Newsletter: Where Service Meets Reader Approval.
TMI Tax Updates - e-Newsletter
February 13, 2024
Case Laws in this Newsletter:
GST
Income Tax
Customs
Corporate Laws
Insolvency & Bankruptcy
Service Tax
Central Excise
CST, VAT & Sales Tax
Indian Laws
TMI Short Notes
Articles
News
Notifications
Circulars / Instructions / Orders
Highlights / Catch Notes
GST
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Cancellation of registration of the petitioner - The High court acknowledges the serious consequences of registration cancellation and considers the petitioner's medical condition during the relevant period. Given that the petitioner deposited all pending GST amounts along with late fees and interest, the court directs the respondents to restore the petitioner's GST license within ten days from the date of the order.
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Refund of GST - eligibility conditions for taking input tax credit (ITC) - The High Court held that, the order is cryptic and the reasoning is not emanating from the order and there is no specific consideration of the factual matrix or the contentions of the petitioner in the Order-in- Appeal. Accordingly, the Order-in-Appeal cannot be sustained and the matter calls for a remit. - Matter restored back.
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Blocking of Input Tax Credit (ITC) - contravention of Rule 86A - The High court observed that while Rule 86A does not stipulate a prior notice, it requires the contemporaneous communication of reasons in writing to the assessee. In this case, apart from mentioning the name of the supplier in the electronic credit ledger, no reasons were provided to the petitioner. Therefore, the petitioner is entitled to the unblocking of ITC.
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Evasion of tax - mismatch in the e-way bill and the branch transfer invoice - levy of penalty and tax on the petitioner - The High Court observed that, even if there was discrepancy in the date which had occurred in the e-way bill as well as branch transfer invoice, there was no element of evasion of tax nor could any situation be pointed out to this Court where merely because of the said discrepancy, the petitioner could have evaded tax. - The HC set aside the imposing penalty and tax on the petitioner for the stock transfer between branches.
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Seeking grant of regular bail - petitioner was the part of the gang, which was engaged in operating a number of fake entities/firms - The High Court granted bail to the petitioner in the GST fraud case, considering the duration of custody and the principle of not prolonging pre-trial detention indefinitely.
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Maintainability of appeal - appeal rejected on the ground of limitation keeping in view the fact that the appeals were filed electronically on 27.05.2022 but manually on 10.06.2022 - Rule 108(3) of the CGST Rules, 2017 - Considering the precedents and the modification of the filing procedure under Rule 108(3), the High court concluded that dismissing the appeal on technical grounds was unjustifiable.
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Reversal of input tax credit (ITC) u/s 17(5)(h) of the CGST Act, 2017 can be sought on presumptive basis or not - Allegation of short declaration of Outward Supply and excess claim of ITC - The High court concludes that the issuance of the Show Cause Notice is arbitrary due to procedural irregularities, including inadequate consideration of the petitioner's submissions. - The petitioner is granted relief in part, with the quashing of the impugned Show Cause Notice, but with certain liberties granted to both parties for further submissions and actions.
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Maintainability of appeal before the appellant authority - Period of limitation - while Section 29(2) of the Limitation Act excludes the applicability of Section 5 for condonation of delay, Section 14, which excludes time spent before a wrong forum, is applicable to appeals under Section 107 of the KGST Act. Additionally, the court noted that a circular issued by the Central Board of Indirect Taxes extended the period for filing appeals.
Income Tax
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Validity of Faceless assessment - procedure contemplated u/s 144B - The petitioner contended that their objections and replies were not considered before passing the assessment order, contrary to the procedures outlined in Section 144B(1)(vii), (xiv), and (xvi)(b) of the Act. The High Court found merit in this argument, noting that the failure to consider the petitioner's responses violated procedural requirements, thereby vitiating the assessment proceedings. - Matter restored back for fresh adjudication.
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Processing of invalid return u/s 143(1) - Denial of exemption u/s 10(23C)(iiiad) - non-filing of ITR-V within 120 days made the assessee’s return as ‘invalid’ being deemed to have been never filed which was picked for processing - Assessee filed 2nd belated return u/s 139(4) - The ITAT held that, since the initial return was invalid, the intimation issued by the CPC based on it was also invalid. The CPC should have considered the second valid return available in the departmental database at the time of processing under section 143(1).
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Salary income from foreign company for short term foreign assignment - The Tribunal held that, the assessee possesses tax residency certificate of United kingdom for a period from 06.04.2013 to 05.04.2014 and the instant year under the appeal pertains to FY 2013-14 and therefore since the assessee has offered to tax for the year in United kingdom, assessee deserves DTAA benefit u/s 90 of the Act. Thus the claim made by the assessee is found to be correct.
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Leave encashment - Disallowance of exemption claimed u/s. 10(10AA) (i) by holding that the assessee is not an employee of the Central or State Governments - The ITAT held that, the assessee was employed with Indian Railway Catering and Tourism Corporation Limited a Government of India Company and the tax has been deducted at source by the employer. Since the assessee was employed with the Central Government, therefore, she is very much eligible for the claim of deduction u/s. 10 (10AA) of the Act.
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Addition u/s 56 - Issue of shares at premium - The ITAT recognizes that the holding company's value is directly impacted by the performance of its subsidiary and therefore supports the use of Discounted Cash Flow (DCF) Method for valuing the wholly owned subsidiary. - The Tribunal concludes that the method adopted by the assessee, which includes using Net Asset Value Method for its own shares and Discounted Cash Flow Method for valuing the subsidiary, is within the provisions of Rule 11UA of the Income Tax Rules.
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Reopening of assessment u/s 147 - eligibility of exemption u/s 11 - The ITAT Mumbai found that the reopening of the assessment was based on incorrect premises since the assessee had filed the return of income. Moreover, it held that the application of Section 12A(1)(ba) by the CIT(A) was inappropriate for the relevant assessment years as the amendment was prospective and not retrospective. Consequently, the ITAT quashed the assessment orders.
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Disallowance of deduction u/s 80IA(4)(i) - The tribunal noted the distinction between a developer (who assumes significant risks and responsibilities for the project) and a contractor (who does not assume such risks and is only responsible for executing work as per the contract) - The tribunal directed that, based on the nature of contracts and risks assumed, the assessee's claim for deductions under Section 80IA(4) should be allowed, emphasizing the role of the assessee as a developer rather than a mere contractor.
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Validity of reopening notice issued u/s 148A - not signed either physically or digitally - minimum period of seven days prescribed u/s 148A(b) not provided - - The High court, in its analysis, referred to precedents and held that the notices were indeed invalid due to lack of signature and non-compliance with prescribed time periods. Consequently, the court quashed the impugned notices and orders while reserving liberty for the respondents to initiate proceedings in accordance with the law.
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Order u/s 148A(b) as passed against the petitioner in respect of the old PAN card - The Court noted that both the old and the new PAN cards of the petitioner were active, and since the old PAN card was used for transactions in the assessment year 2018-19, and the proceedings related to it were pending, the request for deletion of the old PAN could not be considered. The petitioner had transitioned from the old PAN card to a new one but faced issues due to an assessment order pertaining to the old PAN for unexplained money u/s 69A of the Income Tax Act. The Court directed that if the petitioner files an appeal using the old PAN, it should be processed in accordance with the law.
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Addition u/s 68 - unexplained share application money - The Tribunal noted that the assessee provided complete details of the share subscribers, their financial capacity, and the transactions were carried out through banking channels, shifting the burden of proof to the Assessing Officer (AO) who failed to conduct an adequate inquiry to disprove the assessee's claims. Therefore, the primary onus placed on the assessee by section 68 was discharged, and the addition made by the AO was not justified.
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Taxable Income in India or not - Royalty receipt - PE in India or not? - amount received towards Marketing Contribution, Priority Club receipts, Reservation Contribution, and Holidex Fee - Following the precedent, the ITAT held that, the receipt is not taxable as a Royalty or Fees for Technical Services and therefore is not taxable in the hands of the assessee in the absence of any PE in India.
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Taxability of capital gains - denial of adjustments to full value of sale consideration towards amount lying in Escrow account while determining the LTCG - ITAT accepted the revised computation of capital gains, excluding the amount retained in the escrow account, which was neither received nor expected to be received by the assessee due to subsequent events indicating significant liabilities against the escrow. - As conceded on behalf of the assessee, the amount recovered out of escrow account by the assessee in the later years shall be liable to taxation in the respective years of receipt or accrual.
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Levy of fees u/s 234E - The ITAT held that, no fee was leviable to the assessee u/s 234E in violation of section 200(3), because assessee had furnished the statement immediately after depositing all the tax without any delay. Accordingly, the demand on account of 234E is cancelled.In any case, the levy of fee u/s 200A in accordance with the provision of section 234E has come into the statute w.e.f. 1.6.2015. Since the challan and statement has been filed much prior to this date, therefore, no such tax can be levied u/s 200A. - Interest u/s 220(2) cannot be levied when fee u/s 234E itself is not leviable.
Customs
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Levy of penalty - appellant as the Customs Broker was vicariously responsible for the actions of his employees or not - export consignment was highly overvalued - The Tribunal noted that the appellant was not involved in filing the incorrect shipping bills and had no knowledge of them. Consequently, the penalties imposed under Sections 114 and 117 of the Customs Act were deemed unjustifiable.
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Revocation of customs Broker License - The CESTAT noted that, since based on authorized documents submitted by the exporters, they had verified online and filed the shipping bill in good faith; they cannot be penalised for the illegal attempt to export prohibited goods. - the Tribunal set aside the license revocation and forfeiture of the security deposit but upheld a penalty of Rs. 50,000 for regulatory violations.
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Classification of imported goods - Huy glass 1105 M-Membrane Bags (Filter Bags) - The goods are used in the dryer system to prevent fine powder from escaping into the atmosphere and are used to filter titanium dioxide powder from gas. - The tribunal noted that, Section Note 1(r) which specifically excludes glass fibre articles of glass fibres from Chapter 59. - Accordingly, the CESTAT held that, the goods admittedly which are made of 100% glass fibres and which is meant for filtering the gaseous items are rightly classifiable under CTH 8421.
Corporate Law
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Revival of the Company - The Tribunal found no merit in the appellant's contention that additional documents should be considered for the revival of the company after the lapse of the two-year period specified in Section 420(2) of the Companies Act, 2013. The Tribunal emphasized that the application for additional evidence was filed beyond the permissible period, thus not adhering to the statutory timeline.
Indian Laws
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Seeking grant of anticipatory bail - The case suggests a complex scheme involving misrepresentation and fraudulent tactics to extract money from the complainant. This includes claims of a fake case being filed with the Enforcement Directorate, orchestrated by the co-accused, including a public servant, and CA. - in this case, the High Court raises concerns about unethical practices within certain professions, particularly the involvement of Chartered Accountants in facilitating such fraudulent activities. It highlights the prevalence of unethical practices in the professional domain, indicating a broader societal issue.
IBC
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Filing of new claim after Resolution Plan is approved - The NCLAT rejected the appeal by holding that, No claim having been filed till the approval of the Resolution Plan, no relief can be granted to the Appellants in the present Appeal. The impugned order passed by the Adjudicating Authority has already been upheld. - Despite dismissing the appeal, the Tribunal observes that the Appellants can approach the Successful Resolution Applicant with details of payments made to the Corporate Debtor.
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CIRP - The NCLAT upheld the decision to reject inflated claims by the financial creditor, Stressed Assets Stabilization Fund (SASF), and supported the termination of the CIRP process from the stage of the second Expression of Interest (EOI). The appellate tribunal also approved the replacement of the resolution professional, emphasizing the need for a fair and transparent CIRP process.
Service Tax
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Classification of services - Business Auxiliary Services (BAS) or not - The Tribunal while seting aside the demand, held that, the Revenue having alleged that the services rendered by the appellant were under BAS, has not bothered to specifically identify the limb provided under various sub-clauses under the definition of BAS. Unless the alleged service is brought under the specific limb provided under the statute, Service Tax cannot be demanded under BAS as such, since BAS is an umbrella under which various services are categorized.
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Service tax demand on the basis of Form 26AS issued by the Income Tax Department - After considering the submissions, the Tribunal held that the demand based solely on Form 26AS was unsustainable. It noted the lack of examination of the appellant's records and the invocation of the extended period of limitation without proper investigation. Therefore, the demand was deemed not sustainable on limitation grounds.
Central Excise
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Refund of Education Cess and S&H Education Cess paid through PLA - The Department argued that the subsequent decision in Unicorn Industries rendered SRD Nutrients per incuriam, justifying the denial of the refund. However, both the Jammu and Kashmir High Court and the Hon’ble Apex Court upheld the applicability of SRD Nutrients to cases where the decision had attained finality before the subsequent ruling in Unicorn Industries. - Consequently, refund allowed.
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Classification of goods - PP FIBC bags - The tribunal noted that, the issue of classification was resolved in favor of the appellant based on a previous decision regarding similar products. Accordingly, items PP FIBC bags are rightly classifiable under Chapter 6305 3200.
VAT
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Adjustment of Demand with the Refund while objections were pending - The High Court held that, the respondents do not dispute that the objections tendered by the petitioner before the OHA remain pending on its board. The demand for the first quarter of FY 2017-2018 is clearly rendered unenforceable and could not have been adjusted against the refund as claimed by the petitioner for the first quarter of FY 2016-2017. This aspect is clearly covered by the decision in Flipkart. - Refund directed to be allowed.
Case Laws:
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GST
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2024 (2) TMI 601
Detention of goods alongwith vehicle - Intention to evade GST - petitioner alleges that the 1st respondent did not consider the reply of the petitioner and demanded the petitioner to pay tax and penalty for release of the vehicle - It was held by High Court that The order of detention in Form GST MOV-06 on 29.12.2020 passed under Section 129(3) of the CGST Act, 2017 by the 1st respondent is set aside - HELD THAT:- There are no reason to interfere with the impugned order - SLP dismissed.
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2024 (2) TMI 600
Quantum of pre-deposit amount directed to be deposited - HELD THAT:- Reliance placed in [ 2023 (8) TMI 1431 - PUNJAB AND HARYANA HIGH COURT] by the very same Bench of the High Court, wherein a direction was issued to the petitioner therein to deposit 25% of the total amount by way of cash and for the remaining amount the petitioner could furnishing a personal/surety bond and on that basis a direction for release of the goods. The appeal is allowed and disposed of by modifying the direction to give surety by way of Bank Guarantee with furnishing of personal/surety bond in respect of the outstanding amount after deposit of Rs. 4,00,000/- in cash, which is stated to have been deposited by the appellant, within a week from today before the concerned Department.
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2024 (2) TMI 599
Cancellation of registration of the petitioner - appeal rejected on the ground of delay and the same was filed after the expiry of the period of limitation provided for Section 107 of the U.P. GST Act - HELD THAT:- The cancellation of the registration has a very serious consequences and accordingly, considering the fact that the petitioner has been able to demonstrate that he was seriously ill during the period and on the said account could not submit the reply to the show cause notice, on account of which, his registration was cancelled. Further, it has been indicated that the petitioner has already deposited the tax along with late fee and interest and accordingly, considering the submissions advanced by learned counsel for petitioner, the respondents are directed to restore the GST Licence of the petitioner within a period of ten days from the date of communication of the order. Petition disposed off.
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2024 (2) TMI 598
Seeking refund of accumulated input tax credit - application rejected on the ground that the same was filed belatedly - Respondent No. 3 rejected the application solely on the ground that petitioner had not responded to the Show Cause Notice - Violation of principles of natural justice - HELD THAT:- It is relevant to note that after the impugned order was passed, the Central Board of Indirect Taxes and Customs issued a Notification dated 05.07.2022 in line with the orders passed by the Hon ble Supreme Court in IN RE: COGNIZANCE FOR EXTENSION OF LIMITATION [ 2021 (3) TMI 497 - SC ORDER ]. In terms of the said circular, the Board directed that the period from 01.03.2020 to 28.02.2022 is excluded for purposes of computing the period of limitation, inter-alia, for applications filed under Section 54 of the Central Goods and Services Tax Act, 2017. By virtue of the said circular, petitioner s application for refund would be within the period of limitation. Considering the peculiar circumstances of this case, where the benefit of exclusion of the period from 01.03.2020 to 28.02.2022 has been made available subsequent to the impugned order rejecting the application for refund, this Court considers it apposite to allow the present petition and remand the matter to Respondent No. 3 to consider the petitioner s application afresh in the light of the circular dated 05.07.2022 - Respondent No. 3 shall process the application of the petitioner for refund as expeditiously as possible and, in any event, within a period of eight weeks from today. Petition disposed off.
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2024 (2) TMI 597
Seeking refund of GST - appellant has not fulfilled the eligibility conditions for taking input tax credit - HELD THAT:- It is not apparent from the order as to why or on what basis findings have been returned that petitioner does not fulfil the eligibility conditions. The order is cryptic and the reasoning is not emanating from the order and there is no specific consideration of the factual matrix or the contentions of the petitioner in the Order-in- Appeal. Accordingly, the Order-in-Appeal cannot be sustained and the matter calls for a remit. The appeal is restored on the record of the Appellate Authority. The Appellate Authority shall decide the appeal afresh and pass a speaking order after giving an opportunity of personal hearing to the petitioner.
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2024 (2) TMI 596
Cancellation of GST registration certificate - show cause for cancellation was never received - violation of principles of natural justice - HELD THAT:- Having heard the learned counsels for the parties and on examination of the materials on record, in view of the presence of the alternate and efficacious remedy available to the petitioner, this Court is not inclined to entertain this writ petition, or pass any orders at this stage. This writ petition is disposed of with a direction that the petitioner is at liberty to seek alternate remedy under The Meghalaya Goods and Services Tax Act, 2017. The respondents may consider the prayer of the petitioner sympathetically.
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2024 (2) TMI 595
Seeking direction to the first respondent to raise the block on Input Tax Credit (ITC) - contravention of Rule 86A of the Tamil Nadu Goods and Services Tax Rules, 2017 (TNGST Rules) - HELD THAT:- The power under Rule 86A may be exercised by any of the persons specified in sub-rule (1) thereof if such person has reasons to believe that the ITC available in the electronic credit ledger was fraudulently availed or that the registered person was not eligible for such credit. The text of Rule 86A indicates two requirements: the objective satisfaction of the officer concerned and the communication of reasons for so believing in writing to the assessee concerned. While Rule 86A does not stipulate a prior notice, the language thereof and the nature of power exercised by resort thereto require the contemporaneous communication of reasons in writing to the assessee. In the case at hand, apart from mentioning the name of the supplier in the electronic credit ledger, no reasons were provided. Therefore, the petitioner is entitled to the unblocking of ITC. Petition is disposed of by directing the first respondent to take necessary action to remove the block on the ITC in the electronic credit ledger pertaining to the assessee.
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2024 (2) TMI 594
Maintainability of petition - availability of alternative remedy - place of supply - notification of State Benches - HELD THAT:- The fact remains that by way of notification issued by the Government, State Bench is already notified at Goa on 14.09.2023. It is no doubt true that the State till date failed to constitute the Members of the State Bench by appointing such Members as provided under Section 109(4) - The fact remains that the Principal Bench is functioning. When the State Bench is not in operation, the Petitioner could very well approach the Principal Bench by filing an Appeal in order to redress grievances. The Petitioner may file such an Appeal before the Principal Bench and if in the meantime the Members are appointed by the State Bench at Goa, such an Appeal could be relegated to the State Bench for the purpose of adjudication. The contentions of the Petitioner will be kept open in such circumstances. In view of the fact that the Petitioner is having an alternate efficacious remedy by way of filing an Appeal against the impugned Order, the Petition could be disposed of by granting liberty to the Petitioner to approach the Appellate Authority constituted under section 109 of the Central Act. Petition disposed off.
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2024 (2) TMI 593
Evasion of tax - mismatch in the e-way bill and the branch transfer invoice - levy of penalty and tax on the petitioner - HELD THAT:- This Court is of the considered view that even if there was discrepancy in the date which had occurred in the e-way bill as well as branch transfer invoice, there was no element of evasion of tax nor could any situation be pointed out to this Court where merely because of the said discrepancy, the petitioner could have evaded tax. Petition allowed.
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2024 (2) TMI 592
Seeking grant of regular bail - petitioner was the part of the gang, which was engaged in operating a number of fake entities/firms - availment and passing of irregular credits - bogus sales - HELD THAT:- The petitioner was arrested in the present case on 09.08.2023 and is in custody for the last about 06 months. Even though, the allegations levelled against the petitioner points towards the seriousness of the charge, however, the petitioner cannot be ordered to be incarcerated for an indefinite period. In fact, all the allegations levelled by the complainant are yet to be adjudicated by the trial Court during the course of trial and further custody of the petitioner will not serve any useful purpose. Without commenting any further on the merits, the present petition is allowed and the petitioner is ordered to be released on bail on his furnishing bail bonds/surety bonds to the satisfaction of the learned trial Court/Duty Magistrate/CJM concerned.
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2024 (2) TMI 591
Maintainability of appeal - appeal rejected on the ground of limitation keeping in view the fact that the appeals were filed electronically on 27.05.2022 but manually on 10.06.2022 - Rule 108(3) of the CGST Rules, 2017 - HELD THAT:- Reliance is placed upon the judgment passed by another co-ordinate Bench in M/s. Suman Industries vs. State of Haryana and others [ 2023 (2) TMI 1261 - PUNJAB AND HARYANA HIGH COURT] wherein, while keeping in view the amendment made as per the notification dated 25.01.2023 w.e.f. 26.12.2022 and the fact that the provision of certified copy of the decision or the order appealed has been done away though subsequently the relief had been granted by setting aside the order and a direction had been given to the Appellate Authority to decide the appeal on merits. Once the procedure as such has also been modified to the extent that Rule 108(3) provides that where the decision or order appealed against has not been uploaded on a common portal and the final acknowledgement indicating appeal number is to be issued by the Appellate Authority, the date of issuing of the provisional acknowledgement shall be considered as date of filing of the appeal. Thus, the mode of accepting the electronic filing has been made. The same modification has been done for the purposes of ensuring that the rules of procedure are handmaids of justice. The appeal having been dismissed on the ground of technicalities, the order is not sustainable since apparently the appeal was filed within the period of limitation, if calculated from the date of electronic filing - Writ petition stands allowed.
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2024 (2) TMI 590
Maintainability of appeal before the appellant authority - Exclusion of certain period and condonation of delay - Scope of 107 of the CGST / KGST Act, 2017 - dismissal on the ground of the limitation - HELD THAT:- A perusal of the impugned endorsement issued by the respondent will indicate that the sole ground on which the appeal was dismissed was as being barred by limitation in the light of the prescribed period contained in Section 107 of the KGST Act, 2017. While it is true that Section 29(2) of the Limitation 1963 excludes the applicability of Section 5 of the Limitation Act for the purpose of condonation of delay is concerned, Section 14 of the Limitation Act which excludes time spent before a wrong / incorrect forum for the purpose of concluding the prescribed period is applicable to an appeal preferred under Section 107 of the KGST Act in the light of the judgment of the Hon ble Division Bench in the case of DEPUTY COMMISSIONER AND SPECIAL ACQUISITION OFFICER, BANGALORE v/s M/s. S.V GLOBAL MILL LIMITED. [ 2019 (9) TMI 1717 - KARNATAKA HIGH COURT] . It is also necessary to point out that as per circular issued by the CBIT, the period prescribed for preferring the appeal has been extended up to 31.01.2024 and on this ground also, respondent committed an error in issuing the impugned endorsement which deserves to be set aside, quashed and necessary directions are to be issued to the respondent to consider the appeal on merits without reference to the issue/question of limitation which stands concluded in favour of the petitioner. The respondent No. 4 Appellate Authority is directed to consider the appeal filed by the petitioner on merits and pass appropriate orders in accordance with law without reference to the issue/question of limitation which stands concluded in favour of the petitioner under this order - Petition allowed.
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2024 (2) TMI 589
Reversal of ITC - petitioner has not submitted the supporting evidence like debit entries in Electronic Credit Ledger / Books of Accounts - HELD THAT:- The coordinate bench of this Court in the case of Hindustan Unilever Ltd. [ 2023 (9) TMI 998 - RAJASTHAN HIGH COURT ] inter alia on the aspect of issue involved which is similar to present writ petitions, where the coordinate bench was of the opinion that the provision was being questioned on the ground of workability/difficulty in collecting certificate/proof from the recipient regarding reversal of ITC and, therefore, called upon the Union of India to place before it appropriate suggested mechanism. Subsequent thereto, on two occasions time has been granted, however, the mechanism is yet to be placed before the Court. In view of the observations of coordinate bench of this Court, which, while elaborately hearing the present writ petitions, this Court also felt about the issue being that of lack of/providing a mechanism with regard to the subject matter of the demand raised and sought to be disputed by the petitioner only. In that view of the matter, following the observations made in the case of Hindustan Unilever Ltd.(supra), wherein, interim order was not granted by the coordinate bench and the learned ASG was directed to place before the Court appropriate suggested mechanism, issue notice of the writ petition to the respondents - As the respondent no.1 is represented by learned ASG, notice be issued to respondent nos. 2, 3 4, returnable on 22/1/2024.
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2024 (2) TMI 588
Reversal of input tax credit (ITC) u/s 17(5)(h) of the CGST Act, 2017 can be sought on presumptive basis or not - Allegation of short declaration of Outward Supply and excess claim of ITC - levy of interest under Section 50 of the CGST Act and penalty under Section 122(2)(a) - seeking quashing endorsement notice issued by Respondent No. 3 as arbitrary, vague and in contradiction to the provisions of the CGST/KGST and violative of Article 265 of the Constitution - HELD THAT:- The provisions of Rule 142(1) of the Central Goods and Service Tax Rules, 2017, prior to the Central Goods and Service Tax [Sixth Amendment] Rules, 2019 only contemplated issuance of Notice under Section 73[1], 74[1] and 76[2] and other provisions of the CGST/ KGST Act with a summary in FORM GST DRC-01. With the amendment under the aforesaid Amendment Rules with effect from 09.10.2019, Rule 142(1A) is included, and this Rule stipulates that the proper officer shall, before service of notice under Section 73 (1) [as also under Section 74(1)] of the GST Act, communicate the details of the tax, interest and penalty as is ascertained in Part A of Form GST DRC 01A. The proper office is now given the option of issuing intimation in Part A of FORM GST DRC 01A. Simultaneously with the introduction of Rule 142(1A) under the Central Goods and Service Tax [Sixth Amendment] Rules, 2019, Rule 142(2A) is introduced. The provisions of this Rule stipulate inter alia that if the person to whom notice is issued in Part A of Form GST DRC 01A is desirous to file any submissions against the proposed liability, such submissions can be filed in Part B of Form GST DRC 01A. This Court must opine that if indeed the petitioner has filed submissions, as part of its submissions in Part B of FORM GST DRC 01A, asserting that it has offered different prices [for the same supply of goods and services] at different places and declared Returns accordingly, the implication thereof should be examined in the light of the provisions of Section 15 of the KGST Act for a reasonable and just commencement of the proceedings under Section 73(1) of the GST Act. The petitioner s grievance insofar as issuance of impugned notice incorporating Part-II thereof must necessarily be examined in the light of this requirement and the fact that the notice does not refer to the submissions filed in reply to the notice in Part B of FORM GST DRC-01A and though this Court can see the reason for issuance of the impugned Show Cause Notice before 30.09.2023 but when the infirmity as aforesaid is obvious, this Court must intervene under Article 226 of the Constitution of India and pass just and reasonable order to ensure that the proceedings prevail in accordance with the requirement of law. Petition allowed in part.
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Income Tax
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2024 (2) TMI 610
Maintainability of appeal before Supreme Court - monetary limit for filing appeals/SLPs in income-tax matters before the Supreme Court - low tax effect - computation of tax effect - HELD THAT:- As Circular dated 8th August, 2019 issued the Director (ITJ), CBDT, New Delhi, a copy of which is placed on record. As per the Circular, the tax effect limit (monetary limit) for filing appeals/SLPs in income-tax matters before the Supreme Court is fixed at Rs.2,00,00,000 (Rupees Two Crores). In the present case total quantum involved is Rs.2,71,76,799/- (Rupees Two Crores Seventy-one Lakhs Seventy-six Thousand Seven Hundred and Ninety nine). The tax effect at the rate of 33.99% of the total quantum will be Rs.92,37,393/ (Rupees Ninety-two lakhs Thirty-seven Thousand Three Hundred and Ninety-three). As the case is covered by the aforestated Circular, we dispose of this Special Leave Petition on that ground. However, the questions of law are left open.
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2024 (2) TMI 609
Reopening of assessment - deduction u/s 80IB in respect of income received from sale of flats in buildings - HELD THAT:- In the assessment order the details of the project have been stated. It is also stated that Assessee was claiming deduction u/s 80IB in respect of income received from sale of flats in buildings that Assessee had declared from residential units of buildings and declared profit subject to claim of deduction u/s 80-IB. There is also a note on deduction u/s 80-IB where the residential buildings No. 3,4,7 and 8 have been discussed. Therefore, once a query is raised during the assessment proceedings and Assessee has replied to it, it follows that the query raised was the subject of consideration of the AO while completing the assessment. Moreso, when the assessment order contains reference and/or discussion to disclose its satisfaction in respect of the query raised. Therefore, there can be no doubt in the present facts that the deduction claimed u/s 80-IB was a subject matter of consideration by the AO during the original assessment proceedings leading to passing of the assessment order. Therefore, the reopening of the assessment by the impugned notice is merely on the basis of change of opinion of the AO from that held earlier during the course of assessment proceedings leading to the order dated 25th March 2013. This change of opinion does not constitute justification and/or reasons to believe that income chargeable to tax has escaped assessment. Decided in favour of assessee.
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2024 (2) TMI 608
Validity of Faceless assessment - procedure contemplated u/s 144B - Preliminary Objections that the writ petition ought not to be entertained inasmuch as there is an effective alternate remedy - HELD THAT:- This Court is conscious of the fact that writ petition under Article 226 of the Constitution of India would not be entertained normally, if statutory remedy is available. However, existence of alternate remedy is not an embargo or an absolute bar for exercise of power under Article 226 of the Constitution of India, but a self-imposed restriction and the following circumstances viz., violation of principles of natural justice or lack of jurisdiction or error apparent on the face of the record are some of the exceptions carved out to the rule of alternate remedy for exercise of discretion under Article 226 of the Constitution of India. Notice under section 144B (1)(iii) of the Act was not furnished - The petitioner had filed its return of income under section 139 of the Act and the 2nd Respondent had issued notice under section 143 (2) of the Act on 22.09.2019, thus the petitioner case falls under clause (iii)(a) of Section 144B(1). As the expression employed in Section 144B (1) (iii) of the Act viz., shall , is prima-facie indicative of being mandatory, though the same may be rebutted by other considerations such as the object and scope of the enactments and the consequences flowing from such construction. We do not propose to get into the above question for the present. The intimation u/s 144B(1)(iii) of the Act, informs an assessee of the fact that the assessment would be made in terms of Section 144B of the Act, which is important if one bears in mind that Faceless Assessments u/s144B of the Act comes with its own set of obligations and rights in making the assessment. Non-consideration of reply - Violation of procedure u/s 144B(1)(vii) read with (xiv) and (xvi)(b) of the Act - The petitioner had responded to the notice dated 19.08.2021 vide letter dated 07.09.2021 and sought for time till 22.09.2021.1st Respondent without considering the above reply, issued a show cause notice cum draft assessment order on the same the day i.e. 22.09.2021 proposing huge addition and sought reply from the petitioner by 24.09.2021 for which a reply was submitted by the petitioner on 24.09.2021. However, the impugned order of assessment under Section 143(3) read with Section 144(3) of the Act was passed two days thereafter i.e., on 27.09.2021. Violation of the procedure under Section 144B(1)(xi) to (xiv) / Non-consideration of Petitioner's Reply - In the event of an assessee failing to comply with the notice referred to Clause (vi) of Section 144 B of the Act or notice under sub-Section (1) of Section 142 of the Act or with a direction issued under sub-Section (2) of Section 142 of the Act, the National Faceless Assessment Center shall serve upon such assessee, a notice under Section 144B giving an opportunity to show cause as to why the assessments should not be completed to the best of the judgment of the assessing officer. The assessee would then have to respond to the notice - In the event of failure, the National Faceless Assessment Center shall intimate the failure of the assessee to respond to the notice under Clause (xi) to sub-Section(1) of Section 144B of the Act to the concerned assessment unit. In the instant case admittedly the draft assessment order has been made without taking into account the objections filed by the petitioner on 24.09.2021, which vitiates the entire proceeding. In any view even if the Petitioner had failed to reply to the notice dated 19.08.2021, the 1st Respondent should have issued notice u/s 144B as contemplated under Section 144B(1)(xi) of the Act before preparing the Draft Assessment order u/s 144B(1)(xiv). Importantly, a duty is cast on the assessing authority in terms of Section 144B(1)(xiv) to take into account all relevant material and thereafter frame the draft assessment order. The respondent has erred in not complying with the above mandatory requirement inasmuch as the draft assessment order has been made without even examining/taking into account the objections / response of the petitioner made vide letter dated 22.09.2021. Thus the draft assessment order suffers from non-application of mind to matters that are relevant and on record, thus stands vitiated. We are inclined to set aside the impugned proceedings while leaving it open to the respondent authority to proceed, to frame the assessment in accordance with law, after following the procedure contemplated u/s 144B. Decided in favour of assessee.
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2024 (2) TMI 607
Processing of invalid return u/s 143(1) - Denial of exemption u/s 10(23C)(iiiad) - Non-filing of ITR-V within 120 days made the assessee s return as invalid being deemed to have been never filed which was picked for processing - Assessee filed 2nd belated return u/s 139(4) - As the 1st return had become nonest and it is the 2nd return which was a valid return in the eyes of law, despite this, the CPC picked 1st return, processed same and issued intimation u/s 143(1). HELD THAT:- 1st return filed by assessee was an invalid return because of non-filing of ITR-V within prescribed period of 120 days. Therefore, the intimation dated 27.03.2017 issued by CPC on the basis of said return was also invalid. Since the assessee had already filed 2nd return on 04.03.2017 which was a valid return u/s 139(4) and which was available in the departmental database on 27.03.2017 at the time of processing u/s 143(1), the CPC ought to have taken into consideration the 2nd return and subject it to processing. Therefore, we set aside the order passed u/s 154 and 143(1) and remand the matter to the record of the AO to verify and examine the relevant record and then consider the claim of assessee u/s 10(23C)(iiiad) of the Act. Before passing order, the assessee shall be given an appropriate opportunity of hearing. Appeal of assessee allowed.
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2024 (2) TMI 606
Salary income from foreign company for short term foreign assignment - salary income and interest income was not offered to tax in India on the ground that the assessee is a non-resident Indian and taxed on his total income in the country of residence - AO denied the claim because the assessee failed to furnish a tax residency certificate from United Kingdom which is required in order to claim DTAA benefit u/s 90 - HELD THAT:- As we notice that the assessee carried the matter before the CIT(A) and placed the copy of tax residency certificate of United Kingdom. Since this document was filed for the first time the CIT(A) called for a remand report. In the remand report AO accepted that copy of tax residency certificate has been received and the same was issued by HM Revenue and Customs, UK in which it was declared that the assessee was a resident of the UK during the period from 06.04.2013 to 05.04.2014. AO also stated in the remand report that claim of DTAA benefit of the assessee is valid and therefore the salary income received for the work during stay at United Kingdom is exempt. CIT(A) called for a report from Ld. CIT(A)-OSD(IT) Range-2, Kolkata but the fact mentioned by the AO in the remand report stood uncontroverted. Surprisingly Ld. CIT(A) has still not allowed the ground of appeal. Before us, assessee has placed reliance on the evidences and after considering the same and also the remand report issued by the AO , we are inclined to hold that the assessee possesses tax residency certificate of United kingdom for a period from 06.04.2013 to 05.04.2014 and the instant year under the appeal pertains to FY 2013-14 and therefore since the assessee has offered to tax for the year in United kingdom, assessee deserves DTAA benefit u/s 90 of the Act. Thus the claim made by the assessee is found to be correct. We therefore set aside the finding of Ld. CIT(A) and delete the addition - Appeal of assessee are allowed.
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2024 (2) TMI 605
Exemption u/s. 10(10AA)(i) - Leave encashment received by employees of the Central or State Governments - assessee employed with Indian Railway Catering and Tourism Corporation Limited - Disallowance of exemption claimed u/s. 10(10AA) (i) by holding that the assessee is not an employee of the Central or State Governments - whether the assessee is a Central Government / State Government employee? - HELD THAT:- In the light of the above a perusal of the return of income show that the assessee was employed with Indian Railway Catering and Tourism Corporation Limited a Government of India Company and the tax has been deducted at source by the employer. Since the assessee was employed with the Central Government, therefore, she is very much eligible for the claim of deduction u/s. 10 (10AA) of the Act. Appeal filed by the assessee is allowed.
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2024 (2) TMI 604
Addition u/s 56 - Issue of shares at premium - method taken for value of unquoted equity shares - valuation of shares of the assessee company based on which premium has been charged - Choice to adopt either Net Asset Value Method or Discounted cash flow (DCF) Method. - assessee has adopted Net Asset Value Method for arriving the fair market value of the equity shares of the assessee company as per section 56(2)(viib) r.w. Rule 11UA I.T.Rules - As per AO method taken for value of unquoted equity shares is not in accordance with the prescribed under Rule 11UA of I.T.Rules. HELD THAT:- As to value the business of the holding company, the valuation of subsidiary company is relevant and important for determination of the valuation of the holding company. The whole basis of existence of the holding company depends upon the performance of the subsidiary company. It is brought to our notice that the holding company does not have any activities of its own and all the education and training activities are carried in the subsidiary company. For the purpose of argument if we agree the valuation method suggested by the AO to value the shares of the assessee company, the valuation of investments made by the holding company in its subsidiary will remain at the historical cost. It will not change even after ten years and the valuation of the holding company will remain same even after ten years. Proper method of valuation of shares of any holding company depends upon valuation of the subsidiary company. Therefore, in order to determine the valuation of shares of the holding company the valuation of subsidiary company has to be determined on the basis of proper method as per Rule 11UA of I.T.Rules. The method to be selected based on the purpose for which the valuation is necessity. If it is running business, the valuation has to be on the basis of futuristic. Therefore, in order to determine the valuation of the subsidiary company one has to adopt the Discounted cash flow Method considering the fact that the futuristic value of shares has to be determined based on Discounted cash flow Method only. Net Asset Value of the subsidiary company will give present value, but will not give futuristic value. Since the assessee is bringing new investors the valuation has to be done on the basis of futuristic based valuation. The valuation of wholly owned subsidiary company was carried out on the basis of Discounted cash flow Method which is one of the approved method u/R 11UA of I.T. Rules. Coming to the valuation of assessee s company since the assessee does not carrying out any activity except investments in subsidiary company most of the assets and liabilities are at historical cost except there may be changes in the investments made by the assessee in its subsidiary companies. The value of investments will not remain same and as per the new Accounting Standards the valuation of subsidiary has to be made every year. The value of shares of subsidiary company will change every year based on its performance. Therefore, the assessee has valued its shares adopting one of the methods mentioned under Rule 11UA of I.T. Rules i.e., Net Asset Value Method for its own shares and the variables in its balance sheet i.e, investments made in subsidiary company which was revalued based on Discounted cash flow Method which is also one of the approved method under Rule 11UA of I.T.Rules. Therefore, the method adopted by the assessee to value its own shares are within the method prescribed under Rule 11UA of I.T. Rules. Tax Authorities has to appreciate the purpose for which the valuation of shares were carried and it should also appreciate the evolution of various valuation methods to suit the purpose. In the given case, the assessee has brought in new investors and when the new investors are introduced the existing shareholders cannot be at par with the new shareholders by issuing shares at existing Net Asset Value valuation. The new shareholders have to bring in premium to match the goodwill carried on by the existing shareholders. Valuation of any holding company depends upon the performance of the subsidiary company. In this case the MLRPL are wholly owned subsidiary company and the valuation of the wholly owned subsidiary company has to be valued based on futuristic value by adopting Discounted cash flow Method. The above valuation of subsidiary company had a direct impact on the valuation of the assessee company. We do not see any reason to reject the method adopted by the assessee. Allow the ground raised by the assessee.
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2024 (2) TMI 603
Addition u/s. 68 - unsecured loans - as assessee to prove identity, genuineness and creditworthiness of the loan parties failing which the amount be treated as undisclosed income of the assessee - money is being credited to their account either by depositing cash or through RTGS from unexplained sources and money is being immediately transferred to the appellant which reflects that these are merely accommodation entries and lack genuineness - DR argued that the notices issued by the Revenue Authorities have not been complied by the loan parties and hence there is an absolute failure on the part of the assessee to prove the credential of the loan parties. HELD THAT:- On going through the entire details, we find that the assessee has furnished all the required documents during the course of assessment proceedings and additional evidences in appellate proceedings. AO has disregarded the creditworthiness of the lenders stating that they did not have sufficient sources or that their income is disproportionate to the loan advanced without making any verification in the case of the depositors. During the course of assessment proceedings and through additional evidence, the appellant has submitted the ITR reflecting the PAN and address details, relevant bank statement and confirmation of the creditors. Thus the assessee can be said to have discharged the onus laid upon them. CIT(A) has rightly held that, AO has rejected the evidences furnished by the appellant without establishing falsity of the documents filed by the assessee. Personal identities of these investors were proved, the sources have been proved, the ITRs and the subsequent repayments has been examined. Having so examined the CIT(A) came to a conclusion that the AO is not justified treating the unsecured loans received u/s. 68. Appeal of the Revenue is dismissed.
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2024 (2) TMI 602
Reopening of assessment u/s 147 - eligibility of exemption u/s 11 - AO invoked the provisions of section 12A(1)(b) as per which assessee has failed to get its accounts audited and furnish the return of income along with the audited report, in case of failure the assessee is not eligible to get the exemption u/s 11 - HELD THAT:- AO himself observed in his order that assessee had in fact filed its return of income on 13.12.2013. From the above it is also clear that the reason for reopening itself fails in this case, prima facie the assessment was reopened with the wrong reasoning that assessee has not filed its return of income by merely observing from IT Portal. Assessee has filed its return of income and AO has accepted the same. On this count itself the assessment made by the AO with wrong reasoning is deserves to be quashed. Eligibility to claim deduction u/s 11 - CIT(A) has applied the amendment made in the provisions of section in the A.Y. 2018-19. Since the amendment was made in A.Y. 2018-19, in our view, this amendment cannot be applied for the A.Y. 2010-11. Therefore, the appellate order passed by applying provisions, which were not relevant for the assessment year under consideration is bad in law. Accordingly, we hold that the assessment order is bad in law for reopening the assessment with the wrong reasons and appellate order passed with the amended provisions under section 12A(1)(ba) is also bad in law. Assessee appeal allowed.
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2024 (2) TMI 587
Estimation of income - bogus purchases - substantial question of law or fact - Commissioner (Appeals) has estimated the same at 25% whereas the Tribunal has estimated the same at 5% - As decided by HC whether the addition on account of bogus purchases should be estimated at 25% or at 5% cannot be said to be an issue of law giving rise to any question of law. Unexplained cash deposits in the bank accounts - As decided by HC when no defects could be pointed out by the AO in the cash book furnished by the assessee, no infirmity can be found in the reasoning adopted by the Tribunal while deleting such addition. HELD THAT:- Having heard the learned counsel for the petitioner(s), we are not inclined to interfere. Hence, the special leave petitions are dismissed.
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2024 (2) TMI 586
Order u/s 148A(b) as passed against the petitioner in respect of the old PAN card - petitioner has surrendered the old PAN card and petitioner is unable to file the appeal in respect of the said assessment order for which corrigendum was issued - HELD THAT:- It says that the assessee did not file the return of income for the assessment year 2018-19 when the old PAN card was active and new was not issued. The assessee had made cash transactions using the old PAN with Kozhikode District Cooperative Bank and UCO Bank. A notice u/s148 was served on the assessee on 10.04.2022 by post and by e-mail on 31.03.2022. Subsequently, notice under Section 142(1) was issued. Further it states that the petitioner s/assessee s request for deletion of the old pan card could not be considered for the reason that the proceedings are pending against that PAN. Therefore, the old PAN very much in active even now and the petitioner/assessee can file the appeal against the assessment order dated 20.03.2023 before the CIT(A) for which the corrigendum dated 31.03.2023 was issued. Considering the aforesaid instructions writ petition is disposed of with liberty to the petitioner to file appeal against the assessment order dated 20.03.2023 using the old PAN card and, if such an appeal is filed, the same shall be proceed with in accordance with the law. The petitioner is required to get registered in the e-filing portal using the old PAN.
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2024 (2) TMI 585
Validity of reopening notice issued u/s 148A - not signed either physically or digitally - minimum period of seven days prescribed under Section 148A(b) not provided - HELD THAT:- This Court has come to the categorical conclusion that the notice under Section 148A(b) of the IT Act, is not signed either physically or digitally and the same is illegal, invalid and inoperative and further proceedings pursuant thereto including the order u/s 148A(d) of the IT Act, penalty notices, orders, etc., deserve to the quashed. Lesser period than a period of seven days - So also, having regard to the minimum period of seven days prescribed under Section 148A(b) of the IT Act as held by the High Court of Bombay in the case of Mukesh J. Ruparel Vs. Income Tax Officer, Ward 27(2)(1) [ 2023 (8) TMI 228 - BOMBAY HIGH COURT] that if notice u/s 148A(b) prescribes a period lesser than a period of seven days as contemplated in the said provision, the said notice would be vitiated resulting in quashment of not only the notice but also the subsequent assessment orders, penalty notices, orders, etc. In the instant case, it is an undisputed fact that the Notice is not signed either physically or digitally but the impugned notice also prescribes a period of six days, which is lesser than the minimum prescribed period of seven days as contemplated under Section 148A(b) of the IT Act. Under these circumstances, in the light of the judgment of this Court in Begur s case [ 2023 (11) TMI 1222 - KARNATAKA HIGH COURT] and the judgment of the Bombay High Court in Mukesh s case supra, Impugned notice and also consequential proceedings, orders, notices, etc., deserves to be quashed by reserving liberty in favour of the respondents to take recourse to such remedies as available in law. Decided in favour of assessee.
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2024 (2) TMI 584
Addition u/s 68 - unexplained share application money in the form of share capital and share premium - burden of proof - CIT(A) deleted the addition - HELD THAT:- From perusal of the financial statements of the share subscribing companies, we notice that they had sufficient share capital and accumulated Reserves and surplus which are sufficient enough to cover up the share application money invested by them in the equity of the assessee company. D/R has merely given a general statement that these companies are paper/shell companies but no concrete evidence is filed on record which could prove the substance in such submissions failing which the issue in hand can be decided only on the basis of documentary evidence available on record and which clearly states that the assessee has explained the nature and source of the alleged sum thereby proving the identity and creditworthiness of the share subscribers and genuineness of the transactions. Once the assessee has submitted the documents relating to identity, genuineness of the transaction, and credit-worthiness of the subscribers, then the AO is duty bound conduct to conduct an independent enquiry to verify the same. However, as noted AO in this case has not made any independent enquiry to verify the genuineness of the transactions. Assessee having furnished all the details and documents before the AO and the AO has not pointed out any discrepancy or insufficiency in the said evidences and details furnished by the assessee before him. As observed above, the assessee having discharged initial burden upon him to furnish the evidences to prove the identity and creditworthiness of the share subscribers and genuineness of the transaction, the burden shifted upon the AO to examine the evidences furnished and even made independent inquiries and thereafter to state that on what account he was not satisfied with the details and evidences furnished by the assessee and confronting with the same to the assessee. We find that the assessee has successfully discharged the burden of proof primarily casted upon it to explain the identity and creditworthiness of all the alleged share applicants and genuineness of the share transactions and correctness of such details has not been disputed by the Revenue Authorities except making general observations. Therefore, considering the evidences placed by Ld. A/R to explain the nature and source of the alleged share application money, we find no reason to interfere with the detailed finding on facts by the ld. CIT(A) deleting the addition made u/s 68 - Decided in favour of assessee.
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2024 (2) TMI 583
Nature of expenses - Disallowance under the head 'Delay in security charge on loan' when loan itself was not utilized for business purpose and was given to its sister concerns without any basis, moreover, it is a capital expenditure - CIT(A) was convinced that the impugned expenditure has been made by the assessee wholly and exclusively for the purpose of business and allowed the same - HELD THAT:- We find that the ld. CIT(A) has deleted the addition on proper appreciation of facts and the ld. DR could not bring any distinguishing facts. We, therefore, decline to interfere. Ground No. 1 is dismissed. Disallowance of the addition on account of interest paid to M/s Bhayana Builders Pvt Ltd and M/s Logix Infrabuild Pvt Ltd. - HELD THAT:- Due to certain defects in the project, the assessee refused to pay second 50% of the retention amount to M/s Bhayana Builders Pvt Ltd. and the quarrel travelled upto the Arbitration Tribunal and the Arbitration Tribunal decided the quarrel in favour of M/s Bhayana Builders Pvt Ltd. Thereafter, the assessee carried the matter to the Hon'ble High Court [ 2017 (8) TMI 1720 - DELHI HIGH COURT] directed the assessee to return the money along with interest @ 6%. This interest has been claimed by the assessee, which has been disallowed by the AO. On the given facts, we do not find any reason/merit in the disallowance as the same has been paid as per the directions of the Hon'ble High Court. The ld. CIT(A) has rightly deleted the same and thus, calls for no interference. Interest paid to M/s Logix Infrabuild Pvt Ltd - There is no denying that the said advance was given for the acquisition of land in furtherance of the objects of the assessee s business. There is also no denying that both the assessee and M/s Logix Infrabuild Pvt Ltd. were engaged in the development of real estate projects. These undisputed facts go on to show that the impugned advance was purely a business advance and by no stretch of imagination it can be considered that the assessee has transferred borrowed funds as interest free advances - no merit in the disallowance made by the Assessing Officer. The ld. CIT(A) has rightly deleted the addition which calls for no interference. Disallowance on account of professional charges - HELD THAT:- CIT(A) was of the opinion that any expenditure incurred for obtaining loan is allowable as revenue expenditure and correctly deleted the addition. Disallowance on account of foreign currency fluctuation expenses - HELD THAT:- By looking into the documentary evidences filed the appellant, it is clear that the total expenses incurred by the appellant on account of the termination of loan agreement however, due to hedging of loan through swap currency agreements, the appellant got benefit due to foreign exchange rate. Accordingly, net amount charged by the appellant in P L A/c is duly allowable. The disallowance made by the AO on account of foreign currency loan is hereby deleted. Adhoc disallowance being 20% of the facility management charges - CIT(A), after verifying the ledger account, audited balance sheet, sample invoices and agreement with respective parties, came to the conclusion that disallowance cannot be made on adhoc basis without identifying specific default and without putting forth any cogent evidence, thus addition was deleted - HELD THAT:- Since the addition was made on adhoc basis without pointing out any defect, we do not find any reason to interfere with the findings of the ld. CIT(A). This ground is dismissed. Disallowance u/s 36(1)(iii) on account of advance outstanding - HELD THAT:- We find that the undisputed fact is that the said money was given in F.Y. 2014-15 and not in the year under consideration and no adverse interference has been taken in earlier A.Ys. Therefore, on identical set of facts, there is no reason why a different view is taken during the year under consideration. We, accordingly, direct the Assessing Officer to delete the impugned disallowance.
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2024 (2) TMI 582
Taxable Income in India or not - Royalty receipt - PE in India or not? - amount received towards Marketing Contribution, Priority Club receipts, Reservation Contribution, and Holidex Fee - Reimbursement of expenses - assessee is a company incorporated and a tax resident of the USA - HELD THAT:- We find that the taxability of similar receipts came up for consideration before the coordinate bench of the Tribunal in assessee s own case as held that money was received by the assessee, on account of Marketing and Reservation fees, with a corresponding obligation to use it for the agreed purposes and it was not an unfettered receipt in the hands of the assessee and therefore it was a kind of a trust money received in fiduciary capacity. It was further held that the receipt cannot be termed as a consideration for the use of any intellectual property asset of the company, even though the receipt may have been incidental to the same. Accordingly, the coordinate bench came to the conclusion that the receipt is not taxable as a Royalty or Fees for Technical Services and therefore is not taxable in the hands of the assessee in the absence of any PE in India. Marketing Contribution and Reservation Fees received by the assessee are not Royalty and therefore, the impugned addition is deleted. Decided in favour of assessee.
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2024 (2) TMI 581
Taxability of capital gains - denial of adjustments to full value of sale consideration towards amount lying in Escrow account while determining the LTCG - HELD THAT:- We are of the opinion that the facts marshalled and case built up by the assessee is quite comprehensible and plausible. In accord with the view expressed in Dinesh Vazirani case [ 2022 (4) TMI 746 - BOMBAY HIGH COURT] the taxability of amount retained in escrow account which is neither received nor likely to be received is contrary to position of law enunciated in s. 45 rws s. 48 - While the amount retained in escrow forms part of agreed consideration, such amount do not necessarily form part of full value of consideration received or accruing as result of transfer of capital asset as emanating from the facts of the case. The realisation of escrow amount in the instant case is contingent upon fulfilment of wide ranging conditions. The liabilities raised by virtue of escrow agreement are demonstrated to be substantially higher than the amount earmarked in escrow and hence funds have neither been released to the Assessee till date. When subsequent events after the filing of ROI are factored, such amount by way of escrow deposits can not be regarded as sale consideration accrued to the Assessee with reference to s. 48 of Act for the purposes of quantification of capital gains chargeable under s. 45 of the Act. We thus find merit in the case made out on behalf of the assessee and reversal of action of the CIT(A) and AO. As conceded on behalf of the assessee, the amount recovered out of escrow account by the assessee in the later years shall be liable to taxation in the respective years of receipt or accrual. The assessee shall be under legal obligation to pay taxes on accrual of such consideration dutifully in later years as and when arise. The AO while giving effect to this order may seek suitable indemnification and other safeguards to ensure taxation of escrow amount, as and when recovered. Disallowance u/s 14A - assessee has earned dividend income which was claimed as exempt u/s 10(34) - AO resorted to statutory formula provided in Rule 8D and computed disallowance u/s 14A - HELD THAT:- We notice that the assessee has incurred Demat charges which is in the nature of direct expenses under Rule 8D(2)(i) of the Act. As regards on interest expenses, the assessee has demonstrated that own funds exceeds the corresponding investment yielding dividend income. The share capital along with reserves stands at Rs. 108.26 crore as against investment in share yielding dividend income at Rs. 33.35 crore. Thus, the disallowance of interest expenditure under Rule 8D(2)(ii) is not warranted. The disallowance under Rule 8D(2)(iii) is restricted to 0.5% of the average value of investment of Rs. 33.35 crore attributable to investment which yielded exempt income in terms of statutory formula. Assessee has made an ad hoc disallowance of 1/3 of salary of Chief Controller Account worked out to Rs. 1,99,857/- and other administrative expense of Rs. 1 lakh together to Demat charges of Rs. 3,21,949/-. For the purpose of suo motu disallowance, no basis has been given by the assessee for making such ad hoc disallowance. The AO thus shall be guided by the statutory formula as noted in the preceding paragraph. Decided partly in favour of assessee.
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2024 (2) TMI 580
Disallowing brought forwards loss - declaration by the assessee in the revised computation of income filed during the assessment proceedings - HELD THAT:- As submitted recently the ITAT, Delhi vide its order [ 2023 (11) TMI 1223 - ITAT DELHI] in assessee s own case for AY 2017-18 has decided the appeal by partly allowed the appeal for statistical purposes and AO is yet to get effect to order passed by the Tribunal for AY 2017-18. Hence, we direct the AO to consider the assessee s grievance and take remedial action as per law after due verification and allowing a reasonable opportunity of hearing to the assessee. As a consequence, the Ground No. 2 is allowed for statistical purposes. Disallowance of deduction u/s 80IA(4)(i) - Contractees, who have allotted work of infrastructural facility to the appellant, are not recognised u/s 80IA(4)(1)(b), and Appellant is merely a contractor and not a developer - HELD THAT:- As relying on assessee s own case for AY 2016-17 [ 2023 (11) TMI 1223 - ITAT DELHI] we decide Ground in favour of the assessee holding that the assessee is eligible to claim the impugned deduction under section 80IA of the Act. Addition on deduction of expenses u/s. 40(a)(ia) - AO has started the computational process from the total income disclosed by the assessee in the revised computation of total income filed during the course of assessment - as argued Excess deduction was suo moto disallowed by the assessee in the revised computation of total income, hence, according to him, no such disallowance was again called for once starting point was the Revised Computation of total income - HELD THAT:- After hearing both the sides on the issue, we find the plea of the assessee s AR to be reasonable and accordingly, we direct the Assessing Officer to examine the assessee s plea and take remedial action, if any, as per law, after giving adequate opportunity of being heard to the assessee. Accordingly, the Ground No. 4 is allowed for statistical purposes. TP Adjustment under Chapter X - adjustment on account of alleged interest receivable on advance given - HELD THAT:- Following the aforesaid precedent [ 2023 (11) TMI 1223 - ITAT DELHI] , we send the matter back to the AO for deciding the issue afresh keeping in view the evidence submitted by the assessee as also the observations of Kusum Health Care (P) Ltd. [ 2017 (4) TMI 1254 - DELHI HIGH COURT] and as per law. Retention money retained by the employer - Addition made as retention money is received by the assessee and hence, no deduction is allowable to the assessee - as submitted that on the issue of retention money, Finance Act, 2018 has inserted provisions of Section 43CB w.e.f. 1.4.2017 - HELD THAT:- Since effect of this statutory insertion have not been considered by both the lower authorities, hence, matter requires a fresh adjudication by the AO in accordance with law - similar issue came for consideration before the ITAT and the Tribunal vide its order dated [ 2023 (11) TMI 1223 - ITAT DELHI] in assessee s own case for AY 2017-18 has set aside the matter back to the AO for a fresh adjudication. TDS credit - AO has allowed the credit less as allowable to the assessee according to the income offered for taxation for which complete details and reconciliation was filed during the assessment proceedings - As it is a matter of verification, therefore, we direct the AO to consider assessee s claim and after due verification take remedial action in accordance with law. Accordingly, the Ground is allowed for statistical purposes. Levy of interest u/s. 234B is consequential in nature, hence, AO is directed to re-compute the interest u/s. 234B, if any, afresh in accordance with
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2024 (2) TMI 579
Deduction claimed u/s. 80P(2)(d) - interest / dividend income earned from Co-operative Bank - HELD THAT:- As considered the judgment passed in the matter of Kedambady Keyur Primary Agricultural Co- operative Society Ltd. [ 2023 (11) TMI 1221 - ITAT BANGALORE] following the view taken in the case of PCIT Anr. Vs. Totagars Cooperative Sale Society [ 2017 (1) TMI 1100 - KARNATAKA HIGH COURT] and State Bank Of India Vs. CIT [ 2016 (7) TMI 516 - GUJARAT HIGH COURT] we hold that, the interest income earned by a cooperative society on its investments held with a cooperative bank that do not have license under section 22 of the Banking Regulation Act 1949, falls outside the definition the term, Banking Company as per section 2(c) of the Banking Regulations Act, 1949, would be eligible for claim of deduction under Sec.80P(2)(d) of the Act. AO is thus directed to carry out necessary verification in respect of the that same to consider the claim of deduction u/s.80 P(2)(d) of the Act. Further, we make it clear that the assessee is not entitled for deduction u/s 80P(2)(a)(i) of the Act in view of judgement of Hon ble Supreme Court in the case of Totgars Co-operative Sale Society Ltd [ 2010 (2) TMI 3 - SUPREME COURT] wherein as directed that in the event it is found that the interest is earned by the assessee from such commercial/cooperative banks that fall within the definition of banking company as per section 2(c), Section 5(b) and holds license under section 22 of the Banking Regulation Act 1949, such interest are to be considered under the head income from other sources however, relief may be granted as available to the assessee u/s 57 of the Act in accordance with law. Thus we remit the issue to the file of AO to pass orders in the light of the ratio laid down in the said order. Appeal filed by the assessee stands allowed for statistical purposes.
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2024 (2) TMI 578
Levy of fees u/s 234E - alleged default in furnishing TDS statements - as argued provisions of section 234E has come into statue w e f 01.06.2015 and the same is not applicable for the impugned assessment years - HELD THAT:- The issue of levy of charge u/s 234E of the Income Tax Act, 1961 stands decided by the order of the Co-ordinate Bench of ITAT in [ 2018 (10) TMI 355 - ITAT DELHI] , wherein held that no fee was leviable to the assessee u/s 234E in violation of section 200(3), because assessee had furnished the statement immediately after depositing all the tax without any delay. Accordingly, the demand on account of 234E is cancelled.In any case, the levy of fee u/s 200A in accordance with the provision of section 234E has come into the statute w.e.f. 1.6.2015. Since the challan and statement has been filed much prior to this date, therefore, no such tax can be levied u/s 200A. Interest u/s 220(2) cannot be levied when fee u/s 234E itself is not leviable. Charging of interest u/s 201(IA), the same cannot be charged as admittedly no order u/s 201(1) has been passed holding the assessee to be assessee in default and, therefore, such an interest is also deleted. We have examined the issue and the provision of Section 201, Section 200(3) and Section 234E. Since, the issue is in parity with the issues adjudicated in the above said order, the same ratio applies. Hence, the appeal of the assessee is hereby allowed.
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2024 (2) TMI 577
Penalty u/s 271D - contravention of the provisions of section 269SS - accepting loans from M/s Spaze Towers Pvt. Ltd - HELD THAT:- As decided in Aman Sharma [ 2023 (2) TMI 970 - PUNJAB AND HARYANA HIGH COURT] once the Assessing Officer has treated the personal expenses incurred by M/s Spaze Towers Pvt. Ltd as income of the assessee, then the same amount cannot be treated as loan in violation of the provisions of Section 269SS of the Act 1961. The same income cannot be taxed in two hands in the same assessment year and CIT (A) has rightly deleted the additions made by the Assessing Officer. Decided in favour of assessee.
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Customs
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2024 (2) TMI 576
Condonation of delay of 243 days in filing this appeal - Benefit of exemption from duty - 12V SMPS consisting of Main PCB, lightening protector, DC/AC cables, fuse/fuse holders and others - SMPS is not a part of IFWT. - The tribunal held that, the goods imported cannot be considered as accessory as these parts are not used to increase the effectiveness or convenience of IFWT. It is thus held that the goods imported are neither parts nor accessories of IFWT and therefore cannot avail the benefit of notification. HELD THAT:- The delay is condoned - there are no requirement to interfere in this appeal - appeal dismissed.
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2024 (2) TMI 575
Levy of penalty under section 114 or under section 117 of Customs Act - appellant as the Customs Broker was vicariously responsible for the actions of his employees or not - export consignment was highly overvalued - mis-declarations in the shipping bill regarding the port of discharge and country of destination in order to avoid examination of the export goods - HELD THAT:- It is an unusual case where the investigation by the department itself proved that the shipping bills were incorrectly filed by Shri Virender Singh Rawat misusing the credentials of the appellant Customs Broker without its knowledge for monetary gain for himself. Therefore, the undisputed fact is that the appellant had neither any role in filing the incorrect/ manipulated shipping bills nor did the appellant have any knowledge of the shipping bill being filed with its name as the Customs Broker. Penalty u/s 114 of CA - HELD THAT:- The penalty can be imposed only on the person who in relation to the export goods which were rendered liable to confiscation under section 113, does or omits or abets the doing or omission of an act, shall be liable for penalty - In this case the facts has narrated in the show cause notice itself shows that the appellant neither filed the shipping bill nor committed any act or abetted the commission or omission of any act which rendered the goods liable for confiscation under section 113. In view of above, no penalty whatsoever is imposable under section 114 on the appellant. Penalty u/s 117 of CA - HELD THAT:- Penalty can be imposed on any person for contravention of any provision of the Act or abetting any such contravention or failing to comply with any provision of the Act with which it was his duty to comply for which no express penalty is provided. In this case, records do not show that the appellant had contravened any provision of the Act or Rules or abetted such contravention or had failed in any of its duties which it was bound to comply. In view of above, the penalty under section 117 also cannot be sustained. The impugned order is set aside - Appeal allowed.
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2024 (2) TMI 574
Revocation of license of Customs Broker - Prohibition order against Customs Broker - prohibiting the appellant from working in Chennai Customs Jurisdiction - undeclared items were found in the container - Regulation 17 of CBLR 2013 - HELD THAT:- The Bill of Entry dated 31.01.2017 was filed by the appellant on behalf of M/s. J. J. Enterprises at Customs Chennai and statement dated 26.7.2017 was recorded from Shri B. Muthuramalingam, Assistant Manager of M/s. Global Agencies, Chennai. Based on the offence committed by the Customs Broker, the prohibition order was issued on 15.9.2017 and show-cause notice was issued on 27.10.2017 by the Commissioner Customs Chennai. Based on the alleged offence at Chennai and on the basis of documents, another show-cause notice dated 23.1.2018 was issued at Cochin Commissionerate which is parent Commissionerate of the Customs Broker. Reliance placed in Final Order No.41814/2018 dated 2.5.2018 [ 2018 (8) TMI 1603 - CESTAT CHENNAI] wherein the Tribunal has observed We do not find any material ground for issuance of the prohibition order or its continuance. Moreover, it is to be stated that such continuation of the probation order without prescribing a time-limit would be bye passing Regulation 20 with regard to suspension / revocation of the licence. There are no merit in upholding the impugned order since the basis appears to be the offence committed at Chennai which has been set aside by the Tribunal Chennai Bench - the impugned order is set aside - appeal allowed.
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2024 (2) TMI 573
Revocation of customs Broker License - forfeiture of security deposit - levy of penalty - smuggling of red sanders logs which are prohibited items for export - violation of Regulation 10 (e) and 10 (n) of CBLR 2018 - authorisation was not obtained from the exporter - HELD THAT:- Accepting the fact that the shipping bill was filed based on the KYC documents, invoices and packing list made by Mr. Satishkumar, Commissioner alleges that the appellant should have received authorisation and all other documents directly from the exporters which resulted in fraudulent export. The act of negligence on the part of the appellant was only to the extent of not verifying the authenticity of the documents and to check whether the orders have been placed by the exporters. The appellant has placed documents to show that the KYC documents were authorised by the exporter and also placed the mahazar which shows that the department had seized certain documents which included original attested copy of KYC documents of the exporter including certificate of IEC, GST registration certificate, PAN card and Aadhar Card. Since based on these documents, they had verified online and filed the shipping bill in good faith; they cannot be penalised for the illegal attempt to export prohibited goods. The main show-cause noticed dated 24.1.2022 which deals with the main culprits should have been adjudicated along with the present notice. In view of the above, there are no reason for revoking the license of the appellant and for forfeiture of the security deposit. Therefore, the revocation of license and forfeiture of the security deposit is set aside. Penalty - HELD THAT:- The fact remains that the goods that were declared as Industrial Ductile Pipes were found to be red sander logs and the shipping bills were filed by the appellant. For having violated the Regulations of CBLR in not verifying the genuineness of Mr. Satishkumar who claims to the authorised representative of the exporter will warrant penalty under CBLR 2018 - the penalty of Rs.50,000/- is upheld. Appeal allowed in part.
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2024 (2) TMI 572
Classification of imported goods - Huy glass 1105 M-Membrane Bags (Filter Bags) - to be classified under Customs Tariff Heading 5911 9090 or under Customs Tariff Heading 8421? - applicability of limitation applicable under Section 28(1)(a) - HELD THAT:- The articles of glass fibres are excluded from Chapter 59 and 8421 specifically includes air purifiers and therefore, the goods admittedly which are made of 100% glass fibres and which is meant for filtering the gaseous items are rightly classifiable under CTH 8421. Applicability of limitation applicable under Section 28(1)(a) - HELD THAT:- The Commissioner (A) has held that Section 28(1)(a) empowers them to issue notice within one year in the case of Government, any individual, educational, research or charitable institution or hospital. Hence, the appellant being a State Government Undertaking, the notice issued within one year was a valid notice. The appellant is incorporated as a company under the Companies Act, 1956 and though they are State Government Undertaking are incorporated as a company under the Companies Act, 1956. The Hon ble Kerala High Court in THE FOOD CORPORATION OF INDIA VERSUS THE ANGAMALI MUNICIPALITY AND ORS. [ 1994 (3) TMI 410 - KERALA HIGH COURT] rejected the claim of FCI that it is not liable to pay tax, the Hon ble High Court observed But the Act has given the Corporation an individuality, apart from the Government, so that it cannot be equated with the central government though it may be an agency or instrumentality thereof. Considering the fact that the appellant was registered under the Companies Act, 1956, the question of considering as Government undertaking for issuance of notice is rejected - the impugned order is upheld as far as the classification is concerned and rejected on the ground of limitation - Appeal allowed in part.
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Corporate Laws
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2024 (2) TMI 571
Condonation of delay of 18 days in preferring the instant Company Appeal - Section 421(3) of the Companies Act, 2013 - only ground pleaded for delay was the alleged indisposition of the 2nd Appellant - bonafide reasons for condoning the delay or not - HELD THAT:- Where the delay in preferring an Appeal/Restoration Application/Review etc. is not wanton or intentional, the Court would not be justified in rejecting the delay condonation application on the basis that the Applicant had not produced a medical certificate, to show that he/she was ill and the Doctor had advised him/her to take rest, as per decision in Marry Susheela V. Shalee Kasturibai [ 2014 (4) TMI 1302 - MADRAS HIGH COURT] . When substantial justice and technical consideration are pitted against each other, cause of substantial justice deserves to be preferred, for the opposite party, cannot claim to have vested right in justice being denied to him / them, because of a non-deliberate delay. There cannot be any presumption or assumption that the delay as occasioned, wantonly, or on account of culpable negligence or on account of malafides - refusing to condone the delay can even result in a meritorious matter being thrown out at the early stage and cause of justice being defeated. Also that, when the delay in question is condoned, the highest thing that can happen is that the case will be decided on merits after hearing the parties. This Tribunal on a careful consideration of respective contentions, on going through the facts and circumstances of the instant case comes to a cocksure conclusion that the delay of 18 days in preferring the instant Appeal has occurred on account of the indisposition of the 2nd Appellant, the authorised signatory of the 1st Appellant. Furthermore, on 01.05.2023, five days before the expiry of limitation period, the 2nd Appellant / MD and the authorised signatory of the 1st Appellant underwent tooth extraction, tooth implant etc. and the two weeks period came to an end of 14.05.2023 and the further delay of 10 days from 14.05.2023 to 24.05.2023 had occurred, according to the Appellants in the course of 2nd Appellant furnishing instructions in regard to the preferring of Appeal along with ancillary applications. This Tribunal by resorting to an elastic approach and the delay of 18 days that has occurred is covered within the further limitation period of 45 days prescribed in proviso to Section 421(3) of the Companies Act, 2013, condones the said delay of 18 days subject to a condition that the Petitioners/Appellants are hereby directed to pay a cost of Rs. 8000/- (Rupees eight thousand only) to the Prime Ministers Relief Fund to be paid within two weeks from today. Appeal allowed.
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2024 (2) TMI 570
Prayer for reception of additional documents and to consider the revival of the Company - Respondent / ROC had not followed the procedure u/s 248(1) of the Companies Act, 2013 - Notices u/s 248(1) were not sent - ingredients of Section 248(6) of the Companies Act, 2013 not taken note of - HELD THAT:- The power of a Tribunal, to permit additional evidence to produce/documents are within the jurisdiction of the Appellate Authority. A document not pertinent to decide the dispute/controversy in a given proceeding/suit, is not to be accepted as Additional Evidence. Besides this, if there is any lacuna or gap in evidence to be filled up, the discretionary power conferred upon the Appellate Authority does not authorise the Appellate Authority to fill the gap in question. This Tribunal on going through the impugned order [ 2023 (8) TMI 1429 - NATIONAL COMPANY LAW TRIBUNAL CUTTACK] passed by the Tribunal is of the considered view that additional evidence is not to be accepted by this Tribunal, just because the documents/evidence will tilt the decision in Petitioner/Appellant s favour - In fact, the Tribunal/Court of Law is to see whether the Petitioner/Appellant lacked due diligence to be seen and he cannot be allowed to fill up the Lacuna at the belated stage. As a matter of fact, the production of Additional Evidence, is not to be allowed, when an individual does not satisfy the Court of Law / Tribunal that such evidence was not within the knowledge or could not be produced with Due diligence . This Tribunal on going through the impugned order is of the earnest opinion that the Appellant had not preferred IA No. 19/CB/2023 in CP No. 70/CB/2020 within a two years period, as enjoined as per Section 420(2) of the Companies Act, 2013 and indeed, the IA No. 19/CB/2023 in CP No. 70/CB/2020 came to be filed before the Tribunal on 16.12.2022 after a lapse of two years period on 16.12.2022. Therefore, the Tribunal had rightly opined that IA No. 19/CB/2023 in CP No. 70/CB/2020 was not to be considered in regard to the reception of additional documents/additional evidence. Appeal dismissed.
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Insolvency & Bankruptcy
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2024 (2) TMI 569
Filing of new claim after Resolution Plan is approved - HELD THAT:- Admittedly, the Appellants have filed their claim belatedly. In paragraph 21 of the Appeal, the Appellants themselves have pleaded that they could know about the CIRP and approval of the Plan in May 2022 and could file the claim only on 09.06.2022. No claim having been filed till the approval of the Resolution Plan, no relief can be granted to the Appellants in the present Appeal. The impugned order passed by the Adjudicating Authority has already been upheld. It is pleaded on behalf of the RP that the Promoters of the Corporate Debtor has abandoned the project and no records were available and whatever records could be collected from the Flat Buyers, on that basis the Information Memorandum was prepared. The Plan having already been approved by the Adjudicating Authority, no new claim can be admitted. The dismissal of the Appeal shall not preclude the Appellants to approach the Successful Resolution Applicant and to give details of payments given to the Corporate Debtor and it is for the Successful Resolution Applicant to take a call on the said claim. Appeal dismissed.
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2024 (2) TMI 568
Direction for termination of CIRP from the stage of Second EOI and replacement of the RP, Sandeep Khaitan and appointment of new RP, Amit Pareek - seeking direction for re-examination and reverification of the claim of the Financial Creditor - terminating the CIRP from Second EOI and replacement of RP - bone of contention between the parties is regarding the quantum of claim submitted by the Financial Creditor and verified and admitted by the RP - HELD THAT:- The present is a case where the Financial Creditor has initiated proceedings against the Corporate Debtor after 18 years of invoking the guarantee. Guarantee was invoked on 03.12.2001 and Section 7 Application was filed on 12.03.2019. It is also relevant to notice that Corporate Debtor was in BIFR and it came out of BIFR only on 30.11.2016 and after 20.10.2017, it started earning profit. The Corporate Debtor was MSME and was running for last 54 years and it collapsed after initiation of CIRP by the Financial Creditor. The Financial Creditor was proceeding to recover its dues from Principal Borrower and after one time settlement dated 30.04.2005, the Principal Borrower sold its immovable properties to pay its dues under the Negotiated Settlement and it paid Rs.92.24 lakhs. The proceeding under which the Principal Borrower was selling its assets and repaying its dues was got interrupted by the Financial Creditor itself by filing an Application and obtaining an order dated 09.09.2011 from DRT. Further, the Financial Creditor did not prosecute further proceedings, even after restraining the Principal Borrower to sale its assets. Ultimately, DRT has adjourned the proceedings sine-die on 16.11.2018 as noted above. Thus, it was due to its own reasons, the Financial Creditor interdicted the proceedings of sale the immovable assets of the Principal Borrower and stopped the midway, due to which the Principal Borrower could not further sell its immovable properties further and clear the entire debt. Filing of Section 7 Application by the Financial Creditor against the Corporate Debtor is nothing but steps towards recovery of dues of the Financial Creditor and not for any insolvency resolution of the Corporate Debtor. The Corporate Debtor after coming out from the BIFR has recovered from its insolvency and started earning profit, which has been noticed by Adjudicating Authority in the order dated 08.04.2022 in IA No.43 of 2021. The facts of the present case and sequence of events clearly indicate that Section 7 Application was nothing but proceedings to recover the dues and was not for any purpose of insolvency resolution of the Corporate Debtor. The present was a fist case where powers under Section 65 of the IBC were to be exercised and proceedings of CIRP required to be closed against the Corporate Debtor. However, in view of the orders passed by this Tribunal, under which the proceedings of CIRP proceeded too far, it is desisted from passing any such order and the CIRP be completed as per the directions issued by the Adjudicating Authority. There is no merit in Company Appeal which deserves to be dismissed and is hereby dismissed. Removal of respondent no.2 as the Resolution Professional - order made setting aside all acts of the RP in which the RP had been instrumental, as unfair, biased, motivated and lacking in transparency - removing the respondent no. 3 in the matter - disqualification of respondent no.4 as a Resolution Applicant - HELD THAT:- The Respondent No.5 always appeared for Financial Creditor, which was clearly stated before the Adjudicating Authority. Respondent No.4/ PLBB was fully eligible to submits its Resolution Plan. The mere fact that it was incorporated subsequently, i.e. on 20.07.2020, does not have any effect on its eligibility, since it was mentioned in the Application that Respondent No.4 is in the process of incorporation. The allegation that Respondent No.2 and the CoC rollout second EOI to give backdoor entry to Respondent No.4 is wholly incorrect. The second Form-G was issued since no Resolution Plan was received in pursuance to first EOI. Even the Promoter/ Director did not file any Resolution Plan. The second Form-G was issued to fulfill the object of maximization of value of the Corporate Debtor. It is further incorrect to suggest that the RP and CoC permitted Respondent No.4 to modify the Resolution Plan from time to time. Only change made by Respondent No.4 was to increase the CIRP cost. Side-byside perusal of the Resolution Plan would show that Resolution Plan of Respondent No.4 was better than Plan of Promoter/ Director. More so, it was the commercial wisdom of CoC to approve the Resolution Plan, the Promoter Director cannot seek any direction that CoC should approve the Plan of Promoter/ Director. The approval of Resolution Plan by the CoC cannot be questioned before the Adjudicating Authority, which is a settled law - The allegation made by Promoter/ Director against the RP were all unfounded and complaints were filed before the IBBI, which complaints were closed. The allegation that family of Respondent No.2 is in the business of Plywood is not correct. The father of Respondent No.2 was small retail trader of Plywood. The Adjudicating Authority could not have passed an order removing the RP. The RP can be removed only in accordance with Section 27 of the Code. When the statute provides for a thing to be done in a particular way, it must be done in that manner alone, or not at all. The allegations of collusion against Respondent No.2 are all incorrect. There can be no doubt to the scheme of the Code for removal of the RP by the CoC which has to pass a Resolution. The Adjudicating Authority, who has appointed the RP cannot be said to lack jurisdiction to take a decision to replace the RP, when the facts and circumstances of a particular case warrants. In the present case, where serious allegations were made against the RP, regarding not conducting the CIRP transparently, the Adjudicating Authority did not lack jurisdiction to pass an order for replacement of the RP. The observations made against RP be not treated regarding integrity of RP and the observations will be confined and treated as observation for the purpose of case only and the said observations shall not be made basis for initiating any proceedings against RP in any Forum. The order of Adjudicating Authority to the extent it terminates the CIRP from the stage of Second EOI as well as replacement of the RP is upheld - adverse observations made by the Adjudicating Authority against Respondent No.5 in the impugned order, i.e., Counsel who was appearing for Financial Creditor are deleted - Observations made by the Adjudicating Authority against the RP shall not to be treated as adverse to the integrity of RP and not be made basis for initiating any proceeding or action against the RP in any Forum - The new RP, who has been appointed under the impugned order shall conclude the entire CIRP process within 90 days from today, under the supervision and control of Committee of Creditors. Preferential, undervalued and fraudulent transactions undertaken by suspended Director of the Corporate Debtor - Section 43, 45, 49, 44, 48 and 66 of the IBC - Contention raised by Suspended Director that transactions referred to in the Application were taken in ordinary course of business or transfer/ sales made for securing new value of the CD, has been accepted. Aggrieved by the said order, RP as well as Financial Creditor has come up in this Appeal - HELD THAT:- It is clear that Adjudicating Authority has only recorded its conclusion, paragraphs-13 and 15 cannot be said to contain any reason, on the basis of which the Application was rejected. The conclusion in an order has to follow the reasons for coming to the conclusion. Both the parties have elaborately made their submissions and referred to the various materials in support of their respective submissions. The Adjudicating Authority ought to have adverted to them and thereafter should have recorded its reasons and conclusion. There are substance in the Appellant s submission that order of the Adjudicating Authority does not contain any reason for coming to the conclusions. In the facts of the present case, ends of justice will be served in setting aside the order dated 07.10.2021 and remitting the matter before the Adjudicating Authority for deciding IA No.51 of 2020 afresh. The new RP, who has now been appointed by subsequent order dated 08.04.2022, as noticed above, shall take steps for early disposal of IA No.51 of 2020. Appeal disposed off.
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2024 (2) TMI 557
Application filed by Resolution Professional (RP) for approval of Resolution Plan - waterfall mechanism - HELD THAT:- From the facts, which have been brought on record, it is clear that in pursuance of Form-G issued on 20.11.2018, no Resolution Plan was received. The 180 days of CIRP period had come to an end. The RP filed an Application before the Adjudicating Authority for exclusion of period. The RP also in the Application stated before the Adjudicating Authority that now the Flat Buyers Association is desirous to complete the project with the help of a developer. The Adjudicating Authority, noticing the fact that Flat Buyers themselves are desirous to complete the project, extended the period of CIRP. In the order dated 03.07.2019, the extension of CIRP was granted by the Adjudicating Authority, taking the note of the fact that now Flat Buyers Association is desirous to complete the unfinished project. The Appellant dissented with the Resolution Plan. As per Section 30, subsection (2) of the IBC, a dissenting Financial Creditor is entitled for the amount, which shall not be less than the amount, which the dissenting Financial Creditor is entitled in event of liquidation of the Corporate Debtor. The amount is to be distributed in accordance with order of priority provided in sub-section (1) of Section 53. The Resolution Plan, which has been approved by the CoC with 90.45% vote share and through which Resolution Plan the completion of unfinished project is helping in resolution of the CIRP of the Corporate Debtor and in which 97% vote share are being held by the Flat Buyers themselves, the Resolution Plan cannot be set aside at the instance of Appellant, who is being paid the amount as per Section 30, sub-section (2). There are no ground to interfere with the impugned order - The Appeal is dismissed.
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Service Tax
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2024 (2) TMI 567
Rent-a- Cab Operators service - Abatement of 60% of the assessable value vide Notification No.09/2004 dated 09.07.2004, 01/2006- S.T. dated 01.03.2006 and Notification No.6/2005-S.T. dated 01.03.2005 - HELD THAT:- As per the agreement reached between the Appellant and UPSRTC, it would be evident that Appellant attached his bus with UPSRTC on the basis of profit sharing. There is no fixed rent or hire charges. Instead, the profit is variable. Therefore, attaching a bus with the UPSRTC on profit sharing basis would not come under the taxable service under the rent-a-cab operator service of the Act, as the ingredients of the definition are absent. From the perusal of the Explanation B to Notification No. 06/2005-S.T. dated 01.03.2005, it would be evident (i) that the aggregate value for the purpose of this notification would be gross value of taxable services bereft of the value of goods used in providing the service; (ii) that the aggregate value shall be determined after deducting the gross amount exempt from whole of service tax under Notification No. 12/2003-ST dated 20.06.2003 or Notification No. 01/2006-S.T. 01.03.2006 (as amended). On deduction of the amount as envisaged under Notification No. 01/2006 ST dated 01.03.2006, aggregate taxable value each year would be much below the exemption limit as envisaged in the Notification No. 06/2005 ST dated (01.03.2005). That Notification No. 06/2005-ST dated 01.03.2005 (as amended) seeks to exempt taxable service of aggregate value upto to Rs. Ten lakhs in any financial year in the case of rent-a- cab service, the value under Section 67 of the Finance Act, 1994 would be 40% of the gross amount as per notification No. 01/2006-ST dated 01.03.2006. The rest 60% of value is attributable to value of goods which is exempt under Notification No. 01/2006-ST dated 01.03.2006. According to explanation No. (B) of clause-3 of notification number 06/2005-ST dated 01.03.2005, the gross amount which is exempt from payment of service tax would not constitute in the aggregate value of taxable service - in this case, the taxable value in every financial year is far less than the exempted limit. As such, no service tax is payable by the Appellant. The impugned order to the extent of confirmation of the demand and imposition of penalty are set aside - Appeal allowed.
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2024 (2) TMI 566
Service tax demand on the basis of Form 26AS issued by the Income Tax Department - invocation of extended period of limitation - HELD THAT:- The said issue has also been examined by this Tribunal in the case of M/S. PIYUSH SHARMA VERSUS COMMISSIONER OF CGST CX, PATNA-I [ 2023 (10) TMI 736 - CESTAT KOLKATA] , wherein this Tribunal has held on the basis of Form-26AS, no demand is sustainable against the appellant - thus merely on the basis of Form 26AS issued by the Income Tax Department, the demand of Service Tax is not sustainable against the appellant. Time Limitation - HELD THAT:- Initially, the investigation started against the appellant in April, 2015 when they came to know that the appellant is not paying service tax on taxable services and no efforts were made by the Department to issue the show-cause notice in time or to further investigate the matter, no efforts were made by the Department to find out for what purposes these amounts have been paid by the service recipient - as the investigation is faulty and the show-cause notice has been issued by invoking extended period of limitation, the demand is not sustainable on limitation itself. The impugned demand is not sustainable against the appellant on the basis of the details provided by the Income Tax Department in Form 26AS and the extended period of limitation is not invokable - Appeal allowed.
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2024 (2) TMI 565
Classification of services - Business Auxiliary Services (BAS) or not - collecting freight charges for cargo and that the assessee would collect extra charges in excess of the charges paid by them to the air liner / shipper, for which the appellant did not pay Service Tax - Whether the appellant had acted as a commission agent by providing the service of booking space for cargo transportation or not? - HELD THAT:- There are no documents containing any of the facts being involved in the case on hand. Here, the appellant is straightaway treated as a commission agent and consequently, Service Tax was demanded from the appellant for the services allegedly rendered under BAS. There is no whisper about any incentive being received from the liners being commission on sales nor is it the case of the Revenue that the appellant has been receiving commission on a regular basis from the airlines / ships, and nor is their any whisper about discounts being received from the airlines / ships. Rather, the entire profit element is being considered as service charges received by the appellant. The Revenue having alleged that the services rendered by the appellant were under BAS, has not bothered to specifically identify the limb provided under various sub-clauses under the definition of BAS. Unless the alleged service is brought under the specific limb provided under the statute, Service Tax cannot be demanded under BAS as such, since BAS is an umbrella under which various services are categorized. The point of reference to Third Member in the case of M/s. New Era Travel Cargo Agencies [ 2023 (12) TMI 1288 - CESTAT CHENNAI] is not at all applicable to the facts of the present case. The demand raised and confirmed under BAS cannot sustain - impugned order set aside - appeal allowed.
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2024 (2) TMI 564
Non/short-payment of service tax - difference between the trial balance figures and S.T.-3 Returns - time limitation - HELD THAT:- In this case, the appellant has raised various issues in reply to the Show Cause Notices issued to them, on merits as well as on limitation and the same have been argued before this Tribunal also. However, the ld. adjudicating authority has not given any heed to the defence placed by the appellant. It would be in the interests of justice to remand the matter back to the adjudicating authority, to examine the documents filed by the appellant in reply to the Show Cause Notices. It would be convenient if the adjudicating authority would depute an officer who along with an officer of the appellant would sit together and compile the documents and thereafter, the adjudicating authority, on the basis of the report placed by the officers, shall pass an appropriate order in accordance with law considering all the issues on merits as well as on limitation. The appeals are disposed of by way of remand.
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Central Excise
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2024 (2) TMI 563
Levy of penalty - Suppression of facts or not - appellant have paid the amount of proportionate credit of input and input services attributed to the exempted goods or not - non-following the procedure as laid down under Rule 6 (3) (1)/(2)/3A of Cenvat Credit Rules, 2004 nor reversal of any credit utilized for manufacture of exempted goods - HELD THAT:- The fact regarding manufacture and clearance of dutiable as well as exempted goods and availment of credit on the entire input and input services commonly used for manufacture of dutiable and exempted goods is very well on record and known to the department. Accordingly, there is no suppression of fact on the part of the appellant. Hence, the entire demand is prima-facie time bar. However, the appellant have admittedly paid the amount of Rs. 60,15,116/- and they are only contesting the penalty. Though the demand is prima facie time bar but since the appellant have admittedly paid and not contesting such payment, the demand to the extent of Rs. 60,15,116/- is upheld and payment made thereof by the appellant is maintained. However, the appellant is not liable for any penalty. The penalty is set aside. Needless to say that since the appellant have paid the amount of 60,15,116/- which is proportionate Cenvat credit attributed to the exempted goods belatedly, they are liable to pay the interest till the date of reversal - Appeal allowed in part.
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2024 (2) TMI 562
Recovery of short paid service tax alongwith interest and penalty - Maintenance or Repair Service and Erection, Commissioning Installation Services - wrong availment of abatement under the category of Erection, Commissioning and Installation Services and Construction Services in respect of Commercial or Industrial Buildings and Civil Structures - wrong availment of Cenvat credit on improper invoices which were not addressed to their registered account - penalty. Short payment of service tax under the head of Maintenance or Repair Service and Erection, Commissioning Installation Services - HELD THAT:- The issue involved in the present case is only vis- -vis production of the documents showing the receipt/non-receipt of the amount against which the demand of Rs.4,44,939/- has been made - the said documents also not found to be available in the appeal file - one opportunity granted to the appellant to produce all these documents before the Original Authority for consideration and if satisfied that any part of the amount against which service tax has been demand, have not been received by the appellant to allow him the benefit of the same - matter on remand. Short payment of service tax to the tune of Rs.1,20,094/- by way of wrong availment of abatement under the category of Erection, Commissioning and Installation Services and Construction Services in respect of Commercial or Industrial Buildings and Civil Structures - HELD THAT:- As the appellant failed to establish that claim for exemption under the notification no 1/2006-ST, the demand made by denying abatement for determination of taxable value for the levy of service cannot be faulted with - demand upheld. Short payment of service tax to the tune of Rs.69,864/- by way of wrong availment of Cenvat credit on improper invoices which were not addressed to their registered account - HELD THAT:- The issue in this regard is no longer res integra and the Tribunal/Courts have decided that for claiming the benefit of input services, it is not necessary that invoices be addressed to the registered premises of the appellant - reliance can be placed in mPortal India Wireless Solutions P. Ltd. [ 2011 (9) TMI 450 - KARNATAKA HIGH COURT] - there are no merits in the impugned order seeking to deny the Cenvat credit on this ground. Penalty - HELD THAT:- Penalties imposed on the appellant need to be re-determined by the Original Authority on the basis of his findings on the issues for which the matter is remanded back to the Original Authority. Appeal is partly allowed - part matter on remand.
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2024 (2) TMI 561
Refund of Education Cess and S H Education Cess paid through PLA - appeal rejected on account of non deposit of mandatory pre-deposit - HELD THAT:- The Parallel proceedings for recovery of the self-credit/refund erroneously taken by the appellant in respect of Education Cess and S H Education Cess during the overlapping period, were adjudicated by the original authority as well as by the appellate authorities of the department and appellant was asked to deposit an amount of Rs. 22,69,936/-. Thereafter, the CESTAT vide its Final Order [ 2018 (10) TMI 2020 - CESTAT CHANDIGARH] held that the appellant is entitled to take the refund of Education Cess and S H Education Cess in view of the judgment of the Hon ble Supreme Court in the case of SRD Nutrients Pvt. Ltd. [ 2017 (11) TMI 655 - SUPREME COURT ] - It is also found that pursuant to CESTAT s Order dated 25.10.2010, the appellant duly applied for refund of the amount so deposited and was granted by the original authority vide its order dated 11.03.2019 wherein the Original authority has also observed that the appellant is entitled for refund of Education Cess and S H Education Cess and by following the decisions of the CESTAT, the Original authority has rightly granted the refund. The High Court has stated that the decision in SRD Nutrients (P) Limited [ 2017 (11) TMI 655 - SUPREME COURT ] had attained finality and was binding on the parties thereto. Therefore, the subsequent decision of this Court overruling SRD Nutrients (P) Limited in the case of M/s Unicorn Industries [ 2019 (12) TMI 286 - SUPREME COURT ] cannot have a bearing on past decisions which had attained finality although they had followed SRD Nutrients (P) Limited, which was subsequently overruled in M/s Unicorn Industries. Otherwise a pandora's box would be opened and there would be no end to litigation, which is against public policy. In view of the above, the appellant is entitled to the refund of Education Cess and S H Education Cess and the said order has been complied with by the Revenue.
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2024 (2) TMI 560
Classification of goods - PP FIBC bags - to be classified under Chapter Heading 3923 2990 or under 6305 3200? - undervaluation with an intention to evade payment of duty - period from February 2009 to July 2009 - HELD THAT:- With regard to classification, this Bench has already taken a view in the case of M/s. Big Bags Inda (P) Ltd. [ 2023 (6) TMI 1361 - CESTAT BANGALORE] wherein it has been clearly held that items PP FIBC bags are rightly classifiable under Chapter 6305 3200. The demand of Rs.83,96,616/- along with interest and penalty is set aside - appellant has not disputed the issue of undervaluation and therefore, the demand of Rs.1,80,403/- along with interest and penalty is upheld. Appeal allowed in part.
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CST, VAT & Sales Tax
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2024 (2) TMI 559
Adjustment of Demand with the Refund while objections were pending - Refund the amounts claimed along with interest as per the return which was submitted by the petitioner for the first quarter of Financial Year 2016-2017 - it was held by High Court that The respondents shall consequently compute the amounts which would become refundable to the petitioner in light of our observations appearing hereinabove and affect disbursement accordingly. The aforesaid refunds shall be disbursed along with interest in terms of Section 42 of the Act. HELD THAT:- There are no reason to interfere with the impugned judgment and order passed by the High Court - SLP dismissed.
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Indian Laws
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2024 (2) TMI 558
Seeking grant of anticipatory bail - allegation against the petitioner is that he in connivance with co-accused namely Arshdeep Singh and Ravinder Kumar, who were allegedly the thugs, he introduced the complainant to CA Arshdeep Singh and in return, he got a cut of Rs. 30,000/- which he had showed as a professional fee - HELD THAT:- It remains undisputed that the petitioner had received Rs. 30,000/-. This Court has refrained from commenting further because all accused are not parties before this Court in the present case, and any observation would cause severe prejudice against them. Unfortunately, some professions in our country have become highly unethical, and the practitioners accept cuts for referring the work instead of referring the matters on a reciprocal basis or ethical or professional grounds. Although with a heavy heart, this Court cannot ignore the existence of such unethical practices, which are widely prevalent in many professions, including some of the unethical Chartered Accountants. There would be no justification for the petitioner for pre-trial incarceration and custodial interrogation subject to the condition that the petitioner shall fully cooperate for recovery of Rs. 30,000/-. Petitioner is directed to cooperate in the investigation for recovery of Rs. 30,000/- within 15 days. On failure to do so, the concerned Superintendent of Police shall apply for cancellation of bail, and bail would be cancelled on this ground alone. It is further clarified that the above observations are only to decide the present bail petition and for no other purpose. Petition allowed.
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