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Newsletter: Where Service Meets Reader Approval. TMI Tax Updates - e-Newsletter February 16, 2024 Case Laws in this Newsletter: GST Income Tax Customs Insolvency & Bankruptcy PMLA Service Tax Central Excise CST, VAT & Sales Tax Indian Laws Articles Documents Required for Registration Of a Company in India Assessee permitted to withdraw pre-deposit amount from frozen bank account for filing appeal Learning from recently reported judgment in case of M/S. PASARI CASTING AND ROLLING MILLS PRIVATE LTD. TDS Deductors may witness notices on deduction, if the counter-party disagrees Penalties should not be imposed solely for technical errors lacking any intent to evade tax News Department of Revenue, Ministry of Finance, invites applications for appointment to the posts of the Judicial Members, Technical Members (Centre) and Technical Member (State) in Principal Bench and States Benches of GST Appellate Tribunal APEDA hosts Capacity Building Programme and Buyer Meet in Mirzapur to unlock agricultural export potential Exchange Rate Notification No. 13/2024- Customs (N.T.) India’s merchandise exports in Jan 2024 registers 3.12 % growth at USD 36.92 Billion over USD 35.80 Billion in Jan 2023 Fundamental Shifts in the Global Economy: New Complexities, Challenges and Policy Options (Keynote Address by Shri Shaktikanta Das, Governor, Reserve Bank of India - February 15, 2024 - Delivered at the 59th SEACEN Governors' Conference in Mumbai) Joint Press Statement [India and Peru Trade Agreement negotiations gains momentum – 6th Round takes place in Lima] Notifications Companies Law G.S.R. 107(E) - dated 14-2-2024 - Co. Law Companies (Registration Offices and Fees) Amendment Rules, 2024. GST - States S.O. 52 - dated 12-1-2024 - Jammu & Kashmir SGST Seeks to amend Notification No. SRO-GST 13/2017, dated the 08th July, 2017 198-F.T. - dated 31-1-2024 - West Bengal SGST Seeks to notify special procedure to be followed by a registered person engaged in manufacturing of certain goods, such as, tobacco and tobacco products, pan masala etc. 197-F.T. - dated 31-1-2024 - West Bengal SGST Seeks to rescind Notification No.1487-F.T., dated the 28th day of August, 2023 196-F.T. - dated 31-1-2024 - West Bengal SGST Seeks to bring a technical change whereby HSN code for LPG is harmonised with the updated HSN code for LPG, resulting further amendments in this Department notification No. 1125-F.T., dated 28.06.2017. 195-F.T. - dated 31-1-2024 - West Bengal SGST Seeks to extend, u/s 168A, the time limit specified under sub-section (10) of section 73 for issuance of order under sub-section (9) of section 73 of the Act. Highlights / Catch Notes GST Scope of revision proceedings - refund order warrant revision or not - levy of interest under the impugned order was contrary to Section 50(3) of the TNGST Act or not - As a result of the amended Rule 89(5) and the subsequent upholding of such amendment by a Division Bench of this Court and the Hon'ble Supreme Court, learned Additional Government Pleader submits that no interference is warranted with the impugned revision order. - The High Court noted that, the petitioner has assailed the order on the ground that it travels beyond the scope of revision proceedings under Section 108 of the TNGST Act. No findings were recorded with regard to this objection in the impugned order. - Matter restored back for reconsideration. Visit to Get Source Resumption of seized cash/currency u/s 67 of CGST Act - Scope and definition of "goods / things" - cash was sale proceeds of unaccounted goods or not - The High court concludes that cash cannot be considered among the "things" subject to seizure under Section 67(2) of the CGST Act. - Furthermore, the court finds that there is no evidence to support the seizure of the cash as representing the sale proceeds of unaccounted goods, as required by the Act. - The action taken by the Officers was therefore a coercive action. CGST Act does not support such an action of forcibly taking over the possession of the currency from the premises of any person. - The amount directed to be released to the petitioner forthwith. Visit to Get Source Extension of period for issuance of show cause notice u/s 73 of GST Act, 2017 - Validity of N/N. 09/2023 - The Hich Court noted that the Notification extends the time limit under Section 73(10) of the CGST Act, attributing the extension to the COVID-19 pandemic as a force majeure event. - The court acknowledges previous extensions of the time limit and the interim reliefs granted by other High Courts to noticees facing similar situations. - The court allows proceedings to continue on the Show Cause Notice but prohibits the passing of a final order until the returnable date. Visit to Get Source Penalty order - wrongful mention of place of supply in E-Way bills - intent to evade tax or not - The High Court noted that the incorrect address mentioned in the E-Way bills was the registered office of the petitioner, suggesting a technical or clerical error rather than an intentional attempt to evade tax. - The court concludes that since most documents were accompanied with the goods and only some E-Way bills contained errors, with correct addresses mentioned elsewhere, no presumption of tax evasion arises. - Consequently, the penalty orders quashed and set aside. Visit to Get Source Cancellation of GST registration of the petitioner with retrospective effect - The High Court held that, Records clearly demonstrate that the Petitioner had submitted an application seeking cancellation of the GST registration on 17.07.2020 which was rejected and thereafter, vide order dated 30.09.2022, the registration of the petitioner has been cancelled retrospectively with effect from 01.07.2017 - It is clear that both the petitioner and the respondent want the GST registration to be cancelled, though for different reasons. - The petition is allowed, and the order of cancellation is modified to operate from 31.03.2020, aligning with the petitioner's discontinuation of business. Visit to Get Source Income Tax Nature of expenses - The Supreme Court Dismissed the review petition against the judgement [2023 (10) TMI 786 - SUPREME COURT] wherein it was held that, High Court of Delhi was not right in apportioning the expenditure incurred towards establishing, operating and maintaining telecom services, as partly revenue and partly capital by dividing the licence fee into two periods - The nomenclature and the manner of payment is irrelevant. The payment post 31 July, 1999 is a continuation of the payment pre 31 July, 1999 albeit in an altered format which does not take away the essence of the payment.". Visit to Get Source TDS u/s 194C - liability to deduct tax - External Development Charges (EDC) - payments made to the Haryana Shahari Vikas Pradhikaran [HSVP] (Earlier known as HUDA) - The High Court held that, Section 196 frees sums payable to the Government, RBI or a corporation established by or under a Central Act from the obligation of tax being collected at source. Undisputedly, HSVP would neither fall within the ambit of clause (1) or clause (3) of Section 196. The mere fact that HSVP has been constituted under a statutory enactment does not make it the “Government”. - The court found that EDC payments fall within the ambit of Section 194C, imposing a duty on the payer to deduct tax from payments made to a contractor, without discretion to assess the chargeability of the payment to tax. Visit to Get Source Weighted deductions claimed u/s 35(2AB) - The petitioner challenged the restriction of the eligibility period for weighted deductions on R&D expenditure, contending it should cover all expenditures since 01 April 2018, not just from 27 February 2019. - The High Court held that the restriction was untenable and against the legislative intent of Section 35(2AB), which aims to encourage R&D by allowing deductions for related expenditures without linking them to the date of DSIR approval. - The Court clarified that the eligibility for deductions under Section 35(2AB) is not limited to expenditures incurred post the DSIR's approval of the R&D facility. Visit to Get Source Validity of reopening of assessment - grievance raised that the objections raised were not specifically dealt - Procedure prescribed u/s 148A followed or not? - The Central Board of Direct Taxes (CBDT) after the decision of Supreme Court in Ashish Agarwal issued guidelines for issuance of notice u/s 148 - The High court found that the impugned order did not adhere to the prescribed procedures u/s 148A of the Act and the CBDT guidelines. The order was quashed, and the matter was remitted back to the respondent for further proceedings in accordance with the law. - Consequently, the HC remanded the matter back to proceed with notice u/s 148-A(b) in accordance with law. Visit to Get Source Block assessment - Validity of assessment u/s 158BC r.w.s. 158BD - The High court allowed the appeal, holding that the assessment proceedings were illegal due to the failure of the assessing officer to record satisfaction as required under Section 158BD of the Income Tax Act. The appellant provided sufficient evidence to support the ownership claim of the seized cash, and the assessing officer's doubts were deemed unjustified. Visit to Get Source Validity of assessment order u/s 144C - petitioner filed objection to the draft assessment order well within the time of thirty days before the DRP - The High Court held that, if the assessing authority who issued the notice himself did not mention that the objection to the draft assessment order was to be filed before the Dispute Resolution Panel as well as the assessing authority, presuming that the petitioner must have known that the objection was required to be filed before the assessing authority is a very high expectation by the assessing authority from the assessee. - The matter remanded back to the assessing authority to consider the direction issued by the DRP and pass a fresh assessment order in accordance with the law. Visit to Get Source Transfer Pricing Adjustments - The Tribunal upheld the Ld. DRP's directions on various objections raised by the taxpayer, including the consideration of multiple-year data, peculiar economic conditions, abnormal business loss, under-utilization of capacity, and treatment of expenses. - However, the ITAT found that the Assessing Officer (AO) had not fully complied with the Ld. DRP's directions, specifically regarding working capital adjustments. It directed the AO/TPO to consider all of the Ld. DRP's directions while drafting the final assessment order. - Matter restored back. Visit to Get Source Revision u/s 263 - taxability of interest under section 28 of Land Acquisition Act - ‘no enquiry’ or ‘lack of enquiry’ - The ITAT held that, the opinion of the Ld. PCIT that the Ld. AO should have passed the assessment in accordance with the amended law and binding decision in Mahender Pal Narang’s case [2020 (3) TMI 1115 - PUNJAB AND HARYANA HIGH COURT] overlooking the decision of Hon’ble Supreme Court in Ghanshyam’s HUF’s [2009 (7) TMI 12 - SUPREME COURT] case is not sustainable. - The ITAT further observed that, it can at best be said to be a debatable issue on which two views are possible and the Ld. AO accepts one of the views. - Revision order quashed. Visit to Get Source TP Adjustment - Notional Interest on Outstanding Receivables - While acknowledging that receivables from AEs constitute an international transaction, the tribunal held that when TNMM is applied, the net margin already accounts for such notional interest costs. Thus, no separate adjustment for notional interest on receivables was warranted, and the tribunal directed the AO to delete the upward adjustment made for overdue receivables from AEs. - Further, Ld. AO / TPO directed to examine and consider the appropriate adjustments arising out of the working capital differences in the computation of the ALP. Visit to Get Source TP Adjustment - selection of comparables - The tribunal directed exclusion of three comparables from the TPO's list, as they were involved in garment manufacturing, not processing services like the assessee. The tribunal found these companies functionally different from BAI and, therefore, not comparable. Visit to Get Source Addition based on voluntary disclosure made by the key person of the assesse group during the course of search which has subsequently been retracted - The statement recorded u/s 132(4) - The Tribunal observed that admissions made under duress or misconception can be retracted. The reliance solely on such statements for making additions, without corroborative evidence, is not sustainable. - The Tribunal held that without any incriminating material specifically linking the income to undisclosed sources, the disclosed income should be treated as business income, not taxable u/s 115BBE. Visit to Get Source Revision u/s 263 against non-Est order - The ITAT held that, return filed beyond the prescribed time limit under notice u/s 148 should not be treated as non-est. - However, the Tribunal held that, the order passed u/s 147 r.w.s. 143(3) in the present case was invalid on account of non-issuance of notice u/s 143(2) by the Ld. AO which is an accepted fact discernible from the order of Ld. PCIT, wherein it has been impliedly observed that no notice u/s 143(2) was issued, stating that the issuance of notice u/s 143(2) is not required. - Consequently, the revisionary proceedings initiated u/s 263 are without appropriate jurisdiction with the Ld. PCIT, since, the same cannot be invoked on the foundation of an invalid/ void ab initio assessment order. Visit to Get Source Estimation of income - Bogus purchases - CIT(A) has disallowed 25% of the purchases on the grounds that the assessee could have made some super profits - The tribunal found that, given the assessee's exports and corresponding sales, purchases were necessary for production. It concurred with the CIT(A)'s decision but adjusted the profit estimation embedded in the bogus purchases to 12.5%, based on judicial precedents and the specific facts of the case. Visit to Get Source Taxability of software sale by the US entity to Indian entities - Indian subsidiary is held as DAPE [Dependent Agent Permanent Establishment] of the assessee in India - when DAPE is remunerated at arm’s length - The Tribunal, following its previous rulings, found the assessment to misinterpret the distribution agreement and BAPA, holding that if the DAPE is remunerated at arm's length, no further addition can be made. Visit to Get Source Customs Import of foods of Malaysian origin - Benefit of Exemption under Preferential Trade Agreement - failure to prove the condition of qualifying value content of the goods should not be less than 35% of the FOB value - cost structure on the basis of data privacy was not provided - onus of prove shifts to Department (shifting burden) - The Tribunal held that the burden of proof was unfairly placed on the appellant despite documentary evidence and government-to-government verification. - Failure of Indian authorities to get more detailed verification or underlying cost data from the Malaysian Government authorities cannot be held against the appellant. - Benefit of concessional rate of Customs Duty allowed. Visit to Get Source Revocation of Customs Broker license - Regulation 10(n) requires the Customs Broker to verify correctness of Importer Exporter Code (IEC) number, Goods and Services Tax Identification Number (GSTIN),identity of his client and functioning of his client - The CESTAT referenced previous judgments and legal interpretations to support its findings, emphasizing that Customs Brokers cannot be held responsible for the correctness of documents issued by government officers, as long as they verify the authenticity of those documents. - The CESTAT set aside the impugned order, revoking the Customs Broker's license, forfeiting the security deposit, and imposing a penalty Visit to Get Source Classification of import of Ores - The CESTAT held that the lower authorities erred in classifying the imported goods as 'iron ore concentrate' based on speculative inferences from the supplier's website and without proper analysis conforming to standards. - The Tribunal found that the classification adopted by the appellant as 'iron ore' under tariff item 2601 1119 was correct, making the import eligible for exemption under notification no. 12/2012-CE. Visit to Get Source Indian Laws Dishonour of cheque - insufficient funds - vicarious liability of partners - The court concludes that the complaint filed under Section 138 of the Negotiable Instruments Act, solely against the partners without impleading the partnership firm, is flawed. It exercises its power under Section 482 of the Criminal Procedure Code to quash the complaint. Visit to Get Source IBC Inclusion of the Appellant in the Committee of Creditors (CoC) and also to provide voting rights to the Applicant/ Appellant - The appellant, a foreign financial lender, extended loans to the Corporate Debtor - Appellant is a related party of the Corporate Debtor or not - The NCLAT found no substantial evidence that the Corporate Debtor acted on the appellant's advice, directions, or instructions as required under Section 5(24)(h). The actions of Rembert Biemond as a director of the Corporate Debtor could not be construed as directions from the appellant. - The NCLAT set aside the Adjudicating Authority's order, allowing the appellant's inclusion in the CoC with proportionate voting rights, based on the admitted claim amount in the CIRP. Visit to Get Source Scope of duty of RP - Seeking acceptance of the claims which had been rejected by the Resolution Professional - Proof of services provided and debts - The NCLAT held that the RP did not exceed his powers by seeking additional proof to substantiate the claims. The RP's role includes verifying claims to ensure their accuracy for the CIRP process, and the request for additional proof was within his administrative powers, not constituting adjudication. - The Tribunal found that the RP acted within his mandate by seeking further evidence to ensure the credibility of the insolvency process. Visit to Get Source PMLA Money Laundering - commission of eight predicate offences - The Supreme Court allowed the bail to the appellant by observing that, at highest, the allegation against the appellant is of possession of unaccounted money and illegal acquisition of immovable properties. But, prima facie, there is nothing to link the assets of the appellant with the predicate offences. Visit to Get Source Rejection of anticipatory bail - Money Laundering - Bike Bot Scam - Funds were diverted to shell companies for concealing the true purpose of collecting it and for rotation - proceeds of crime - The Allahabad High Court rejected the application for anticipatory bail, citing the serious nature of the economic offenses involved, the ongoing investigation's requirements, and the legal strictures against bail in such cases. Visit to Get Source Composition of Adjudicating Authority under PMLA and its Jurisdiction - Whether the quasi judicial bodies should consist of members having requisite qualification in the field of law and should be appointed instead of members having no experience in the field of law? - The Telangana High Court set aside the learned Single Judge's order, holding that the PMLA does not mandate the Adjudicating Authority to include a member with legal experience. The PMLA provisions allow for the Authority to perform its designated functions without this requirement, supported by the appellate mechanism that ensures judicial review and adherence to legal standards. Visit to Get Source Central Excise Valuation - MRP based value u/s 4A or transaction value u/s 4 - Extended period of limitation - package of MCCBs cleared to industrial/institutional consumers - The entire issue has arisen because of change of opinion due to differing legal interpretations. The Appellant has contended that he was under the bonafide belief that there was no requirement to affix MRP on the switchgear products sold by them industrial/institutional consumers through their dealers - The tribunal set aside the demand on the ground of period of limitation. Visit to Get Source VAT Validity of assessment order u/s 25(1) of the Kerala Value Added Tax Act, 2003 - suppression of turnover - evasion of tax - The court held that the petitioner did not respond to the notices, objections, or appear for the personal hearing. The court finds no jurisdictional error or violation of the law in the assessment order and dismisses the writ petition. However, the petitioner is advised to explore other available remedies if advised. Visit to Get Source Case Laws: GST 2024 (2) TMI 764 Cancellation of GST registration - non-filing of returns for the periods subsequent to April 2022 - HELD THAT:- In TVL. SUGUNA CUTPIECE CENTER VERSUS THE APPELLATE DEPUTY COMMISSIONER (ST) (GST) , THE ASSISTANT COMMISSIONER (CIRCLE) , SALEM BAZAAR. [ 2022 (2) TMI 933 - MADRAS HIGH COURT] , this Court directed restoration of GST registration subject to several terms and conditions. The said judgment was followed thereafter in many cases. In order to maintain consistency, the said judgment is followed. Petition disposed off. 2024 (2) TMI 763 Scope of revision proceedings - refund order warrant revision or not - levy of interest under the impugned order was contrary to Section 50(3) of the TNGST Act or not - HELD THAT:- Nonetheless, the petitioner has assailed the order on the ground that it travels beyond the scope of revision proceedings under Section 108 of the TNGST Act. No findings were recorded with regard to this objection in the impugned order. The petitioner also contended that interest was not leviable under Section 50(3) of the TNGST Act and that penalty should not be levied in the facts and circumstances. While these contentions were noticed in the impugned order, the respondent did not engage with these contentions and record reasons for not accepting the same. For such reason, the order impugned herein warrants interference. The impugned order is quashed and the matter is remanded for reconsideration. The respondent is directed to provide a reasonable opportunity, including a personal hearing, to the petitioner and thereafter issue a speaking order. This exercise shall be completed within a maximum period of two months from the date of receipt of a copy of this order. Petition disposed off. 2024 (2) TMI 762 Validity of seizure of cash/currency u/s 67 of CGST Act - Scope and definition of goods / things - cash was sale proceeds of unaccounted goods or not - whether cash/currency (money), coming under the scope of thing and can be seized or not - Jurisdiction of proper officer for such seizure - Direction for issuance of directions declaring resumption of currency as recorded as illegal, arbitrary and contrary to the provisions of law - seeking directions to the respondents to return the resumed currency to the petitioners - HELD THAT:- Cash is clearly excluded from the definition of the term goods as the same falls squarely within the definition of the word money as defined in Sub-section (75) of Section 2 of the Act. In the case of Kanishka Matta [ 2020 (9) TMI 42 - MADHYA PRADESH HIGH COURT ], Indore Bench of Madhya Pradesh High Court rejected the prayer for the release of cash that was seized from the premises of the petitioner. The Court held that the word thing in Section 67 (2) would include money - Even otherwise, in the facts of this case what is evident is that cash was seized/resumed vide Panchnama dated 04.10.2021 and in accordance with sub section (7) of Section 67 thereof, when no notice in respect thereof is given within six months of seizure of the goods, the goods shall be returned to the person from whose possession they were seized. On this ground also, petitioners are entitled for the return of resumed cash. Undisputedly, petitioners had not handed over the cash to the concerned Officers voluntarily. The action taken by the Officers was therefore a coercive action. CGST Act does not support such an action of forcibly taking over the possession of the currency from the premises of any person. There are no justification for the resumption of the cash and its continued retention by the respondents. Petitions are therefore allowed with directions to the respondents to forthwith remit the proceeds of the fixed deposit (along with interest) to the bank account of the entities/person from whose possession the same was resumed during search conducted on 04.10.2021 - petition allowed. 2024 (2) TMI 761 Extension of period for issuance of show cause notice u/s 73 of GST Act, 2017 - Validity of N/N. 09/2023 Central Tax dated 31.03.2023 - validity of Demand cum Show Cause Notice - HELD THAT:- Issue notice, returnable on 15.03.2024. In the Explanation to Section 168A of the CGST Act, 2017, the expression force majeure means a case of war, epidemic, flood, drought, fire, cyclone, earthquake or any other calamity caused by nature or otherwise affecting the implementation of any of the provisions of the Act. It is noticed that the time limit under sub-section [10] of Section 73 of the SGCT Act was extended once prior to the Notification dated 31.03.2023. Various High Courts have provided interim reliefs to the noticees by inter alia observing that the proceedings in pursuance of the impugned Show Cause Notice may proceed but no final order shall be passed. The said interim orders are stated to be in operation till date. The petitioner shall file its reply to the impugned Show Cause Notice on or before 15.03.2024. It is further observed that till the returnable date, the proceedings initiated pursuant to the impugned Show Cause notice may proceed, but no final order in respect of the impugned Show Cause Notice shall be passed. 2024 (2) TMI 760 Penalty order - wrongful mention of place of supply in E-Way bills - intent to evade tax or not - reason for the mistake having been done by some of the parties is that on filling the GSTIN (registration number) of the petitioner while generating the E-Way bill, the principal place of business is automatically reflected in the place of supply(which is auto populated) - HELD THAT:- Upon a perusal of the detention order, the order imposing penalty and the order passed in appeal, a common thread appears to run through the same, i.e. there was non-compliance of the Rules by putting the wrong address in four of the e-way bills. The common thread that also runs through these orders is that the invoices and the bilties in all the eight invoices and in four of the e-way bills was correct in all respect including the address. Undisputedly, the address in four of the e-way bills was incorrect. However, what is to be seen is that this particular address was not an anonymous address, but was the address of the registered office of the petitioner. The explanation provided by the petitioner with regard to a mistake on the part of the supplier to have populated the incorrect address is not far fetched, especially since the correct addresses were mentioned in all the eight invoices and the eight bilties. From the above factual matrix, it does not appear that there was any intention whatsoever to evade tax. In the present case, it is palpably clear that the goods were accompanied with the relevant invoices, bilty documents and the e-way bills. It is to be noted that the invoices and bilty documents also contain the correct address of the destination and only four out of eight of the e-way bills had the incorrect address. Even this incorrect address was the registered office of the petitioner. In such a case, no presumption to evade tax arises at all. The mere technical error committed by the petitioner cannot result in imposition of such harsh penalty upon the petitioner. The penalty imposed in this particular case is without any basis in law, and accordingly, impugned penalty order dated February 14, 2020 and the order passed in appeal dated October 13, 2020 are quashed and set aside - The writ petition is allowed. 2024 (2) TMI 759 Cancellation of GST registration of the petitioner with retrospective effect - failure to pay tax to the account of the Central/State Government beyond a period of three months from the date on which such payment becomes due - violation of principles of natural justice - HELD THAT:- It may be noticed that the impugned order dated 08.02.2021 states that the registration is liable to be cancelled for the following reason whereas no reply to notice to show cause has been submitted . The order also seeks to cancel the registration with retrospective effect from 11.09.2017. However, there is no material on record to show as to why the registration is sought to be cancelled retrospectively - Show Cause Notice dated 29.01.2021 also does not put the petitioner to notice that the registration is liable to be cancelled retrospectively. Accordingly, petitioner had no opportunity to even object to the retrospective cancellation of the registration. In terms of Section 29(2) of the Central Goods and Services Tax Act, 2017, the proper officer may cancel the GST registration of a person from such date including any retrospective date, as he may deem fit if the circumstances set out in the said sub-section are satisfied. Registration cannot be cancelled with retrospective effect mechanically - Merely, because a taxpayer has not filed the returns for some period does not mean that the taxpayer s registration is required to be cancelled with retrospective date also covering the period when the returns were filed and the taxpayer was compliant. Records clearly demonstrate that the Petitioner had submitted an application seeking cancellation of the GST registration on 16.01.2021 which was rejected and thereafter, vide order dated 08.02.2021, the registration of the petitioner has been cancelled retrospectively with effect from 11.09.2017 - It is clear that both the petitioner and the respondent want the GST registration to be cancelled, though for different reasons. The order of cancellation is modified to the extent that the same shall operate with effect from 16.01.2021, i.e., the date of the petitioner s application for cancellation of registration - Petition allowed. 2024 (2) TMI 758 Cancellation of GST registration of the petitioner with retrospective effect - The appeal of the petitioner was dismissed solely on the ground of limitation - HELD THAT:- In terms of Section 29(2) of the Central Goods and Services Tax Act, 2017, the proper officer may cancel the GST registration of a person from such date including any retrospective date, as he may deem fit if the circumstances set out in the said sub-section are satisfied. Registration cannot be cancelled with retrospective effect mechanically - Merely, because a taxpayer has not filed the returns for some period does not mean that the taxpayer s registration is required to be cancelled with retrospective date also covering the period when the returns were filed and the taxpayer was compliant. It is important to note that, according to the respondent, one of the consequences for cancelling a tax payer s registration with retrospective effect is that the taxpayer s customers are denied the input tax credit availed in respect of the supplies made by the tax payer during such period. Although, it is not considered apposite to examine this aspect but assuming that the respondent s contention in this regard is correct, it would follow that the proper officer is also required to consider this aspect while passing any order for cancellation of GST registration with retrospective effect. Thus, a taxpayer s registration can be cancelled with retrospective effect only where such consequences are intended and are warranted. Records clearly demonstrate that the Petitioner had submitted an application seeking cancellation of the GST registration on 17.07.2020 which was rejected and thereafter, vide order dated 30.09.2022, the registration of the petitioner has been cancelled retrospectively with effect from 01.07.2017 - It is clear that both the petitioner and the respondent want the GST registration to be cancelled, though for different reasons. The order of cancellation is modified to the extent that the same shall operate with effect from 31.03.2020, i.e., the date on which the petitioner discontinued his business - petition allowed. Income Tax 2024 (2) TMI 757 Review petition - Nature of expenses - apportioning the licence fee as partly revenue and partly capital - variable licence fee paid by the assessees under the New Telecom Policy, 1999 to Department of Telecommunications ( DoT ) - Allowability of revenue expenses u/s 37 or capital in nature [to be amortised u/s 35ABB] - Payment of royalty - distinction between a payment made to acquire a right, and payment of royalty in a broad sense - As decided in BHARTI HEXACOM LTD. [ 2023 (10) TMI 786 - SUPREME COURT] single transaction cannot be split up, in an artificial manner into a capital payment and revenue payments by simply considering the mode of payment. Such a characterisation would be contrary to the settled position of law - High Court of Delhi was not right in apportioning the expenditure incurred towards establishing, operating and maintaining telecom services, as partly revenue and partly capital by dividing the licence fee into two periods HELD THAT:- Having carefully gone through the Review Petition, the order under challenge and the papers annexed therewith, we are satisfied that there is no error apparent on the face of the record or any merit in the Review Petition, warranting reconsideration of the order impugned. The Review Petition is, accordingly, dismissed. 2024 (2) TMI 756 TDS u/s 194C - liability to deduct tax - External Development Charges (EDC) - payments made to the Haryana Shahari Vikas Pradhikaran [HSVP] (earlier known as the Haryana Urban Development Authority - HUDA ) - As per revenue department functioning under the Government of Haryana, would clearly fall within the ambit of Section 194C and as a consequence of default, the petitioners are liable to be proceeded under Section 201 as also to answer why penalty be not levied in terms of Section 271C of the Act. HELD THAT:- The liability to deduct tax stands effaced only if a recipient obtains a certificate of exemption or where a beneficiary produces a certificate which obliges the payer to deduct tax at a rate lower than that prescribed. HSVP had obtained no certification as contemplated in terms of the aforenoted provisions nor had it obtained a declaration that moneys received by it were exempt from tax. In view of the aforesaid, it is apparent that the writ petitioners did not stand absolved of the obligation to deduct tax on payments that were being made to HSVP. Section 196 frees sums payable to the Government, RBI or a corporation established by or under a Central Act from the obligation of tax being collected at source. Undisputedly, HSVP would neither fall within the ambit of clause (1) or clause (3) of Section 196. The mere fact that HSVP has been constituted under a statutory enactment does not make it the Government . Even if it were discharging functions akin to or similar to governmental obligations or performing activities closely connected with State functions, the same would not result in us recognising HSVP as the Government. This issue, in our considered opinion, stands conclusively answered against the writ petitioners by Adityapur Industrial Area[ 2006 (5) TMI 61 - SUPREME COURT] . The said decision eloquently explains the distinction which is liable to be borne in mind between a sovereign government and a statutory authority. Quoting from Basu s Commentary on the Constitution of India, the Supreme Court noted that it is the property of the State which alone is immune from taxation under Article 289 of the Constitution. Ultimately, the question which warrants consideration is whether EDC was a payment to the State. This must necessarily be answered in the negative bearing in mind the undisputed fact that the income was placed in the hands and at the disposal of HSVP. We note that undisputedly at least till 31 March 2017 all EDC payments even as per the DTCP were being made out in favour of HSVP. It is only thereafter that EDC was deposited with the DTCP. This too leads us to the irresistible conclusion that the payments made to HSVP would not fall within Section 196. We also bear in mind the unambiguous legislative command of Section 194C which places the payer under the unshirkable obligation of deducting tax from all payments being made to a contractor. We have already noticed in the preceding parts of this decision that Section 194C of the Act vests no discretion in the payer to examine or contemplate chargeability of that payment to tax. We find ourselves unable to concur with the view taken by the Tribunal in Santur [ 2019 (12) TMI 1106 - ITAT DELHI] , Satya [ 2022 (6) TMI 687 - ITAT DELHI] , Perfect Constech [ 2020 (12) TMI 1158 - ITAT DELHI] and Spaze Tower[ 2022 (5) TMI 1344 - ITAT DELHI] . Those decisions have proceeded on the basis of a contractual obligation between the petitioner and HSVP being a prerequisite. They have additionally based their decision on the fact that HSVP was undertaking external development work on the directives of the DTCP. These, for reasons recorded hereinabove, were factors wholly irrelevant for the purposes of considering the applicability of Section 194C. Show Cause Notices not specifically adverting to the specific provision contained in Chapter XVIIB and in terms of which the petitioners were held liable to deduct tax - Chapter XVII-B embodies Sections 192 to 206AB and refers to various contingencies and situations where a payer is bound in law to deduct tax. The respondents were thus clearly obliged to indicate with sufficient clarity the specific statutory provision contained in Chapter XVII-B and which according to them placed an obligation on the petitioners to deduct tax. This aspect of criticality could not have been left to supposition or for the writ petitioners grappling to understand and discern an obligation to deduct tax flowing from any one of the more than the fifty sections comprised in Chapter XVII-B. A Show Cause Notice fundamentally must apprise the noticee of the case that it is called upon to answer, the context in which an explanation is sought and the charge that it has to answer. The notice thus cannot leave the assessee grappling with or trying to discern the provision which it is supposed to have infringed. In the absence of requisite particulars, the Show Cause Notice would be liable to be quashed on the ground of being wholly vague. Assessee in Default u/s 201 - Levy of penalties by virtue of Sections 221 and 271C - Pursuant to the interim orders that were made on these writ petitions, while the respondents were permitted to continue further in terms of the show cause notices impugned herein, orders if passed against the petitioner were not to be given effect to. We have not been apprised of the status of those proceedings nor have the respondents apprised of any final orders that may have been framed in respect of each of the writ petitioners. We have also not been apprised of whether the EDC payments have been taxed in the hands of the HSVP or whether the same was offered to tax. We are also cognizant of the legal position of penalty be it either under Section 221 or 271C not being an inevitable corollary in case of default. This position is made explicit by the Second Proviso to Section 221 as well as Section 273B. The imposition of penalty where a question with respect to taxability had remained unclear or where an assessee had good and sufficient cause to not deposit the tax were lucidly explained by the Supreme Court in CIT v. Eli Lilly Co. (India) (P) Ltd [ 2009 (3) TMI 33 - SUPREME COURT] We are accordingly of the opinion that while the challenge as raised in the writ petition must fail, subject to due verification of the issues flagged in para 82 and 83 above as well as the scope of a person in default and penalty provisions as noticed above, the respondents may revive the proceedings presently pending and conclude the same in light of the observations made hereinabove. Accordingly, we negative the challenge raised in these writ petitions insofar as the invocation of Section 194C of the Act is concerned and hold that EDC payments would be covered thereunder. For reasons recorded in the body of this judgment, we also turn down the challenge to the Clarification issued by the Central Board of Direct Taxes dated 23 December 2017. We dispose of those writ petitions where final orders under Section 201 may not have been made by according liberty to the respondents to revive the pending show cause notice proceedings and conclude the same in accordance with law bearing in mind the observations appearing hereinabove. The proceedings on the pending show cause notices would be liable to be decided afresh after affording an opportunity of hearing to the writ petitioners and decided in accordance with this judgment. 2024 (2) TMI 755 Weighted deductions claimed u/s 35(2AB) - R D expenditure incurred before the date of approval from DSIR - expenditure incurred on the creation and establishment of an in-house Research and Development facility [R D facility], being restricted to the period - 27 February 2019 to 31 March 2020 - HELD THAT:- Both Section 35(2AB) and Rule 6 speak of expenditure which has already been incurred and therefore it would be wholly incorrect to read those provisions as envisaging benefits being extended only to such expenditure that may have been sustained after the facility has been accorded approval. We also find ourselves in agreement with the view expressed in Claris Lifesciences Ltd. [ 2008 (8) TMI 579 - GUJARAT HIGH COURT ] when it observed that the provisions of the Act and the Rules nowhere suggest that the date of approval of the R D facility would constitute the cutoff date for the purposes of evaluating eligibility of weighted deductions or for expenses incurred only from that date onwards being liable to be taken into account for the purposes of Section 35(2AB) of the Act. The conditions which have come to be incorporated by the respondent in the impugned communications and which are impugned before us are rendered unsustainable even when one evaluates them on the basis of the Guidelines framed by the DSIR and more particularly Clause 5(v) thereof. As is evident from a reading of Clause 5(v), it clearly contemplates a situation where an applicant may have moved an application for approval under the Rules in respect of an in-house facility which is yet to be accorded recognition by the DSIR. Clause 5(v) while dealing with such a scenario in unambiguous terms speaks of expenditure incurred from the commencement of said preceding year . It also employs the phrase capital investments on R D in the financial year preceding the year in which the firm applied to the prescribed authority for the approval . It is thus manifest that a centre which is yet to be accorded recognition by the DSIR is not prevented from claiming benefits contemplated u/s 35(2AB) of the Act. The only condition which the Guidelines impose for the extension of Section 35(2AB) benefits in such a situation is of the center being subsequently recognized by DSIR . Viewed thus both on the anvil of Rule 6(7A)(b)(ii) of the Rules as well as the Guidelines themselves, it is evident that the condition of only such expenditure as was incurred post 27 February 2019 being eligible for deduction u/s 35(2AB) is rendered wholly untenable. We accordingly allow the instant writ petition and quash the communications issued by the respondent. An amended Form 3CM shall consequently be issued to be read as effective from 01 April 2018. We additionally call upon the respondent to frame Form 3CL afresh specifying the expenditure incurred by the petitioner in Financial Year 2018-19 commencing from 01 April 2018 for the purposes of computation of weighted deductions u/s 35(2AB) 2024 (2) TMI 754 Validity of final assessment order u/s 144B and 144C - objection with the DRP - as argued notwithstanding filing of objections with DRP ) u/s 144C Subsection 2(b) within 30 days prescribed AO has proceeded to pass the impugned assessment order - stand of Revenue is assessee only informed the AO that it is filing an objection with the DRP and therefore, not to proceed to pass the final assessment order. But, the copy of the objections filed was not made available to the AO - HELD THAT:- Objections are to be considered by the DRP and not the AO, who has to only comply with the directions given under Sub-section 5 of Section 144C of the Act by DRP, as required under Sub-section 13 of Section 144C of the Act. At the same time, we also find that the AO has admitted in the assessment order that the objections were available in the portal. The reference before DRP is still pending. In our view, since Petitioner had already filed a reference raising its objections to the DRP and Section 144C of the Act requires the AO to pass the final order in conformity with the view expressed by the DRP, we will be justified in setting aside the order of AO dated 30th December 2023, which is impugned in this petition. We would also observe that the AO cannot be faulted for passing the impugned order. At the same time, the AO will also have benefit of considering the views of DRP while passing a fresh assessment order. 2024 (2) TMI 753 Validity of reopening of assessment - grievance raised that the objections raised were not specifically dealt - procedure prescribed u/s 148A followed or not? - whether A.O. while passing the impugned order has considered the material on record, the replies filed and passed a speaking order? HELD THAT:- From the language of Section 148A and the guidelines, it is clear that before initiating the proceedings u/s 148 with prior approval of the specified authority, the A.O. if so, required may conduct an enquiry with regard to the information suggesting escaped assessment. The assessee is to be provided an opportunity of hearing by issuing notice specifying the date of not less than 7 days but not exceeding 30 days, which may be extended on application. The information relied upon for reassessment and outcome of enquiry if conducted any, is to be supplied. In case of information having been received from investigating wing or other agency, brief summary of information along with relevant portion of report and details of documents relied upon is to be supplied. The decision as to if it is a fit case for issuance of notice u/s 148 is to be taken with prior approval of the specified authority, on the basis of material available on record and considering the reply filed by the assessee. The order is to be passed within one month from ending of the month when reply was filed and in case no reply was filed within one month from end of month when time to file reply expires. The proviso to Section 148A of the Act provides exception to the applicability of Section 148A of the Act. Addition on cash loan and the interest received - In the survey conducted documents were seized indicating that petitioner had advanced cash loan and interest was received by petitioner. The statement of Shri Ram Gopal Sukhal was also to this effect. On issuance of notice, the petitioner filed replies demanding copy of the material relied upon and raising objections. In the impugned order the reply was reproduced and it was concluded that the petitioner had not made argument on merits of the case hence, had nothing to explain about the cash loan and the interest received. It is mandatory for A.O. to pass speaking order, taking into consideration not only the material on record but also the reply filed. The additional reply was not considered, consequently there was no occasion to deal with the objections raised therein. The impugned order is not as per the procedure prescribed under Section 148A of the Act and cannot stand judicial scrutiny. The impugned order passed u/s 148A(d) is unsustainable, therefore, the other contention raised by the counsel for the petitioner needs no dilation. Scope of alternative remedy - There cannot be quibble with the proposition that if an Act mandates, a particular thing to be done in the manner, it has to be done in that way. The provisions of Section 148A of the Act and the guidelines issued by the CBDT provides for passing a speaking order after considering the reply and the material on record. The impugned order is not in consonance with the procedure prescribed and issue goes to the root of the jurisdiction for initiating the proceedings under Section 148 of the Act. The case falls within the exception to the self-imposed restriction of not entertaining the writ where alternative remedy is available. Reference be made to Whirlpool Corporation Vs. Registrar of Trade Marks [ 1998 (10) TMI 510 - SUPREME COURT] wherein the Supreme Court provided at least three contingencies where the writ petition can be entertained in spite of alternative remedy. (i) Where it is a case of enforcement of fundamental rights, (ii) Where it is the case of violation of principle of natural justice and lastly, (iii) Where the proceedings are without jurisdiction or vires are challenged. The reliance placed by the counsel for the respondent on the decisions of Bhagchand Dinga and Ram Kishore Kadal [ 2023 (4) TMI 1299 - RAJASTHAN HIGH COURT] is of no avail. The writ petitions were filed in those cases after passing of the reassessment order or just a day before when it was passed and the petitioner participated in proceedings. In the present case, the challenge to the initiation of proceedings was subjudice before this Court and during the pendency, the order under Section 147 of the Act was passed. The impugned order is quashed, resultantly, the consequential proceedings. 2024 (2) TMI 752 Block assessment - Validity of assessment u/s 158BD when record did not show that any satisfaction was recorded nor any notice was issued under the said provision r.w.s.158BC - HELD THAT:- Under Section 158BD, the existence of cogent and demonstrative material is germane to the Assessing Officer s satisfaction for initiation of action u/s 158BD in concluding that the seized documents belong to a person other than the searched person is necessary for initiating action u/s 158BD. For the purpose of Section 158BD of the Act, a satisfaction note is sine qua non and must be prepared by the Assessing Officer who has jurisdiction over such other person. Since as per admitted case of the assessee, AO has not prepared a satisfaction note either before or along with or even after the assessment proceedings as mandatorily required u/s 158BD, therefore, the entire proceedings initiated by the AO to pass the assessment order u/s 158BC, is patently illegal, particularly when the entire facts and evidences in the form of seizure of books of account including cash book, statement of the appellant assessee and Sri J.M. Kothari u/s 131, statement of parties who made the payment to the entities of the appellant assessee recorded u/s 131 and the letters of Sri J.M. Kothari and the appellant assessee evidencing sufficient explanation regarding cash seized to be belonging to the aforesaid entities and reflected in their cash book were well available on record. Thus impugned order relating to block assessment u/s 158BC(c) passed cannot be sustained and is hereby set aside. Decided in favour of assessee. 2024 (2) TMI 751 Validity of assessment order u/s 144C - petitioner filed objection to the draft assessment order well within the time of thirty days before the DRP - While the Dispute Resolution Panel was still considering the objection to the draft assessment, the assessing authority has finalised the impugned assessment order on the ground that the petitioner had not filed objection to the draft assessment order HELD THAT:- If the assessing authority who issued the notice himself did not mention that the objection to the draft assessment order was to be filed before the Dispute Resolution Panel as well as the assessing authority, presuming that the petitioner must have known that the objection was required to be filed before the assessing authority is a very high expectation by the assessing authority from the assessee. The objection to the draft assessment order was filed before the Dispute Resolution Panel, and the said objection must be available on the web portal and, therefore, the assessing authority recording that no objection was filed to the draft assessment order is incorrect. The assessing authority has proceeded in a highly technical manner. The Dispute Resolution Panel has already considered the objections and given direction in Exhibit P-4 to the assessing authority. The impugned assessment order wherein the assessing authority had observed that no objection to the draft assessment order was filed by the assessing authority is palpably wrong. The assessment order gets vitiated for incorrect findings. Therefore, set aside the assessment order and remand the matter back to the assessing authority to consider the direction issued by the Dispute Resolution Panel and pass a fresh assessment order. 2024 (2) TMI 750 Addition u/s 68 - creditworthiness of 17 lenders were found satisfactory but creditworthiness and genuineness of 11 lenders were not found satisfactory - addition as the income of the petitioner from unknown sources - HELD THAT:- From Ext. P1, it is evident that only the names of 22 persons were mentioned, from whom, the petitioner had taken fresh loan in the assessment year 2021-2022. However, the assessment order would mention that the petitioner had taken loan from 28 persons. The transaction of 5 persons were not put to notice to the petitioner for initiating its response. Unless and until the petitioner was not put to notice, in respect of the transaction of the aforesaid 5 persons, there was no occasion for him to give any response in respect of the proposed additions. Therefore we find to the extend of the addition of amount of loan advanced by the aforesaid 5 persons with the return of income of the petitioner under Section 68, is not in accordance with law and the same has vitiated, the assessment order impugned in the present writ petition to that extent. Present writ petition is disposed of, and the matter is remanded back to the assessing authority, to pass a fresh assessment order. The petitioner is directed to file his response / supporting documents in respect of the loan advanced by the 5 persons. The respondents are directed to activate the link with intimation to the petitioner for enabling the petitioner to file his explanation in respect of these 5 transactions only. It is made clear that no opportunity is given in respect of the other creditors and the remand is only in respect of the 5 creditors as mentioned above. 2024 (2) TMI 749 Transfer Pricing Adjustments - Validity of final assessment order u/s. 143(3) r.w.s 144C(13) passed not in conformity with the directions issued by the Ld. DRP - Request for change in the Transfer Pricing Method (TPM) from Transactional Net Margin Method (TNMM) to Comparable Uncontrolled Price (CUP) method - HELD THAT:- We find from the directions of the Ld. DRP wherein the objections raised by the assessee with respect to providing appropriate adjustment towards difference on account of working capital, the Ld. DRP has directed the Ld. AO to compute the mean of the working capital adjustment in respect of the comparables retained. AO in his order while considering the other directions of the Ld. DRP has erred in not considering the directions of the DRP with regard to working capital adjustment. We find that the Ld. AO has partly carried out the directions and partly ignored the directions with regard to working capital adjustment. We are therefore of the considered view that it would be deemed fit to direct the Ld. AO/ Ld.TPO to consider all the directions of the Ld. DRP while drafting the final assessment order. Accordingly, this legal ground raised by the assessee is partly allowed for statistical purposes. Selection of MAM [ Most appropriate method] - changing the method from TNMM to CUP which was rejected by the Ld. DRP - HELD THAT:- The principle of Res Judicata is not applicable to tax proceedings but at the same time, when there is no change in the facts, then it is the requirement of law that consistency should be maintained and the method will be adopted by the assessee for benchmarking its international transaction should not be disturbed. The assessee has adopted the TNMM during the earlier and subsequent assessment years as Most Appropriate Method. In the absence of any reasoning brought on record, there is no merit in deviating or taking a stand contrary to the accepted method in both the preceding and succeeding years. We therefore find merit in the arguments of the Ld. DR and in the present case, since there is no change in the facts and circumstances which merits deviating from the TNMM to CUP method to benchmark its international transactions.Thus the change in method from TNMM to CUP method cannot be entertained and thereby dismissed the grounds raised by the assessee. Comparable selection - AR submitted that the objections raised before the Ld. DRP were not considered and rejected by the Ld. DRP - HELD THAT:- DRP has observed and rejected the objections raised by the assessee with respect to multiple / prior year data and comparable companies while determining the ALP in relation to the assessee that the assessee has failed to establish that the use of data of earlier FYs could result in more reliable results. DRP also relied on various judicial pronouncements and Rule-10B(iv) of the IT Rules, 1962. The assessee also failed to produce any data to establish its objections raised before the Ld. DRP, even before us. DRP also rejected the objections of the assessee with regard to peculiar economic conditions faced by the assessee by observing that any such differences are taken care of while computing the mean margin - with regard to abnormal business loss and under-utilization of the capacity by the assessee company, the assessee has failed to demonstrate such factors which are unique to the assessee-company and does not exist in the case of comparable companies. We find that the assessee has also failed to produce or demonstrate such factors even before us. With regard to non-operating and extraordinary expenses, the Ld. DRP has observed that these cannot be considered as operating expenses as it is only a provision made in the books of account. We also find that the assessee has failed to establish that the above expenses are extraordinary in nature and these are not incurred by the comparable companies which necessitate appropriate adjustment. We are therefore inclined to uphold the directions of the Ld. DRP on the above issues thereby rejecting the grounds raised by the assessee. 2024 (2) TMI 748 Revision u/s 263 - taxability of interest under section 28 of Land Acquisition Act - no enquiry or lack of enquiry - as per CIT AO had completed the assessment without carrying out necessary and proper enquiry which he ought to have carried out in respect of the treatment of interest received on compensation or enhanced compensation - HELD THAT:- In the light of evidence available on records, it cannot be alleged as done by the Ld. PCIT that it is a case of no enquiry or lack of enquiry . No doubt that the Ld. AO did not discuss elaborately in the assessment order but that alone cannot make the order erroneous as held in CIT vs. Sunbeam Auto Ltd [ 2009 (9) TMI 633 - DELHI HIGH COURT] and Ganpat Ram Bisnoi [ 2005 (8) TMI 106 - RAJASTHAN HIGH COURT] An incorrect assumption of facts or an incorrect application of law will satisfy the requirement of the order being erroneous as held in Malabar Industrial Co. Ltd.[ 2000 (2) TMI 10 - SUPREME COURT] None of these elements exist in the case at hand. The opinion of the Ld. PCIT that the Ld. AO should have passed the assessment in accordance with the amended law and binding decision in Mahender Pal Narang s case [ 2020 (3) TMI 1115 - PUNJAB AND HARYANA HIGH COURT] overlooking the decision of Hon ble Supreme Court in Ghanshyam s HUF s [ 2009 (7) TMI 12 - SUPREME COURT] case is not sustainable. Reliance by the Ld. PCIT on the decision in Mahender Pal Narang s case is misplaced. During assessment proceedings in response to notice under section 143(2) and 142(1) of the Act, with reference to specific query on receipt of interest under section 28 of Land Acquisition Act, the assessee explained that interest received under section 28 of the Land Acquisition Act has been held to be part of compensation by Apex Court in the case of CIT vs. Ghanshyam HUF [ 2009 (7) TMI 12 - SUPREME COURT] , the same being exempt under section 10(37) of the Act has not been included in the total income of the assessee while filing return of income. The Ld. AO accepted the explanation of the assessee. Since the order of the Ld. AO is based on the decision of the Hon ble Supreme Court in Ghanshyam HUF (supra) on the issue of taxability of interest received by the assessee under section 28 of Land Acquisition Act, it can at best be said to be a debatable issue on which two views are possible and the Ld. AO accepts one of the views. In this view of the matter too, the Ld. PCIT cannot assume revisional jurisdiction as held by the Hon ble Delhi High Court in CIT vs. Hindustan Coca Cola Beverages P Ltd. [ 2011 (1) TMI 138 - DELHI HIGH COURT] Thus we hold that the order of the Ld. PCIT is not sustainable. Decided in favour of assessee. 2024 (2) TMI 747 TP Adjustment - selection of comparables - HELD THAT:- Exclude Kitex Garments Limited from the list of comparables as engaged in manufacturing of fabrics and export its fabrics and sells to domestic customers directly whereas the assessee is engaged in the business of processing of garments thereby leading to the conclusion that the operations of Kitex Garments Limited are functionally different from that of the assessee-company. Kewal Kiran Clothing Ltd is also engaged in the business of manufacturing and marketing of apparels and trading of lifestyle accessories and generating power from Wind Mills. Further, Kewal Kiran Clothing Limited is also engaged in branding and advertising activities under its brand name Killer . This leads to the conclusion that Kewal Kiran Clothing Limited is engaged in a diversified activities and deriving income from various kinds of operations whereas the assessee is engaged only in one activity ie., processing services. Further, we also find from the annual report Kewal Kiran Clothing Limited has incurred huge processing charges by sub-contracting the work to other entities such as the assessee-company, hence it cannot be considered as a comparable for the computation of ALP of the assessee. Virat Industries Ltd is functionally different from that of the assessee-company and cannot be considered as a comparable for the computation of ALP. Liabilities no longer required written back - whether it has to be treated as operating income or non-operating income while computing the mark-up of the assessee? - HELD THAT:- Since this liability was waived off by BAL, it was written back and considered as income in the impugned AY. Respectfully following the ratio laid down in the case of Pr. CIT vs. Tetra Pak India Ltd [ 2023 (10) TMI 43 - BOMBAY HIGH COURT] , we direct the Ld. AO to include the liabilities written back in the impugned assessment year as operating income. TPO has not considered certain expenses such as provision for doubtful debts, provisions for warranties, provision of doubtful deposits and miscellaneous expenditure written off as operating in nature - submission of the Ld. AR that due to political instability in Visakhapatnam arising out of the agitations due to bifurcation of the separate state of Telangana, the assessee was forced to incur certain expenditure to minimize the impact of the agitations on the work output of the processing unit - Revenue Authorities rejected the contention of the Ld. AR stating that the assessee has not furnished any details of the expenses before the Ld. TPO - HELD THAT:- We direct the assessee to produce the details of expenditure incurred by the assessee which was considered as extraordinary to the TPO / AO. We direct the Ld. AO / TPO to provide one more opportunity to the assessee for submission of the details of expenditure and decide the allowability in accordance with law. Accordingly, this ground raised by the assessee is allowed for statistical purposes. Whether foreign exchange loss is non-operating in nature in the determination of the mark-up on cost of the assessee? - HELD THAT:- TPO has observed that the foreign exchange fluctuations on account of hedging operations cannot be considered as operating item. However, in the instant case we find that the assessee has not engaged in hedging activities and foreign exchange loss is a transactional loss and in our opinion it should be considered as an operating cost for mark-up purposes. Further there is also merit in the argument of the Ld DR wherein the ratio laid in the cases NVH India Auto Parts P Ltd [ 2023 (11) TMI 935 - ITAT CHENNAI] and Phoenix Comtrade P Ltd [ 2023 (5) TMI 943 - ITAT MUMBAI] was emphasised. Therefore, we find no infirmity in the order of the Ld. Revenue Authorities and accordingly, this ground raised by the assessee is dismissed. Material difference providing appropriate adjustments in the working capital between the assessee and the comparable companies selected by the Ld. TPO was not considered by the Ld. DRP - DRP has held that the assessee has not demonstrated with any data or information and the impact of difference on the pricing, cost and profits - HELD THAT:- AR has not provided any documents regarding the working capital adjustments. Following the principles of natural justice, in order to provide one more opportunity to the assessee, we hereby direct the Ld. AO / TPO to consider the impact of working capital adjustments of the assessee company and appropriate material differences with that of the comparable companies and decide on this issue accordingly. We also direct the assessee to submit necessary documentation to the Ld. AO / TPO on this issue. Accordingly, this ground raised by the assessee is allowed for statistical purposes. Computation of the notional interest on outstanding receivables - HELD THAT:- We reject the arguments of the Ld. AR that outstanding receivable is not an international transaction. Whether separate adjustment is required to be made in respect of receivables? - We find that from the directions of the Ld. DRP that the assessee has not demonstrated the working capital adjustments before the Ld. Revenue Authorities while determining the ALP under TNM method both for the Tested Party and the comparables. We hereby direct the Ld. AO / TPO to examine and consider the appropriate adjustments arising out of the working capital differences in the computation of the ALP. The assessee is also directed to submit the working relating to working capital adjustments of the assessee company. Following the principle of consistency if the working capital adjustments on the ALP has been already factored in its pricing / profitability vis- -vis that of its comparables further adjustment to the margin of the assessee on the outstanding receivables cannot be justified and no separate upward adjustment on outstanding receivables is required, since TNM method is considered as the most appropriate method, which was also not disputed by Revenue, the net margin thereunder would take care of such notional interest cost. Accordingly, this ground raised by the assessee is allowed for statistical purposes. 2024 (2) TMI 746 Addition based on voluntary disclosure made by the key person of the assesse group during the course of search which has subsequently been retracted - assessee surrendered additional business income - addition on basis of statement recorded u/s 132(4) - HELD THAT:- It is, a settled law that no addition can be made solely on the basis of statement recorded u/s 132(4) of the Act in the absence of any corroborative material or evidence to support the disclosure or the addition. We, therefore, conclude AO was not justified in making addition only on the basis of statement recorded during the course of search u/s 132(4) of the Act which has subsequently been retracted and no other incriminating material was found during the course of search which could have a live link with the alleged addition made in the hands of the assessee. Treatment to income u/s 115BBE - We find that he assessee is private limited company. Though a disclosure has been made in the statement made to offer Rs. 75 Lakhs for tax but there is no reference to any incriminating material found during the course of search. The assessee has disclosed Rs. 75 Lakhs as extraordinary item in the profit and loss account and offered it as income. The said income cannot be treated as unexplained unless any seized material has been referred by the revenue authorities. In absence thereof and also considering the fact that the assessee is into the regular business, the alleged sum of Rs. 75 Lakhs can be considered only as a business income and, therefore, the ld. Assessing Officer erred in treating it as an income u/s 115BBE of the Act liable to be taxed. This action of the ld. Assessing Officer is not justified. We accordingly, allow the cross-objection raised by the assessee. 2024 (2) TMI 745 Revision u/s 263 against non-Est order - as per assessee assessment which was taken-up for revisionary proceedings was completed u/s 143(3) r.w.s. 147 but without issuance of statutory notice u/s 143(2), therefore, the assessment was bad in law, invalid and void ab initio - as per DR Return filed by the assessee was delayed which is against the provisions of the law, thus, has been categorized as a non-Est return which does not required issuance of any notice u/s 143(2), therefore, the order passed u/s 147 r.w.s. 143(3) was a valid order and the order passed by the Ld. PCIT u/s 263 was eligible to be upheld Validity of a return filed belatedly in response to notice u/s 148 - HELD THAT:- When a return is filed by the assessee beyond the stipulated time period, the same would not render as invalid or non-Est in the eyes of law merely because it was filed with delay. Analogy in this respect has been duly discussed and decided in the case of Smt. Amani Ismile Rangari [ 2017 (10) TMI 1079 - ITAT MUMBAI] which in our opinion was the right approach to be adopted, accordingly, in the present case the return filed by the assessee though belatedly, which has been recognised by issuing a valid acknowledgement, subsequently the same was E-verified by the assessee and has been duly accepted by the e-portal of the department. AO has acted upon such return therefore the same cannot be treated as a non-Est return. Mandation of issuance of notice u/s 143(2) in completing the assessment u/s 147 r.w.s. 143(3) - As in the case of Shri Dev Narayan Sahu [ 2022 (5) TMI 110 - ITAT RAIPUR] wherein it has been decided that, issuance of notice u/s 143(2) is a sine-qua-non for framing of an assessment u/s 143(3), this view is well supported by the judgment of M/s Hotel Blue Moon[ 2010 (2) TMI 1 - SUPREME COURT] , wherein as held that issuing of notice u/s 143(2) of the Act is mandatory and not a procedural mistake, if the notice is not served within the prescribed period then assessment order would be invalid. In view of such observations, we are of the considered opinion that the order passed u/s 147 r.w.s. 143(3) in the present case was invalid on account of non-issuance of notice u/s 143(2) by the Ld. AO which is an accepted fact discernible from the order of Ld. PCIT, wherein it has been impliedly observed that no notice u/s 143(2) was issued, stating that the issuance of notice u/s 143(2) is not required. Validity of an assessment order during the Appellate Proceedings - This issue duly answered in the case of M/s Maruti Clean Coal Power Ltd [ 2022 (10) TMI 1215 - ITAT RAIPUR] Accordingly, we hold that as per law the assessee is permitted to challenge the validity of order passed u/s 263 on the ground that the impugned assessment order selected for revisionary proceedings, was a non-Est order. Order framed u/s 147 r.w.s. 143(3), which was passed dehors issuance of a notice u/s 143(2) is liable to be treated as non-Est, and therefore, the revisionary proceedings initiated u/s 263 are without appropriate jurisdiction with the Ld. PCIT, since, the same cannot be invoked on the foundation of an invalid/ void ab initio assessment order. 2024 (2) TMI 744 Estimation of income - Bogus purchases - CIT(A) has disallowed 25% of the purchases on the grounds that the assessee could have made some super profits - HELD THAT:- As relying on NKG Infrastructure Ltd. [ 2023 (6) TMI 1272 - ITAT DELHI] we hold that justice would be well served if the profit on these purchases is determined at 12.5%. Appeals of the assessee are partly allowed. 2024 (2) TMI 743 Taxability of software sale by the US entity to Indian entities - Indian subsidiary is held as DAPE [Dependent Agent Permanent Establishment] of the assessee in India - when DAPE is remunerated at arm s length - HELD THAT:- Tribunal in assessee s own case in preceding assessment years [ 2022 (5) TMI 1513 - ITAT MUMBAI] has decided the similar issue in favour of the assessee and held that once the DAPE is remunerated at arm s length no further addition can be made in the hands of the assessee. As transactions in question were at arm s length price, no taxability survives in the hands of the assessee. Once basic taxability under the DAPE itself comes to an end, all other issues raised in the appeal are rendered academic and infructuous - Decided in favour of assessee. Short grant of credit of TDS - This issue is restored to the file of the AO with the direction to grant TDS credit, in accordance with the law, after conducting the necessary verification. As a result, ground raised in assessee s appeal is allowed for statistical purposes. Customs 2024 (2) TMI 742 Valuation of imported goods - inclusion of discount in assessable value - related party transaction - it was held by CESTAT that In the light of the status of the appellant as exclusive commercial agent , the 25% discount enjoyed by them is reasonable and the same cannot be termed as abnormal discount - HELD THAT:- There are no requirement to interfere with the impugned judgment and order passed by the High Court. Hence, the Civil Appeal is dismissed. 2024 (2) TMI 741 Goods imported from Malaysian origin - benefit of N/N. 46/2011-Cus dated 01.06.2011, as amended - onus to prove on Department (shifting burden) - Department in the absence of cost data sought to reject the certificate of origin by issuing show cause notice - HELD THAT:- In the instant case, the certificate was duly got verified through the Government to Government process and Malaysian authorities have not doubted the issuance of genuine certificate of origin nor its contents. However, the department in the absence of cost data has placed the whole burden of proof on the appellants, despite documentary evidence coming to the fore by way of certificate of origin and getting verified by the Malaysian authority. It is clear the cost data of Malaysian manufacturer having been provided or having been denied is a matter between Government to Government (G to G) and cannot be held against the appellants. Failure of Indian authorities to get more detailed verification or underlying cost data from the Malaysian Government authorities cannot be held against the appellant, who discharged the burden to claim benefit by providing the relevant prescribed document under the agreement and the Customs notification. On production of such evidence, it was for the department to discharge the onus as shifted upon it. Appeal allowed. 2024 (2) TMI 740 Import of foods of Malaysian origin - Benefit of Notification No.46/2011-Cus and 53/2011-Cus - failure to prove the condition of qualifying value content of the goods should not be less than 35% of the FOB value - cost structure on the basis of data privacy was not provided - onus of prove shifts to Department (shifting burden) - HELD THAT:- In the instant case, the certificate was duly got verified through the Government to Government process and Malaysian authorities have not doubted the issuance of genuine certificate of origin nor its contents. However, the department in the absence of cost data has placed the whole burden of proof on the appellants, despite documentary evidence coming to the fore by way of certificate of origin and same getting verified from Malaysian authorities - Failure of Indian authorities to get more detailed verification or underlying cost data from the Malaysian Government authorities cannot be held against the appellant, who discharged their burden to claim benefit by producing the relevant prescribed document under the agreement and the Customs notification. On production of such evidence, it was for the department to discharge the burden as shifted on it. Appeal allowed. 2024 (2) TMI 739 Revocation of Customs Broker license - forfeiture of security deposit - levy of penalty - involvement in fraudulent IGST refunds, who were not traceable, along with the details Customs Brokers involved in the clearance of the alleged risky consignments - violation of Regulation 10(n) of CBLR, 2018 - HELD THAT:- Regulation 10(n) requires the Customs Broker to verify the identity of the client using reliable, independent, authentic documents, data or information. In other words, he should know who the client is and the client cannot be some fictitious person. As per the Regulation, this identity can be established by independent, reliable, authentic: a) documents; b) data; or c) information. Any of these methods can be employed by the Customs Broker to verify the identity of its client. It is not necessary that the CB appellant has to only conduct a physical verification or launch an investigation. So long as the CB can find documents which are independent, reliable and authentic to establish the identity of his client, this obligation is fulfilled. In addition, under Regulation 10(n) the Customs Broker is required to verify the functioning of the client at the declared address using reliable, independent, authentic documents, data or information - there is nothing on record to show that either of these documents were fake or forged. Therefore, once verification of the address is complete, the responsibility cast on the appellant under Regulation 10(n) stands fulfilled. The impugned order revoking the Customs Brokers license of the appellant, forfeiting their security deposit and further imposing penalty on the appellant cannot be sustained and are set aside - Appeal allowed. 2024 (2) TMI 738 Revocation of Customs Broker license - forfeiture of security deposit - levy of penalty - involvement in fraudulent IGST refunds, who were not traceable, along with the details Customs Brokers involved in the clearance of the alleged risky consignments - violation of Regulation 10(n) of CBLR 2018 - HELD THAT:- Regulation 10(n) requires the Customs Broker to verify correctness of Importer Exporter Code (IEC) number, Goods and Services Tax Identification Number (GSTIN),identity of his client and functioning of his client at the declared address by using reliable, independent, authentic documents, data or information. This obligation essentially involves two step verification viz., the correctness of IEC number and the correctness of GSTIN and in addition, verify the identity and functioning of the client using reliable, independent, authentic documents, data or information. It is noted that IEC and GSTIN are issued by the Government departments. Therefore, any verification would be based on the copies of these documents submitted by the client/exporter, which can be verified independently online in DGFT/GSTN portals. The Department cannot expect the appellant/CB to be responsible to ensure the correctness of the actions of the Government Department which have issued these certificates. Consequently, verification of certificates as part of the obligation under Regulation 10(n) on the Customs Broker stands satisfied as long as it satisfies itself that the IEC and the GSTIN were issued by the concerned officers. Under Regulation 10(n) the Customs Broker is required to verify the functioning of the client at the declared address using reliable, independent, authentic documents, data or information. This responsibility, again, can be fulfilled using documents or data or information so long as they are reliable, independent and authentic. Nothing in this clause requires the Customs Broker to physically go to the premises of the client to ensure that they are functioning at the premises. It is found that both the GSTIN as well as the IEC indicates the address of the client. This in itself is independent data to verify the correctness of the identity/address of the client. It is also noted that there is nothing on record to show that either of these documents were fake or forged. Therefore, once verification of the address is complete, the responsibility cast on the appellant under Regulation 10(n) stands fulfilled. The impugned order revoking the Customs Brokers license of the appellant, forfeiting their security deposit and further imposing penalty on the appellant cannot be sustained and are set aside - appeal allowed. 2024 (2) TMI 737 Refund claim/recovery of differential duty, along with applicable interest - import of Ores being in conformity with description corresponding to tariff item 2601 1119 or not - ineligibility for exemption extended to ores by notification issued under section 25 of Customs Act, 1962 - finalization of two provisional assessments under section 18 of Customs Act, 1962 upheld - HELD THAT:- It needs noting that the decision in M/S RUNGTA MINES LTD, M/S RUNGTA SONS PVT LTD, M/S SAIL, M/S KAMAL JEET SING AHLUWALIA, M/S ODISHA MINING CORPORATION LTD VERSUS COMMISSIONER OF CENTRAL EXCISE, CUSTOMS AND SERVICE TAX, BBSR-II [ 2016 (4) TMI 602 - CESTAT KOLKATA] pertained to determination of liability of duties of central excise on ascertainment of impugned process as amounting to manufacture which has no bearing on a levy concerned with goods crossing the frontiers and, particularly, when attributed to deeming fiction that finds place, through a note, in chapter 26 of Schedule to Central Excise Tariff Act, 1985. The source actual or fictional - of the liability, intended as the objective of Central Excise Act, 1944, is not material to duty that emanates from the authority of section 3(1) of Central Excise Tariff Act, 1975 prescribing levy, equivalent that of duty of excise chargeable, solely for being akin to goods emerging from manufacturing process; the process of emergence, whether in domestic production or activity overseas, is, of itself, irrelevant to the charging of this duty and rate thereof. To the extent that there is no variance in tax rates at the eight , or tariff item , level, the corresponding descriptions make for distinction without difference. Therein lies the nub: a tax policy that admits of tax preferences among the enumerations within a sub-heading which is bereft of methodology either inherent or insinuated to isolate and distinguish fails to communicate the intent and offers, thereby, little scope for judicial determination from having to steer clear of intervention in tax policy. It cannot, therefore, be conceived that the tax collection or assessment machinery have been endowed with competence to portray, or arrogate, such intent. In the absence of strict construction of executive empowerment, the potential for discrimination and discard of twin principles, constancy and continuity, of tax administration is rife. The lower authorities had not, in the absence of any other ground for distinguishment, ventured in either or both of those directions. Notwithstanding the conclusion of more sophistication inhering in the impugned goods, the assessable value was left untouched; not was any attempt made to establish that the goods were not lumps - it is inferred that the process by which ores becomes concentrates should make for finer form with high, and well above the base of 65 per cent, content that is designated as the threshold of the highest category of ores incorporated in the Tariff. It is the absence of such evaluation with unwarranted reliance on inapplicable Explanatory Notes that outrightly jeopardizes the findings in the impugned order. No attempt was made to appreciate the process, if any, by which the impugned goods reached the Fe content therein or conformity to any prescription attending upon the segregation, as well as differentiation by rates of duty, of ores and concentrates for levy of duties of central excise. Instead, a theoretical exposition of the nature of activities that the supplier claimed, in the public domain, to be proficient in was presumed, and speculatively so, as extending to the impugned goods without alluding to cause for arriving at such conclusion. The lower authorities have not conformed to the approved manner of arriving at classification of the impugned goods and that the impugned order must be set aside. The classification adopted by the appellant is not incorrect and, thence, eligibility for exemption from additional duty of customs follows. Appeal allowed. Insolvency & Bankruptcy 2024 (2) TMI 736 Rejection of application seeking a direction to the Resolution Professional to include the Appellant in the Committee of Creditors (CoC) and also to provide voting rights to the Applicant/ Appellant - The appellant, a foreign financial lender, extended loans to the Corporate Debtor - Appellant is a related party of the Corporate Debtor or not - HELD THAT:- Appellant has nothing to do with day to day functions of the Corporate Debtor, appointment of staff and employees of the Corporate Debtor or any of the day to day functions. The Adjudicating Authority again committed error in treating actions of Rembert Biemond as actions of Appellant. The Adjudicating Authority observed that Rembert Biemond is Managing Director of the Appellant - It is already noticed that when there are more than one Managing Director, functions on behalf of the Appellant can be carried out at least by two Managing Directors. Present is not a case that there is any evidence that two Managing Directors did any action which may suggest or indicate participation in the policy making process of the Corporate Debtor, therefore, finding of the Adjudicating Authority with regard to Section 5(24)(m)(i) is without any basis and cannot be sustained. The Adjudicating Authority failed to notice that Rembert Biemond is in the Board of Director of the Corporate Debtor since 2017 when he was nominated by a foreign investor of the Corporate Debtor and Rembert Biemond was not nominated by the Appellant in the Board of Corporate Debtor. Hence, the whole observation is fallacious. In spite of pleading of the Appellant that there was no material to suggest essential technical information were received by the Appellant or were given by the Appellant to the Corporate Debtor. No finding has been returned referring to any material. Appellant was only Financial Creditor who has extended loan to the Corporate Debtor. There being neither any pleading regarding provision of essential technical information to, or from, the Corporate Debtor nor any proof, there was no occasion to come to the conclusion that condition under Section 5(24)(m) were fulfilled - The conclusion of the Adjudicating Authority were wholly baseless. The Adjudicating Authority having not accepted the Appellant being related party on the basis of Section 5(24)(d) and holding of related party only on the basis of Section 5(24)(h) and (m), which already found that Section 5(24)(h) and (m) are not attracted, there are no substance in submission of learned counsel for the IRP that Appellant is a related party. The Adjudicating Authority committed error in holding the Appellant as a related party and rejecting application filed by the Appellant - the impugned order set aside - appeal allowed. 2024 (2) TMI 735 Scope of duty of RP - Seeking acceptance of the claims which had been rejected by the Resolution Professional - Proof of services provided and debts - RP did not convey any confirmation nor was any query raised until in response to a letter sent to the RP seeking status of his claims - it is contended by Appellant that the RP on his own had never requested the Appellant to provide further information or documents - whether the process and manner of treatment of the claims by the RP in respect of the claims filed by the Appellant is violative of the provisions of the IBC? - HELD THAT:- The RP had made it clear, time and again, that due to want of documents in support of their claims, the RP was unable to verify the claims of the Appellant. However, the Appellant failed to comply to the persistent request of the RP for documents. It was pointed out by the Learned Counsel for the Respondent that apart from unilaterally sending a composite invoice, the details of the services provided were not adequately explained by the Appellant except for enclosing a set of random snapshots of television news which find place at page 78-83A of the APB as against the scope of work claimed by the Appellant to be one which included generating positive stories, crisis management, tracking competitor news, overall media management etc. A glance at the proof of services provided on the other hand shows that it contained few newspaper advertisements on a film promotion. There are substance in the contention of the RP that not only were these media clippings skeletal and sketchy but that they were all issued on a single day while the invoice submitted was in respect of services performed for a period which was spread over more than one year. Examining the validity/sustainability of any contractual agreement including its formatting etc lies outside the purview of the charter of duties and responsibilities of the RP. In fact, determination of the tenability/validity of a contractual agreement falls in the realm of a civil dispute and therefore outside the scope and jurisdiction of both the Adjudicating Authority and the Appellate Tribunal. Be that as it may, this does not prevent the RP from seeking additional information from any creditor to substantiate his claims. In the present case, the Adjudicating Authority after considering in detail the entire facts and circumstances and material on record has rightly come to the conclusion that the claims submitted by the Appellant could not have been admitted in the CIRP of the Corporate Debtor. This inadequacy of documents to substantiate their claims by the Appellant has been noticed by the Adjudicating Authority in the impugned order - It is quite clear from the sequence of events in the present facts of the case that the RP had been consistently pointing out that he is not in a position to verify the claims due to want of documents substantiating the claims. There are no incidence of wilful negligence, or deliberate stone-walling of the claims on the part of the RP in dealing with the claim preferred by the Appellant. The Adjudicating Authority is agreed upon that the RP was well within his rights to exercise the discretion of seeking additional information from the Appellant and for which purpose he gave reasonable opportunity. The RP had made earnest and credible effort to verify the claims submitted by the Appellant and his conduct stands in sharp contrast to rather lacklustre effort by the Appellant in providing information to substantiate his claim. Thus, the bona-fide and fairness of the RP cannot be doubted. There are no error on the part of the Adjudicating Authority in affirming the conclusion drawn by the RP that the hindrance faced by him in deciding the claim of the Appellant was squarely on account of failure on the part of the Appellant to hand over proof of alleged services - there are no cogent grounds which warrants any interference in the impugned order - appeal dismissed. PMLA 2024 (2) TMI 734 Money Laundering - commission of eight predicate offences - proceeds of crime were derived or obtained as a result of any criminal activity relating to scheduled offences or not - HELD THAT:- Prima facie, it is found that nothing is stated therein to even indicate that the proceeds of crime were derived or obtained as a result of any criminal activity relating to scheduled offences. The existence of proceeds of crime as defined in Section 2(u) of the PMLA Act is a condition precedent for the commission of offence of money laundering under Section 3 of the PMLA Act. Therefore, on the basis of material placed on record, as of today, as far as the appellant is concerned, it is found that both the grounds in clause (ii) of sub-section 1 of Section 45 of the PMLA Act have been satisfied in this case. Therefore, the appellant deserves to be enlarged on bail, pending the disposal of the complaint under the PMLA Act - no adjudication made as regards the role played by any other accused in the same complaint. At highest, the allegation against the appellant is of possession of unaccounted money and illegal acquisition of immovable properties. But, prima facie, there is nothing to link the assets of the appellant with the predicate offences. Appeal allowed. 2024 (2) TMI 733 Rejection of anticipatory bail - Money Laundering - Bike Bot Scam - Funds were diverted to shell companies for concealing the true purpose of collecting it and for rotation - proceeds of crime - economic offence - trial not joined by applicant despite issuance of summons - HELD THAT:- Admitted case of the applicant is of receipt of Rs. 61 crore in the company account of Bhasin Group from company account of GIPL and Independent TV Ltd., both belong to Sachin Bhati. Subsequently Rs. 25 crore from the same was transferred to the personal account of the applicant on the very next date from the account of Bhasin Group. The applicant has been summoned by the trial court vide order dated 28.05.2022. Since then without proceeding to appear before the court concerned, he has been absconding till date. The said property as stated to have been sold out to GIPL is under attachment by Enforcement agency. In Pokar Ram v. State of Rajasthan and others [ 1985 (4) TMI 341 - SUPREME COURT ], the Apex Court had observed that relevant considerations governing the court's decision in granting anticipatory bail under Section 438 Cr.P.C. are materially different from those when an application for bail by a person who is arrested in the course of investigation. It further held that courts must be cautious and circumspect in exercising powers of anticipatory bail as it intrudes the sphere of investigation. In Vijay Madanlal Choudhary and Others Vs. Union of India and Others [ 2022 (7) TMI 1316 - SUPREME COURT] the Apex Court observed we have no hesitation in observing that in whatever form the relief is couched including the nature of proceedings, be it under Section 438 of the 1973 Code or for that matter, by invoking the jurisdiction of the Constitutional Court, the underlying principles and rigors of Section 45 of the 2002 must come into play and without exception ought to be reckoned to uphold the objectives of the 2002 Act, which is a special legislation providing for stringent regulatory measures for combating the menace of money-laundering. Looking to the nature of case, gravity of offence, the facts that the present matter relates to an economic offence, the fact that the applicant has not joined the trial court concerned despite issuance of summons to him, the law as laid down by the Apex Court, the fact regarding receipt of money from the companies and transfer of it in his personal account, the magnitude of offence, the fact that the property in question stands attached by the Enforcement authorities as a part of laundered money and the rigours of the twin conditions of Section 45 of the PMLA, 2002, the applicant being charge sheeted in the predicate offence and the long criminal antecedents of the applicant, this Court does not find it to be a fit case to grant anticipatory bail to the applicant. The present anticipatory bail application under Section 438 Cr.P.C. is, accordingly, rejected. 2024 (2) TMI 732 Validity of provisional order of attachment and SCN - Composition of Adjudicating Authority under PMLA and its Jurisdiction - grounds for questioning such validity is that single member cannot pass an order of attachment, as Section 6 of PMLA contemplates the constitution of adjudicating authority by a chairperson and two members - another ground attack is that the adjudicating authority was not a judicial member, and as such cannot perform quasi-judicial function of passing of the provisional order of attachment. Whether the power under Section 8 of PMLA conferred on an Adjudicating Authority can be exercised only by a member having experience in the field of law? - HELD THAT:- If the functions of Adjudicating Authority under Section 8 of PMLA, which is a creature of statute under Section 6 of PMLA, are considered, it is evident that it has authority to determine the questions which affects the rights of the persons and is required under PMLA to comply with the mandate contained in Section 8(2) of PMLA, undoubtedly performs quasi-judicial function. Whether the aforesaid quasi-judicial function under Section 8 of PMLA can be performed by an Adjudicating Authority, which can be exercised only by a member having experience in the field of law? - HELD THAT:- The Adjudicating Authority, is an authority constituted by a statute, namely PMLA, which confers the power on it under Section 8 of PMLA. An adjudication is a function which is performed by several statutory authorities under different enactments, namely under the Foreign Exchange Regulation Act, 1973; the Smugglers and Foreign Exchange Manipulators (Forfeiture of Property) Act, 1976; the Narcotic Drugs and Psychotropic Substances Act, 1985 and the Foreign Exchange Management Act, 1999. Thus, when legislature confers the function of adjudication on an authority under the statute, the same can be performed by such authority within the four corners of the power conferred on it. It is pertinent to note that under PMLA, the Adjudicating Authority neither has power to decide on the criminality of offence nor does it have power to impose punishment. In ROJER MATHEW VERSUS SOUTH INDIAN BANK LTD. OTHERS [ 2019 (11) TMI 716 - SUPREME COURT] , the Constitution Bench dealt with the challenge made to the constitutional validity of Part XIV of Finance Act, 2017 and Rules made thereunder and held that whenever Parliament decides to divest the traditional courts of their jurisdiction and transfer the same to other analogous court/tribunal, the qualification and acumen of member in such a tribunal must be commensurate with that of court from which adjudicatory function is transferred. Thus, it is evident that whenever the traditional Court is divested of its jurisdiction and the same is transferred to any other analogous Courts/tribunal, the qualification and acumen of such a member in the tribunal must be commensurate with that of the court from which such an adjudicatory function is transferred. In the instant case, it is noteworthy that Adjudicating Authority is neither a tribunal constituted under Article 323A or under 323B of the Constitution of India. None of the adjudicatory functions which are being performed by the Court had been transferred to the Adjudicating Authority. Thus, powers under Section 6 can be exercised by an Adjudicating Authority comprising single member. Therefore, the proposition that powers under Section 8 of PMLA can be exercised by the Adjudicating Authority comprising only from member in the field of law does not deserve acceptance as the same would render provisions of Section 6(5) and 6(7) of PMLA nugatory and ineffective. Appeal allowed. 2024 (2) TMI 731 Discharging the accused from the case upon allowing the petition u/s 227 of the Code of the Criminal Procedure, 1973 - fraudulent act of encashment of Railway Cheques - proceeds or crime - criminal activity relating to a scheduled offence - proceeds of crime and scheduled offence - parallel proceedings or not - benefit of Section 132 Evidence Act. - The accused was previously made an approver in a related CBI case. It is submitted by the petitioner that the Ld. Spl Court while passing the impugned order failed to consider that the two proceedings were independent of each other and dependent on two separate enquiry and complaint under two separate offence having separate effects and it has no binding with other proceedings. HELD THAT:- Though the proceeds of crime may be an independent offence, the total case under Section 3 of the PLMA Act rests on the case registered in respect of a scheduled offence in which the opposite party turned approver. If the case for a scheduled offence fails, the case under PLMA Act also fails, as the case under PLMA Act has been prima facie made out of the materials and evidence on record in the case in respect of a scheduled offence (herein registered by the CBI). Without the evidence provided by the opposite party as an approver, the case under PLMA would have not been made out and thus the opposite party is entitled to the relief provided under the law to an approver, not only in the case registered in respect of a scheduled offence but also in respect of all cases which are dependent on the materials and evidence in the case registered in respect of a scheduled offence, in which the accused has turned approver. Admittedly, the opposite party herein turned an approver in the case registered by CBI in respect of scheduled offences and was examined by the Court under Section 306(4)(a) of Cr.P.C. as a witness. Thus keeping with the observation of the Supreme Court in VIJAY MADANLAL CHOUDHARY ORS. VERSUS UNION OF INDIA ORS. [ 2022 (7) TMI 1316 - SUPREME COURT] and the materials on record in the present case, it is clear that the present case against the opposite party, under Section 3 of the PMLA 2002, Act is dependent on the process and activity in a scheduled offence (CBI) and thus directly connected. The total case under Section 3 of the PLMA Act rests on the case registered in respect of a scheduled offence in which the opposite party turned approver. If the case for a scheduled offence fails, the case under PLMA Act also fails, as the case under PLMA Act has been prima facie made out of the materials and evidence on record in the case in respect of a scheduled offence (herein registered by the CBI). In view of the fact that the two cases have a direct connection, the opposite party is entitled to the benefit of Section 132 Evidence Act and Section 307 of Cr.P.C. in the present case. The findings of the learned Trial Court in the order under revision being in accordance with law requires no interference - Revision dismissed. 2024 (2) TMI 730 Money Laundering - predicate offence - seeking grant of regular bail for second time - earlier bail application of the petitioner was rejected on merits - main ground for renewal of the bail application by the petitioner is that after earlier rejection, bail applications of the similarly situated co-accused persons have been allowed by Hon ble the Supreme Court as well as by this Court - HELD THAT:- It is apparent that case of this Petitioner cannot be equated with that of coaccused, Bachu Yadav or co-accused, Krishna Kumar Saha who have been granted bail. Petitioner is the main accused and Bachhu Yadav was his henchman as the per the prosecution case. Accused, Krishna Kumar Saha was not named in the earlier two prosecution complaints and his name came up in the 3rd supplementary prosecution complaint submitted by the ED. Petitioner being the political representative of the then Chief Minister enjoys political and administrative connection. Matter involves crime proceed being generated by large scale illegal mining activity being carried out, and the Petitioner appears to be the king pin. There are prima facie materials to suggest his pivotal role in laundering of the crime proceed generated in illegal mining activity. Trial is at its nascent stage with charge being framed on 03.03.2023 and out of 42 only 10 witnesses having been examined. Petitioner s health condition is monitored by the Jail doctors and was referred to and treated in higher centre at Delhi. There are no change of circumstance to enlarge the petitioner on regular bail and accordingly, the same is again rejected. 2024 (2) TMI 720 Money Laundering - proceeds of crime - Constitutional Validity of Sections 6 (2), 6 (3)(a)(ii) and 6 (5)(b) of the Prevention of Money Laundering Act, 2002 - violation of Article 14 of the Constitution of India - HPZ token, an application based token promised users, of large gains against investment by investing in mining machines for Bitcoin and other crypto currencies - application stopped working and the investors were not allowed to withdraw the money. Whether the composition of Adjudicating Authority is bad in law, in as much as it is not manned by a Judicial Officer/person eligible to be appointed as Judicial Officer? - HELD THAT:- Originally Section 6 (1) of the Act envisaged more than one Adjudicatory Authority to exercise jurisdiction, powers and authority conferred under this Act. The said provision has been amended to make the Adjudicating Authority as a single entity and the current provision is extracted in paragraph No.7, which establishes now a single Adjudicating Authority for the entire country. Any law providing for the constitution of any authority would be legal if only it is manned by Judges/Judicial Officers or persons who were or eligible to be appointed as Judicial Officers (i) if it is a Judicial Tribunal created under Article 323A or 323B of the Constitution of India; (ii) if it transfers any adjudicatory functions hitherto exercises by the Courts in India; (iii) if it adjudicates the rights of parties has the trappings of a Court/Tribunal - In the instant case, the Adjudicating Authority is constituted under Section 6 of the PMLA. Admittedly, the said authority is not a Tribunal, constituted under Article 323-A or 323-B of the Constitution of India. It cannot also be said that any power which was being hitherto exercised by the Courts are transferred to the authority. The submission made on behalf of the petitioner is that since a complaint is filed and the authority hears the aggrieved person whose properties are attached, decides the lis and as such discharges judicial function. It can be seen that the function of the Adjudicatory Authority is that of the original authority exercising the administrative function under the Act, that is, formation of an opinion as to reason to believe and making the orders absolute after satisfying as to the correctness of its opinion after hearing the parties. It can be seen that the Adjudicating Authority itself is in place as a check and balance so that the power is not exercised solely by the investigating officer - It is trite that even in an administrative actions, principles of natural justice are to be followed. The Administrative Authority conducts a statutory hearing and in that process, it only deals with the administrative case . The enquiry is limited to confirmation of prima facie opinion / reason to believe. The same does not manifest into a lis. In the scheme of PMLA, it transforms the issue into a lis only from the stage of appeal to the Appellate Tribunal, thus, the Adjudicating Authority remains the Original Authority which makes the decision. Accordingly, the question answered that constitution of Adjudicating Authority as such by Section 6 is not illegal for want of Judicial Officers/persons qualified to be appointed as Judicial Officers or who were Judicial Officers. When the Adjudicating Authority is considered to be a single entity / institution, whether the power conferred on the Chairman to constitute single / two member Benches which an be even without a legal Member is illegal? - HELD THAT:- The provisions of a statute have to be read harmoniously. A careful reading of Section 6, would make it clear that the statute creates one Adjudicating Authority with a Chairperson and two members. All the three of them have to be from the three different fields of expertise. The provision only envisages that in a given case, that the expertise of the persons in these fields, namely, law, administration and finance/accountancy would be relevant in forming an opinion. The Chairperson is given the discretion as to whether in a given case, the authority would make its decision with a full quorum or in Benches including single member Bench would decide the matter. Such discretion does not make the provisions incongruous or self contradictory. Since the petitioner has ample opportunity to contest before the Adjudicating Authority and even if the ad-interim order of attachment is made, a right of appeal is provided to a Appellate Tribunal and ultimately all contentions that the properties or materials are not the proceeds of the crime are not involved in money-laundering etc., has to be established and finally determined only by the Special Court and when such remedy is wide open to the Writ Petitioner herein, we do not find any reason to grant any other relief to the petitioner. Accordingly the question is answered that merely because there is power to the Chairman to constitute Single Member Bench, the same will not render the provision unconstitutional. Thus, finding no merits, the Writ Petition stands dismissed. Service Tax 2024 (2) TMI 729 Classification of service - service of radiography of plant and machinery to various clients - Revenue sought to classify the service under Technical Inspection And Certification Service whereas the appellant had classified the service under the Works Contract Service - invocation of Extended period of limitation on the ground that the appellant had not filed the Service Tax returns at the material time - demand pertains to the period October 2008 to March 2012 and April 2012 to March 2013 - HELD THAT:- The works contract service applies only in cases where construction, erection, installation, commissioning, fitting out, repair maintenance, renovation alteration of any immovable or immovable property or any other similar activity is undertaken. Prima facie in some cases the service might fall under the service of technical testing analysis service however scope of work appears to be different in most of the contracts and the scope of work in each contract needs to be examined before coming the conclusion if the said service fall under the category of Technical Testing and Analysis Service or otherwise. The impugned order does not examine the description of scope of work in each work order. The description is different in each work order as can be seen from the analysis above. In view of above the matter needs to be reexamined by the lower authorities and each contract needs to be examined separately for the purpose of classification. Matter remanded back to the original adjudicating authority for fresh adjudication - appeal allowed by way of remand. 2024 (2) TMI 728 Dismissal of appeal - appeal was rejected on the ground that the same is not accompanied by a proof evidencing that the appellant had deposited 7.5% of duty demanded or penalty imposed through the new revised procedure - HELD THAT:- During the course of hearing, the learned counsel for the appellant has pointed out to the challan dated 13 May 2023 whereby he has made the pre-deposit of the complete 10% in order to avail the appeal to be filed before this Tribunal and the appeal has been filed before the Tribunal on 29.05.2023. Since the needful for payment of the pre-deposit stands complied with, there are no hesitation in remanding the matter back for proper adjudication on merits. Since neither the adjudicating authority in the absence of the documents to be placed by the appellant nor the appellate authority has considered the issue on merits, it would be just and appropriate that the matter is remanded to the adjudicating authority to consider the same on merits and decide the issue in the light of the decisions referred by the superior forums. The matter is remanded back to the adjudicating authority, to be considered de novo - Appeal allowed by way of remand. Central Excise 2024 (2) TMI 727 Valuation - MRP based value u/s 4A or transaction value u/s 4 - Extended period of limitation - package of MCCBs cleared to industrial/institutional consumers - requirement to affix MRP on the Product MCCB as per the Standards of weights and Measures (packaged Commodities) Rules, 1977 or not for clearances effected to industrial and institutional customers through their dealers and depots - existence of machinery provisions available to determine the MRP for the product or not - list price can be adopted to determine MRP as per the Rule 4(a)(ii) of Central Excise (Determination of Retail Sale Price of Excisable Goods) Rules, 2008 or not? HELD THAT:- The impugned SCN has been issued on 11.05.2012 for the period from 01.04.2007 to 27.05.2008. The entire issue has arisen because of change of opinion due to differing legal interpretations. The Appellant has contended that he was under the bonafide belief that there was no requirement to affix MRP on the switchgear products sold by them industrial/institutional consumers through their dealers and these were exempted under the Packaged Commodity Rules, 1977. Moreover, it is an admitted fact that they were affixing a sticker on their own on the packages of their products that they are Specially packed for the exclusive use of an industry as a raw material or for the purpose of servicing any industry, Mine or quarry for industrial use only and not intended to be displayed for sale at a Retail Outlet. Hence, it is to be noted that there is no mis-declaration by the Appellant to intentionally evade payment of duty. The Appellants have been issuing invoices under Rule 11 of Central Excise Rules and periodically filing ER 1 returns disclosing the value adopted for the clearances and it is not the case of deliberate and wilfully evading payment of duty and hence the proviso to Section11 A(1) is not invokable and hence the penalty imposed under Section 11 Ac will not sustain. In fact the impugned order has not adduced any evidence on the above allegation and the intention to evade payment of duty due to any contraventions of the provisions of the Act has not been well brought out - the Show Cause Notice is barred by limitation and hence the demand will not survive. The appellant succeeds on limitation. The appeal is thus allowed with consequential relief. 2024 (2) TMI 726 Valuation - inclusion of insurance charges recovered in excess from the customers - HELD THAT:- The issue is not more res integra and has already been decided by the Hon ble Supreme Court in the case of BARODA ELECTRIC METERS LTD. VERSUS COLLECTOR OF CENTRAL EXCISE [ 1997 (7) TMI 126 - SC ORDER] , wherein the Hon ble Supreme Court held the excess amount represents profit element. Once this is so, the same cannot be subjected to excise duty inasmuch as the duty is leviable on manufacture of goods and not on profit. The impugned order set aside - appeal allowed. 2024 (2) TMI 725 Valuation of goods - manufacture of M.S. Fabricated Hot Dip Galvanized Steel Structures (Tower) - non-inclusion of freight chaged from their buyers in the transaction value in terms of Section 4(3)(d) of the Central Excise Act, 1944 - HELD THAT:- The price of goods depends upon the transaction value of goods and the element of freight has no bearing whatsoever on the value of goods. It is the case of the Department that the excess of transportation (Freight Element) of the excisable goods from the factory to the buyer s premises was liable to be included in the assessable value of the goods for computation of duty. Further, in the delivery terms, it is mentioned freight at actual. Accordingly, the place of removal is the factory gate and not the premises of the buyers - the issue is no more res integra and is covered by the decision of this Bench in the case of M/S FLAKTWOODS ACS (INDIA) PVT. LTD. VERSUS COMMISSIONER OF CENTRAL EXCISE S.T., NOIDA-II [ 2016 (9) TMI 1173 - CESTAT ALLAHABAD] where it was held that the, transfer of ownership takes place at the factory gate when the goods are delivered. Therefore, the ld. Commissioner have erred in holding that the goods manufactured and cleared by the appellant, shall not be valued under Section 4(1)(a) but under Section 4(1)(b). As per Rule 5 of the Central Excise Valuation (Determination of Price of Excisable Goods) Rules, 2000- wherein excisable value of goods are sold in the circumstances specified in clause (a) of sub-section (1) of Section (4) of the Act, except the circumstances in which the excisable value of goods are sold for delivery at a place other than the place of removal, then the value of such excisable value shall be deemed to be the transaction value, excluding the cost of transportation from the place of removal up to the place of delivery of such excisable goods. The Respondent had arranged for the transport of goods to buyer s addresses and the freight charges were mentioned separately in the invoices. The goods after manufacturing in the plant of the Respondent were subject to pre-delivery inspection by the buyer and were ascertained in favour of the particular buyer before the delivery. In the invoices, the Respondent have charged sales tax and have reflected freight separately in most of the cases. The transfer of ownership takes place at the factory gate when the goods are delivered. There are no reasons to interfere with the impugned Order-in-Appeal passed by the learned Commissioner (Appeals) and the same is sustained - appeal of Revenue dismissed. CST, VAT & Sales Tax 2024 (2) TMI 724 Validity of assessment order under Section 25(1) of the Kerala Value Added Tax Act, 2003 - suppression of turnover - evasion of tax - petitioner never bothered to file a reply to the show cause notices and notices for producing the relevant records for completing the assessment - HELD THAT:- The assessment order would disclose that the petitioner was given notice for producing the relevant records to complete the assessment. The petitioner never bothered to file reply to the notices. The proposed assessment order was also served on the petitioner requiring him to file objection, if any. The petitioner did not file any objection to the proposed assessment order and not appeared for the personal hearing granted by the assessing authority - the impugned order is not without jurisdiction or against the express provision of the law. This court cannot examine the merit of the impugned assessment order as this court does not exercise the appellate jurisdiction. While exercising the writ jurisdiction, this court has to consider whether the order passed by the authority is within jurisdiction or without jurisdiction or it is against the express provision of the law. Both the conditions are absent in this present case and therefore, there are no ground to grant any indulgence to the petitioner against the impugned assessment order. The present writ petition is dismissed. 2024 (2) TMI 723 Classification of goods - granite stone block and pieces - rate of tax 14.5% or 5%? - applicability of entry no. 109 of the Schedule II Part A as per notification No. KA.NI-2-421/XI-9(1) dated 31.03.2011 - HELD THAT:- Entry No. 109 specifically includes stone with the caveat that the same shall not include glazed stone, marble and marble chips. On an interpretation of the intention of the Legislature, it is found that glazed stone, marble and marble chips have been specifically excluded from the definition of stone in Entry No. 109. If the Legislature wanted to exclude granite stone, the same could have very well been done by the amendment carried out on March 31, 2011 - if one were to agree with the submission made by the revenue, one would have to exclude several items that would ordinarily be termed as stone , which is not permissible in law. Upon perusal of the order passed by the Tribunal, one finds that the Tribunal has held that stones that have not been processed in any manner, would be included in Entry No. 109 whereas processed stones that have gone through some kind of procedure would be excluded. The above finding is in consonance with the fact that glazed stone has been specifically excluded from Entry No. 109. There is no scope of interference in the well reasoned order passed by the Tribunal, and accordingly, this revision petition is dismissed. Indian Laws 2024 (2) TMI 722 Dishonour of Cheque - insufficient funds - existence of debt and liability or not - alleged authorization letter has not been issued by the applicant no.2, who being a Managing Director is solely authorized to issue any such letter on behalf of the Company - summons passed without considering the evidence produced by the applicants - violation of principles of natural justice - HELD THAT:- After perusal of the materials available on record, prima facie it appears that the learned trial court has failed to appreciate the materials available on record and has committed manifest illegality while passing the impugned order while summoning the applicants as the same is passed without considering the evidence produced by the applicants, which is unsustainable in the eyes of law. On perusal of the authorization letter dated 14.08.2020, it would reveal that the alleged authorization letter as claimed by the opposite party No.2 has been issued for the specific time period of 15 working days i.e. from 16.08.2020 till 30.08.2020 and there is no averment in the complaint made by the opposite party No.2 that the said letter has been extended further - It is admitted case of the complainant that the alleged authorization letter has not been issued by the applicant no.2, who being a Managing Director is solely authorized to issue any such letter on behalf of the Company, thus, there exists no debt or liability upon the applicants. Section 138 is structured in two parts, the primary and the provisory. The contents of the proviso place conditions on the operation of the main provision, while it does not form a constituent of the crime itself, it modulates or regulates the crime in circumstances where,unless its provisions are complied with, the already committed crime remains impervious to prosecution - The cause of action for prosecution will arise only when the period stipulated in the proviso elapses without payment. Ingredients of the offence have got to be distinguished from the conditions precedent for valid initiation of prosecution. The stipulations in the proviso must also be proved certainly before the offender can be successfully prosecuted. But in the strict sense they are not ingredients of the deemed offence under the body of Section 138 of the N.I. Act, though the said stipulations must also be proved to ensure and claim conviction. It is in this sense that it is said that the proviso does not make or unmake the offence under Section 138 of the NI Act. That is already done by the body of the sections. Hon'ble the Supreme Court of India in the case of Lalankumar Singh and Others vs. State of Maharashtra [ 2022 (10) TMI 1135 - SUPREME COURT ] has specifically held in paragraph No.38 that the order of issuance of process is not an empty formality. The Magistrate is required to apply his mind as to whether sufficient ground for proceeding exists in the case or not. The impugned summoning order passed under Section 138 N.I. Act, Police Station P.G.I., District Lucknow and the entire proceeding are against the spirit and directions issued by the Hon'ble Apex Court and are liable to be set aside - the matter is remanded back to the trial court - the instant application under Section 482 Cr.P.C. is allowed in respect of the instant applicants. 2024 (2) TMI 721 Dishonour of cheque - insufficient funds - vicarious liability of partners - cheque in question was issued from the account of the partnership firm and signed by both partners - no legal notice was issued to the partnership firm - partnership firm was not impleaded - HELD THAT:- Admittedly, the cheque in question was not issued by the partners from their individual accounts. Rather, it was issued from the account of the partnership firm and signed by both the partners. Thus, the liability of the partners is vicarious and flow from Section 141 of the NI Act. It is apt to observe that sub-section 1 of Section 141 NI Act stipulates that if an offence is committed by a company, then every person, who at the time of commission of offence, was in charge and was responsible to the company for the conduct of its business, as well as company itself, would be guilty of the offence. The first proviso, which is in the nature of exception, provides that in case such a person is able to prove that offence was committed without his knowledge or that he exercised due diligence to prevent the commission of offence, then such a person would not be liable for punishment. The onus to satisfy the said requirement is on the person alleging/stating the same. However, this does not take away the initial onus cast on the complainant to establish the requirements of sub-section 1 of Section 141. The issue whether any person under Section 141(1) can be proceeded against in the absence of a company, came up before the Supreme Court in Aneeta Hada v. Godfather Travels Tours (P.) Ltd. [ 2012 (5) TMI 83 - SUPREME COURT ], wherein a three Judges Bench held that for maintaining prosecution under Section 141, arraigning of company as an accused is imperative. The other categories of offenders can only be brought in the drag-net by way of vicarious liability. The position with respect to a partnership firm is no different. Likewise in the case of the partnership firm, the liability of its partners is vicarious and thus impleading of the partnership firm is necessary. In the present case, though the complainant sought to overcome the said issue by way of filing an amended memo of parties however, the same would not come to its rescue. When a cheque issued for discharge of any debt or other liability is returned unpaid, the drawer or holder of the cheque in due course is required to issue a demand notice for payment of the amount under the cheque within 30 days of the receipt of the information from the bank of its dishonour and if the drawer fails to make such payment within 15 days of the receipt of the said notice, then the offence under Section 138 NI arises. In the present case, no such demand notice was issued to the partnership firm and as such, the filing of the criminal complaint suffered from a material defect. The criminal complaint under Section 138 of the NI Act was filed only against the partners, without impleading the partnership firm and as such this Court deems it fit to exercise its power under Section 482 Cr.P.C. to quash the complaint. Petition allowed.
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