fashion designer may be involved in designing of any goods which are intended to be worn by human beings. Paragraph 4 deals only with a specific query raised as to whether tailors and jewellers will be covered under the service tax. It does not talk about a manufacturer of leather footwear for women. Whether fashion designing services would fall under rule 3(ii) of the Import Rules? - HELD THAT:- The fashion designing services fall under section 65(105)(zv) of the Finance Act and, therefore, would be covered in the second category of rule 3(ii) of the Import Rules. These services are performed outside India and, therefore, cannot be made taxable under rule 3(ii) of the Import Rules. In this connection reliance has been placed on the decision of the Tribunal in INTAS PHARMACEUTICALS LTD. VERSUS COMMISSIONER OF SERVICE TAX, AHMEDABAD [ 2009 (5) TMI 73 - CESTAT, AHMEDABAD] , wherein it has been held that if services are entirely provided outside India, the proviso to rule 3(ii) of the Import Rules is not applicable and no tax can be levied on the same. Such being the position, the impugned order cannot be sustained - appeal allowed - decided in favor of appellant.
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2022 (2) TMI 410
CENVAT Credit - input services - credit wrongly taken as per Rule (9) of CCR for want of supporting documents - reverse charge mechanism - seeking recovery of proposed amount with equal amount of penalty - HELD THAT:- The same amount of Cenvat credit of Rs.-3,32,102/- (excluding Cess) has also been shown as credit in the ER-1 Return, and the same have been rightly allowed without dispute to the Appellant, and also permitted to be carried forward to the GST regime. It is also found that the Assistant Commissioner have noted that the Cenvat credit arises from payment of Service Tax under reverse charge mechanism which is supported by challans. Thus, there was situation of confusion both at the end of Revenue and end of the assessee, due to showing of the same credit in both the returns. The show cause notice itself should not have been issued in the facts of the case - Appeal allowed - decided in favor of appellant.
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2022 (2) TMI 409
Valuation of services - retreading of tyres - service tax charged on the gross amount charged under Section 67 of the Finance Act, 1994 - Department entertained a view that the activity of retreading of tyres falls under Works Contract Service (WCS in short) and the appellants classified the service under Maintenance or Repair Service - violation of Rule 2 A of the Service Tax (Determination of Value) Rules, 2006 - April 2014 to March 2016, April 2016 to June 2017 and May 2015 to August 2016 - CENVAT Credit for Works contract services - HELD THAT:- The issue was analysed by the Tribunal in the appellant s own case M/S. SUNDARAM INDUSTRIES LIMITED VERSUS COMMISSIONER OF GST CENTRAL EXCISE (VICE-VERSA) [ 2020 (12) TMI 282 - CESTAT CHENNAI] for the period prior to 01.07.2012 as well as for the period after 01.07.2012 - The Tribunal followed the decision in the case of M/S SV JIWANI VERSUS CCE ST, VAPI [ 2014 (3) TMI 454 - CESTAT AHMEDABAD] . This decision was challenged before the Hon ble High Court of Bombay by the department in COMMISSIONER OF CENTRAL EXCISE, CUSTOMS AND SERVICE TAX, VAPI VERSUS M/S. S.V. JIWANI, NAROLI, SILVASSA [ 2016 (3) TMI 484 - BOMBAY HIGH COURT] , the Hon ble High Court dismissed the appeal filed by the department. Similar view was taken by the Tribunal in the case of M/S INTERARCH BUILDING PRODUCTS PVT. LTD. VERSUS COMMISSIONER OF SERVICE TAX, NOIDA [ 2018 (1) TMI 491 - CESTAT ALLAHABAD] . Moreover, the decision of the Hon ble High Court of Bombay has been accepted by the department as per their Circular No. 1063/2/2018-CX dated 16.02.2018. Applying the decision in the appellant s own case, the impugned orders cannot sustain. Appeal allowed - decided in favor of appellant.
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2022 (2) TMI 408
Levy of service tax - incidental charges - token charges and postage charges recovered - charges recovered for disbursement of money - Revenue alleged that part of the interest collected by the appellants, over and above 18% of interest, at times referred to as incidental charges are leviable to service tax - extended period of limitation - penalties. Whether the Interest charged from the customers above 18% per annum initially recorded in internal records under the head Incidental Charges till September 2008 and as Risk Interest from October 2008 and from 2013-14 the entire amount of interest as Interest on Gold Loan is liable to Service Tax? - HELD THAT:- It is not disputed that the appellants are a NBFC and are engaged in collection of deposits and advancing of loans against security inter alia in the form of gold. The appellants charge interest on the loans advanced. It is the case of the department that prior to October 2008, appellants have collected some incidental charges which is taxable to service tax and for the period after October 2008, the appellants have collected risk interest / interest on gold loan over and above the prescribed rate of 18% as per RBI. For the period prior to October 2008, it is the contention of the appellant that in view of the restrictions, imposed by the Kerala Government, that no money lender will charge interest over and above 2% than the interest charged by commercial banks, they have shown a portion of the interest as incidental charges. However, after October 2008, the same is referred to and accounted as risk interest / interest on gold loans. As long as the consideration received for advancement of loans is interest in whatever manner it is accounted for and at whatever rate it is collected, the same is not chargeable to service tax. Also the learned Commissioner vide order dated 6.7.2018 (Revenue appeal No.ST/21862/2018) has rightly concluded that the demand of service tax on interest of gold loans is not sustainable. The demand on account of interest is set aside irrespective of their nomenclature i.e., incidental charges/risk interest/interest on gold loan. Whether Token Charges and Postage Charges collected as reimbursement of expenses incurred from the customers are an additional consideration for the loans and advances under the Banking and other Financial Services attracting levy of service tax? - HELD THAT:- Having gone through the order, it is found that the learned Commissioner seeks to distinguish between the recoverable expenses discussed in the above case and the case of the appellant. It would be na ve to come to such a conclusion only because the reimbursable expenses discussed in UNION OF INDIA AND ANR. VERSUS M/S. INTERCONTINENTAL CONSULTANTS AND TECHNOCRATS PVT. LTD. [ 2018 (3) TMI 357 - SUPREME COURT] relate to travel cost, hotel stay, transportation, etc., and in the instant case, it is about token charges, postal charges, etc. The distinguishing is only on the categories of expenses and not on the principle of exclusion of reimbursable expenses and thus, not acceptable. It is also found that there have been number of judgments on the excludability of reimbursable expenses. Therefore, the demand on the token charges, postal charges, etc., would not sustain and the same needs to be set aside. Demand of service tax - money transfer service - HELD THAT:- In the light of the principles of taxation, all the players at one end cannot be treated as exporters and all the players at the other end cannot be treated as importers. If the appellants are rendering service to an Indian entity who is in turn engaged in export of services, law requires that the appellant pay service tax and their client is eligible to avail credit of the same and refund if applicable. There is no short-cut of the procedures. Since because the ultimate beneficiary is abroad, it cannot be claimed that the appellants are exporting services. Neither the place of rendering of the activity nor the type of service rendered by the appellants nor the recipient of such service are stationed abroad. Therefore, we are not inclined to consider such service as an export of service - the demand of service tax on the money transfer service rendered by the appellants requires to be upheld. Liability of service tax - air travel agent / rail travel agent / travel agent services - commission on insurance - HELD THAT:- The Revenue pleads that no documentary evidence whatsoever has been given by the appellants to the adjudicating authority. The appellants, on the contrary, submit that they have placed relevant challans on record. The only way to resolve the issue is to send it back for the purpose of verification. Therefore, the case remanded to the adjudicating authority for the limited purpose of verifying the claim of the appellant that they have discharged the liability of service tax in respect of air travel agent / rail travel agent / travel agent services and in respect of commission on insurance. Appeal allowed in part and part matter on remand.
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Central Excise
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2022 (2) TMI 407
Refund of central excise duty deposited during the investigation of case and Pre-deposit made under Section 35F of the Central Excise Act, 1944 - whether payment over and above the amount of 7.5% or 10% as stipulated under Section 35F of Central Excise Act, 1944 cannot be considered as deposit under the provisions of Section 35F ibid? - HELD THAT:- As per the facts of the present case the appellant suo moto deposited amount of duty during investigation. The said amount become refundable consequent to the tribunal s order dated 12.01.2018. Before this date there was no reason for refunding amount even in terms of Section 11B, if any, refund is arising out of the order of appellate authority. The relevant date for filing refund is within one year from the date of such order therefore, in the present case when refund itself was not arising before the tribunal s order dated 12.01.2018 there is no question of any interest. However, for entertaining the appeal the appellant required to pay 7.5% or 10% as the case may be as pre deposit in terms of section 35F of Central Excise Act, 1944. Section 35FF provides for interest on the mandatory pre deposit of 7.5% or 10% as the case may be, paid for filing the appeal. If any assessee pays an amount more than that which is otherwise not required, no interest is accurable on the amount over and above the mandatory pre deposit in terms of Section 35FF - in the impugned order the demand of interest on refund over and above the mandatory pre deposit was rightly rejected. Appeal dismissed.
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CST, VAT & Sales Tax
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2022 (2) TMI 406
Rejection of prayer for grant stay of the remaining outstanding demand - HELD THAT:- The Court finds substance in the submissions of learned counsel for the petitioner. From the urgent notice, it appears that the same has been issued after almost 16 months of the order by which stay was rejected. Since the order of rejection, dated 28.08.2020 is not before the Court, this Court is unable to go into the aspect as to whether the authority has applied its mind and considered the relevant factors before declining to grant stay. However, since the petitioner has already moved before the Tribunal and has paid 50% of the demand, as also the fact that a Coordinate Bench has taken a view with regard to declining grant of stay even though 50% of payment had been made and has granted stay, we are inclined to adopt the same. This writ petition stands disposed of by directing that there shall be interim stay of the remaining 50% of the demanded amount till disposal of the appeal filed by the petitioner before the Tribunal. The Tribunal is also requested to dispose of the appeal at the earliest.
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2022 (2) TMI 405
Validity of assessment order - It is the case of the petitioner that the petitioner is entitled to have the entire turn over assessed at 0.5% in terms of the provisions and the subsequent notification vide Notification No.II(1)/CTR(a-1)/2007 G.O.Ms.No.2 dated 01.01.2007 wherein, the rate at 1% was reduced to 0.5% for the purpose of Section 3(4) of the TNVAT Act, 2006 - HELD THAT:- The petitioner is not entitled to invoke jurisdiction of this Court as the petitioner has failed to give a reply which was elementary on the part of the petitioner to have file a reply notices when there is a proposal for revising the assessment. Considering the fact that the petitioner has shown scant regards of the assessment proceedings under the TNVAT Act, 2006, there are no merits in the present writ petition. Further, this writ petition has been filed for an order which came to be passed in the year 2019, which is exactly two years after the orders was passed. There are no reasons for entertaining this writ petition belatedly. Petition disposed off.
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2022 (2) TMI 404
Service of notice - whether pre-revisional notices dated 18.08.2014 was served on the writ petitioner-dealer on 31.08.2014 as mentioned in the impugned orders? - HELD THAT:- In the case on hand, obviously, the service going by the respondent records has been made under Rule 19(1)(a) of TNVAT Rules. If it is under Rule 19(1)(a), explanation to rule 19(1)(a) assumes significance. A perusal of the explanation would make it clear that the person, who delivers the notice should have made an endorsement and such endorsement will be proof for the purposes of Sub-rule (1)(a). In the instant case, there is no such endorsement in the extracts from the records which have been placed before this Court. The writ petitioner counsel emphatically submits that the pre-assessment notices were not served on writ petitioner and the signature there is not that of anyone concerned with the writ petitioner. This is a fit case to give the benefit of doubt to the writ petitioner-dealer. This means that it has not been conclusively established {vide explanation to Rule 19(1)(a) of TNVAT Rules} that the pre-revisional notices dated 18.08.2014 have been duly served on the writ petitioner-dealer on 31.08.2014. This further means that the impugned orders will have to be interfered with on this short point and the writ petitioner-dealer has to be given opportunity afresh to show cause. Impugned orders are set aside on the short point that it has not been conclusively established {qua explanation to Rule 19(1)(a) of TNVAT Rules} that pre-revisional notices have been served on the writ petitioner and therefore, there is infraction of the common proviso to Section 27(1) and 27(2) of TNVAT Act, which makes it statutorily imperative to give a reasonable opportunity to the writ petitioner-dealer to show cause against the impugned orders - writ petitions are disposed of.
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Indian Laws
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2022 (2) TMI 403
Seeking grant of anticipatory bail - time limitation - whether an accused is entitled for statutory bail under Section 167(2), CrPC on the ground that cognizance has not been taken before the expiry of 60 days or 90 days, as the case may be, from the date of remand? - HELD THAT:- It is clear from the judgment of this Court in Bhikamchand Jain [ 2013 (2) TMI 821 - SUPREME COURT ] that filing of a charge-sheet is sufficient compliance with the provisions of Section 167, CrPC and that an accused cannot demand release on default bail under Section 167(2) on the ground that cognizance has not been taken before the expiry of 60 days. The accused continues to be in the custody of the Magistrate till such time cognizance is taken by the court trying the offence, which assumes custody of the accused for the purpose of remand after cognizance is taken. The conclusion of the High Court that the accused cannot be remanded beyond the period of 60 days under Section 167 and that further remand could only be at the post-cognizance stage, is not correct in view of the judgment of this Court in Bhikamchand Jain. The point that requires to be considered is whether this Court has taken a different view in Sanjay Dutt [ 1994 (9) TMI 351 - SUPREME COURT ], Madar Sheikh (supra) and M. Ravindran [ 2020 (10) TMI 1105 - SUPREME COURT ]. In Sanjay Dutt, this Court held that the indefeasible right accruing to the accused is enforceable only prior to the filing of challan and it does not survive or remain enforceable, on the challan being filed. It was made clear that once the challan has been filed, the question of grant of bail has to be considered and decided only with reference to the merits of the case under the provisions relating to grant of bail to an accused after the filing of the challan - In Madar Sheikh [ 1996 (1) TMI 429 - SUPREME COURT ], which was relied upon by the learned Senior Counsel appearing for Respondent Nos. 1 and 2 and the Intervenor, the appellants therein were taken into custody on 16.01.1993. The charge-sheet was submitted on 30.08.1993. Though the appellants were entitled to be released in view of the charge-sheet not being filed within the statutory period prescribed under Section 20(4)(b) of the Terrorist and Disruptive Activities (Prevention) Act, 1987 read with proviso (a) to Section 167(2), CrPC, they did not make an application for release on bail on the ground of default in completion of the investigation within the statutory period. After filing of the charge-sheet and cognizance having been taken, they continued to be in custody on the basis of orders of remand passed under other provisions of the CrPC. Refusing to grant relief of statutory bail in the said fact situation, this Court held that the right conferred on an accused under Section 167(2) cannot be exercised after the charge-sheet has been submitted and cognizance has been taken. This Court observed that no prior application for bail was filed in Madar Sheikh though the charge-sheet was submitted after the expiry of the statutory period. This Court repeated the findings recorded in Madar Sheikh that the right to bail cannot be exercised once the charge-sheet has been submitted and cognizance has been taken. As stated above, the said conclusion in Madar Sheikh was arrived at with reference to the facts of the case - A close scrutiny of the judgments in Sanjay Dutt, Madar Sheikh and M. Ravindran would show that there is nothing contrary to what has been decided in Bhikamchand Jain - In all the above judgments which are relied upon by either side, this Court had categorically laid down that the indefeasible right of an accused to seek statutory bail under Section 167(2), CrPC arises only if the charge-sheet has not been filed before the expiry of the statutory period. As the issue that arises for consideration in this case is squarely covered by the judgment in Bhikamchand Jain - Appeal allowed - decided in favor of appellant.
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2022 (2) TMI 402
Dishonor of cheque - insufficiency of funds - discharge of legally enforceable debt or not - commission of offence u/s.138 of N.I.Act established or not - invocation of rebuttal of presumption - HELD THAT:- On scrutiny of evidence and the reasons assigned by the Trial Court, there are no reason to disturb the findings of Trial Court and the order of acquittal. The judgment is supported by cogent reasons which indicate that the Court has appreciated the evidence. On scrutiny of evidence it is evident that the complainant has not established that the cheque was issued in discharge of legally enforceable debt. The cross-examination of witnesses show that from time to time the accused had deposited the amount. It is not proved beyond doubt that the applicant had liability of ₹ 1,00,000/- towards complainant. There is overwriting in respect of dates in Exhibit-47. In Exhibit-46 after the cheque number, amount is not mentioned. There were discrepancies in the letter issued by the complainant and the evidence of witnesses about the liability of accused which creates doubt - To invoke presumption u/s.139 of N.I.Act, at least foundational facts about the liability have to be established by the complainant. The Trial Court has considered these aspects and by assigning reasons acquitted the accused. The complainant has not proved that the cheque was issued in respect of the legally enforceable liability. Considering the evidence before the Trial Court in the form of depositions of the witnesses and the documentary evidence, there are no reason to take a different view other than Trial Court - appeal dismissed.
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