TMI Tax Updates - e-Newsletter
February 17, 2024

Case Laws in this Newsletter:

GST Income Tax Customs Corporate Laws Insolvency & Bankruptcy PMLA Service Tax Central Excise CST, VAT & Sales Tax Indian Laws

Articles

• RE-OPENING OF ASSESSMENT AGAINST CLOSED COMPANY
• Assessment Order not sustainable when no reasonable opportunity is granted for proper representation and filing of reply
• Assessee eligible to claim ITC on rooftop solar system used in course or furtherance of business

News

• MCA operationalises Central Processing Centre (CPC) for Centralised Processing of Corporate Filings

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• Union Finance Minister Smt. Nirmala Sitharaman presides over 19th Foundation Day celebrations of Security Printing and Minting Corporation of India Limited (SPMCIL) in New Delhi

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Notifications

Central Excise

• 07/2024 - dated 15-2-2024 - CE
  Seeks to further amend No. 04/2022-Central Excise, dated the 30th June, 2022, to increase the Special Additional Excise Duty on export of Diesel.

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• 06/2024 - dated 15-2-2024 - CE
  Seeks to amend No. 18/2022-Central Excise, dated the 19th July, 2022 to increase the Special Additional Excise Duty on production of Petroleum Crude.

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Customs

• 13/2024 - dated 15-2-2024 - Cus (NT)
  Rate of exchange of one unit of foreign currency equivalent to Indian rupees - Supersession Notification No. 10/2024-Customs(N.T.), dated 1st February, 2024

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• 12/2024 - dated 15-2-2024 - Cus (NT)
  Fixation of Tariff Value of Edible Oils, Brass Scrap, Areca Nut, Gold and Silver

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IBC

• IBBI/2023-24/GN/REG113 - dated 15-2-2024 - IBC
  Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) (Amendment) Regulations, 2024

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Circulars / Instructions / Orders

DGFT

• Trade Notice No. 38/2023-24 - dated 16-2-2024
  Clarification regarding Notification No. 60 dated 13.02.2024.

Customs

• Instruction No. 02/2024 - dated 15-2-2024
  Arrest Report and Incident Report (where arrest not made) — revised guidelines and formats

Highlights / Catch Notes

GST

• Power of CBIC to issue circular and delegate the functions of 'Proper officer' to issue Audit Report - The High Court held that the impugned circulars are intra vires and legally valid. It was concluded that the Central Government and the Board exercised their powers under Sections 3 and 5 of the CGST Act correctly. - The Court found that the officers who issued the audit report and show cause notices were indeed "proper officers" as defined under Section 2(91) of the CGST Act. The circulars assigning these functions were valid, and the actions taken by these officers were within their legal powers and jurisdiction.
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• Validity of assessment order - replies submitted by the petitioner and the documents provided by the petitioner were not taken into consideration - principles of natural justice - The High court quashes the assessment order dated 31.12.2023 due to procedural irregularities and failure to consider the petitioner's submissions adequately. - Matter restored back for reconsideration.
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• Cancellation of GST Registration of petitioner - The High Court noticed that the SCN was never served, and taking note of the fact that the impugned order does not make a reference of the contents of the reply, if any, submitted by the petitioner. To make things worse, the impugned order also does not disclose the grounds on which the authorities concerned were compelled to issue the cancellation of the registration. Therefore, the impugned order is liable to be interfered with this ground alone. - Matter restored back.
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• Attachment of bank account - Failure to pay tax due to due amounts from the main contractors had not been received - The High court acknowledged the petitioner's predicament but noted that tax payment was a burden they must bear. However, it considered the petitioner's request for reasonable time to pay the balance of the tax amount.
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• Cancellation of GST registration of petitioner - While setting aside the order, the high Court remitted the matter back to the 2nd respondent with a direction to consider the supportive documents said to be filed by the petitioner and also afford an opportunity of hearing to the petitioner and pass appropriate order regarding the cancellation of the registration expeditiously.
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• Seeking grant of anticipatory bail - ITC availed on the ground of fake bills - After considering the arguments and examining the record, the court found merit in the prosecution's case. It observed that the petitioner, along with co-accused, had engaged in fraudulent activities causing significant financial loss. Consequently, the court dismissed the petition for anticipatory bail, citing the gravity of the offense and the need for custodial interrogation to unearth the full extent of the crime.
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• Quantum of levy of penalty - petitioner points out that 100% penalty was imposed although the show cause notice was issued u/s 73 - The High Court held that, it is clear that such notices were issued under Section 73 and not under Section 74 of the TNGST Act. Therefore, the impugned order calls for interference as regards the imposition of penalty at 100% on the SGST dues. - Levy of penalty deleted.
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• Rejection of appeal on the ground of time limitation - whether the appellate authority had power to condone a delay of thirty days over and above the prescribed three month limitation period? - The High Court held that, the appellate authority cannot be faulted for rejecting the appeal. - However, the High Court condoned the delay on the ground that, the petitioner presented the appeal on 11.09.2023 and made the requisite pre-deposit. Apart from asserting that the petitioner was unaware about the show cause notice and assessment order, significantly, the petitioner has placed on record the death certificate of his mother. Matter restored back to appellate authority.
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Income Tax

• Reopening of assessment u/s 147 - reason to believe - new regime u/s 148A - The High Court held that, the amended provisions require a prima facie satisfaction of income escapement, not merely a "reason to believe." - Further, the impugned orders passed by the AO u/s 148A(d) of the Act are bad because, Petitioners’ Objections have not been considered. Thus, apart from being in violation of principles of natural justice, the assumption of jurisdiction under Sec. 148 is perverse and unsustainable. - Notice issued u/s 148 and order u/s 148A quashed.
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• Penalty u/s 271(1)(c) - addition made on account of mistake in treating the income from transfer of depreciable asset as long-term capital gain instead of short term capital gain u/s 50 - The High Court allowed the appeal, stating that there was no concealment of income or furnishing of inaccurate particulars. It emphasized that a mere incorrect claim in law does not amount to furnishing inaccurate particulars.
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• Applicability of Section 44BB - Special provision for computing profits and gains in connection with the business of exploration, etc., of mineral oils - The High court reiterated the findings of the ITAT regarding the scope of work outlined in the contract. It emphasized that the terms of the contract were not contested and clearly fell within the purview of services "in connection with" mining activities, as per Section 44BB.
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• Addition u/s 69A - Source of Cash deposit - Assessee contended that same is received in advance against the sale of property - Levy of penalty u/s 271D - The ITAT held that, on one hand when the impugned cash receipts are characterized as assessee’s own money the same, on the other hand cannot be a specified sum received from someone else in contravention to provisions of section 269SS, therefore, the very foundation and prerequisite to bring such amount within the realm of section 269SS was lost. - Thus ITAT deleted the penalty on this ground. However, the lelvy penalty, on the issue of repayment of loan to financer in cash, got confirmed.
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• Penalty u/s 271D - accepting cash loan of Rs. 2 lakh in aggregate without any reasonable cause in contravention to section 269SS - transactions between father and son, both carrying on their independent business - The Tribunal held that, genuineness of transaction has not been doubted. All the transactions were accounted for by the assessee and his son in their respective books of account. The impugned transaction is reportedly to meet business exigency. - No penalty.
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• Penalty u/s 271-D and 271-E - accepting loan in cash from the director of the company - The tribunal held that, the assessee`s case under consideration the transactions between Directors and assessee-company are on account of business exigency. Besides, assessee-company and the director both have disclosed transactions in their respective books of accounts for the relevant previous year. In the assessee`s case, it was not a case of loan taken/given from/to public, but amount received/paid to director to meet the business exigencies.
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• Determination of value u/s 50C - Validity of order of CIT(A) directing the AO to recalculate the capital gain on sale of land taking total value of property of Rs. 6.05 Crs. after deducting value of Rs. 1.75 Crs. towards Building, Plant & Machinery - The ITAT held that, CIT [A] is not correct in holding that 50C valuation is not applicable to building. The assessee has not produced the copy of the Valuation Report to ascertain the value determined towards land alone or also building, plant & machinery.
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• TDS u/s 195 - Sales commission paid to foreign company - non deduction of TDS - addition u/s 40(a)(i) - ITAT upheld the CIT(A)'s decision, noting that services rendered by MSI do not fall within the ambit of Fees for Technical Services (FTS) or under Article 12 of the DTAA between India and the USA. The payment was for sales and marketing services, not constituting FTS or royalty, and did not require TDS deduction. The Revenue's appeal on this matter dismissed.
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• Correct head of income - addition of interest income on margin money kept with Bank/Financial Institution taxable under the head ‘income from other sources’ - The ITAT held that, the fact that interest has been earned and the margin money was kept for purpose of guarantees and letter of credit in relation to setting up of the project has not been disputed, thus, same being linked inextricably with setting up of the plant, interest is eligible for deduction against the cost of the asset or capital work-in-progress.
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Customs

• Benefit of the Customs Tariff [Determination of Origin of Products under the Duty Free Tariff Preference Scheme for Least Developed Countries) Rules, 2015 - N/N. 96/2008-Custom, dated 13.08.2008 - benefit denied to the petitioner herein on the basis that there is no provision for third country invoicing in the relevant rules - The High court intervenes and quashes the impugned appellate order due to its failure to address the petitioner's contentions. The matter is remanded to the appellate authority for reconsideration, with a directive to provide a reasonable opportunity for the petitioner.
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• Seeking release of 540 bags of areca nuts of Sri Lankan origin imported without providing a bank guarantee - Considering the verified certificate of origin and absence of specific mention of the petitioner in the communication from D.L.K. Spice Export, the court directs the provisional release of the goods, subject to certain safeguards to protect revenue interests.
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• Seizure of Gold - smuggling of gold - Extension of period for issuance of show cause notice - "sufficient cause" for extension - The court examines the reasons recorded in the impugned communication and finds that they relate to the delay in investigation due to key persons being at large and the necessity for further investigation. The court concludes that reasons were indeed recorded in writing and that they are germane to the extension.
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• Levy of CVD - rubber scrap imported by the respondent - Appeal against the decision of Tribunal setting aside the demand of CVD without considering that the twin test of manufacture and marketability - The High Court held that, in the light of the subsequent development viz., the order of the Hon'ble Supreme Court, whereby the Order of the Delhi High Court was set aside as incomplete adjudication, the very foundation on the basis of which the impugned order of the Tribunal was made, no longer survives and thus, the same is liable to be set aside. - Matter restored back.
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• Valuation - inclusion of royalty / technical know-how to the transaction value - The tribunal noted that, the argument in regard to amendment of Rule 10 is not material to be considered for the reason that for the disputed period (2010-2013) the respondent has not paid any royalty or technical know-how fee. Therefore, the amendment has no bearing to decide the issue as to whether the transaction value accepted by the department is proper. - The CESTAT while dismissing the revenue appeal held that, there is no material pointed out to show that that the price quoted for similar goods as per NIDB data or contemporaneous imports is higher or different from the value adopted by the respondent.
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• Imposition of penalty u/s 112(a) of the Customs Act, 1962 - fraudulent import in the name of dummy IECs with mis-declaration in description and value inputs - Abetment - The tribunal held that, the appellant’s own statement afford sufficient corroboration to those statements. Cross-examination is vital for meeting out the allegations But when there is sufficient corroboration to those allegations, denial of cross-examination cannot be held prejudicial - there are sufficient ingredients for commission of offence by the appellant. - Demand with penalties confirmed.
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Corporate Law

• Manipulation of voters’ list for the tenure of office bearers of the association from 2021 to 2023 by the named appellant defendants - Jurisdiction of Court or Tribunal - Section 241 of the Companies Act, 2013 - The appeal is disposed of by holding that the suit is maintainable before this court. - The interest of the members of the association would be best subserved if an election of the executive members of the association was conducted under the aegis of the court through an administrator. The administrator would be first responsible for preparation of a true and correct voters’ list of eligible members and then convene and hold an Annual General Meeting of the appellant association.
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Indian Laws

• Dishonour of Cheque - vicarious liability of the director - The Court found that, the resignation of the directors, as recorded in Form 32, indicates their disassociation from the company's affairs before the issuance of the cheques in question. - The appellants cannot be held liable for the dishonored cheques issued after their resignation.
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IBC

• Rejection of Resolution Plan - The appellant argued before the Adjudicating Authority and subsequently in the Appeals that his plan, being submitted by an MSME (Micro, Small, and Medium Enterprises) promoter, should have been given more weight. - The NCLAT emphasized that its role is not to question the commercial wisdom of the CoC unless there are glaring omissions or statutory violations. The decision to approve the resolution plan of 'Eastern Copper Manufacturing Company Pvt. Ltd.' was upheld based on this principle.
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PMLA

• Powers of the High Courts in staying the investigations or directing not to take coercive action against the accused pending petitions u/s 482 of Cr.PC - The Supreme Court, after considering the arguments presented by both parties, set aside the impugned interim orders passed by the High Court. The Supreme Court emphasized the importance of judicial discipline and adherence to legal principles, particularly regarding the stay of investigations and protection from coercive actions.
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Service Tax

• Benefit of SabkaVishwas Legal Dispute Resolution Scheme (SVLDRS), 2019 - The High Court observed that, the Supreme Court had an effect of extending the period of limitation under the General Law or under Special Law pertaining to judicial and/or quasi-judicial proceedings, but the said order did not extend the time limitation prescribed for making payment of an amount which has already been determined pursuant to culmination of quasi-judicial proceedings - Accordingly, the High Court dismissed the writ petition.
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Central Excise

• Classification of micronutrient fertilizers - Presence of nitrogen as a chelating agent - essential constituent - In this remand back case from the Supreme Court, the tribunal observed that, the process lacks a chemical reaction that could justify the presence of nitrogen as an essential constituent of the product. Therefore, the Tribunal upheld the classification of the products under Chapter Subheading 3808.20 as PGR, not as "Other Fertilizers" under Chapter 3105, confirming the demands for duty with interest. Penalties imposed on the company under Rule 25 and personal penalties under Rule 26 on the Partner were deemed unwarranted due to the nature of the classification issue and interpretation of law, hence were set aside.
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VAT

• Seeking grant of regular bail - evasion of tax under Haryana VAT Act - The High court applies the triple test in economic offenses, which includes evaluating whether the accused is a flight risk, whether they will tamper with evidence if granted bail, and whether they could influence witnesses if granted bail. - Based on the arguments and considerations presented, the court grants bail to the petitioners, noting that the investigation stands concluded, and the proceedings are stayed in one of the cases.
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Case Laws:

• GST

• 2024 (2) TMI 810
  Cancellation of GST registration of petitioner - cancellation of registration has been passed without any application of mind - principles of natural justice - HELD THAT:- In the present case, the facts are similar to one in SURENDRA BAHADUR SINGH VERSUS STATE OF U.P. THRU. PRIN. SECY. COMMERCIAL TAX (GST) LKO. AND 2 OTHERS [ 2023 (8) TMI 1262 - ALLAHABAD HIGH COURT ], wherein the appeal was barred by time under Section 107 of the Act. However, the Division Bench in Surendra Bahadur Singh's case took into consideration the original order and set aside the same being non-reasoned and allowed the petitioner therein to file reply to the show cause notice. The orders impugned herein are liable to be set aside. Accordingly, the order in original dated February 16, 2023 and the appellate order dated September 23, 2023 are quashed and set aside. The petitioner is directed to file its reply to the show cause notice within three weeks from date and the adjudicating authority is directed to proceed de novo and pass order after granting opportunity of hearing to the petitioner. Petition allowed.

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• 2024 (2) TMI 809
  Maintainability of petition - availability of alternative remedy - Validity of demand notice dated 13/9/2023 and the order dated 23/12/2023 - demand of GST from the Petitioner - HELD THAT:- This Petition need not be entertained, leaving it open to the Petitioner to avail of the alternate remedies under the CGST Act. This Petition is not entertained, but the Petitioner is granted liberty to avail of the alternate and efficacious remedy available under the CGST Act - petition disposed off.

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• 2024 (2) TMI 808
  Power of CBIC to issue circular and delegate the functions of 'Proper officer' to issue Audit Report - Validity of Circular No. 3/3/2017-GST dated 05.07.2017, Circular No. 31/05/2018- GST dated 09.02.2018 and Circular No. 169/01/2022-GST dated 12.03.2022 - impugned circulars challenged mainly on the ground that the Central Board of Indirect Taxes and Customs (Board) had no powers to issue the same - jurisdiction to issue the audit report - functions of a proper officer as defined under Section 2(91) of the CGST Act - HELD THAT:- In the present case, not even any dispute was raised about the officers referred to in the impugned circulars being central tax officers. Section 4 of the CGST Act provides that the Board may, in addition to the officers as may be notified by the Government under section 3, appoint such persons as it may think fit to be the officers under the CGST Act. Without prejudice to the provisions of sub-section (1) of Section 4, the Board may, by order, authorise any officer referred to in clauses (a) to (h) of Section 3 to appoint officers of central tax below the rank of Assistant Commissioner of Central Tax for the administration of the CGST Act. Section 5 of the CGST Act provides that subject to such conditions and limitations as the Board may impose, an officer of central tax may exercise the powers and discharge the duties conferred or imposed on him under the CGST Act. An officer of central tax may exercise the powers and discharge the duties conferred or imposed under the CGST Act on any other officer of central tax who is subordinate to him - Section 4, which begins with a non-obstante clause, provides that an Appellate Authority shall not exercise the powers and discharge the duties conferred or imposed on any other officer of central tax. The Central Government has issued the notification dated 19.06.2017 in the exercise of powers conferred by Section 3 r/w. Section 5 of the CGST Act constitutes the Commissioner of Central Tax (Audit) and Central Tax officers subordinate to him as central tax officers. About this, not even any dispute was raised on behalf of the petitioner. The impugned circular dated 05.07.2017 is issued by the Board which is the proper authority in terms of Section 2(91) of the CGST Act. This is the reason why reference was made to Section 2(91) of the CGST Act. By the impugned circular dated 05.07.2017, the Board has inter alia assigned the Deputy or the Assistant Commissioner of Central Tax to function as a proper officer in relation to the CGST Act. This includes clause (v) of Section 65(6) concerning the communication of the audit report on the conclusion of the audit. The respondent No. 4 in the present case is the Deputy Commissioner of CGST (Audit). Consequently, he was the proper officer to communicate the audit report under Section 65(6) of the CGST Act to the petitioner vide the communication dated 15.11.2022 - Merely because the impugned circular dated 05.07.2017 refers to Section 2(91) of the CGST Act as one of its sources of power, no case is made out to strike down the impugned circulars on the ground that the Board had no power to issue the same by reference to the said section. As noted above, the source of power is contained in other provisions of the CGST Act, which were also referred to in the impugned circular. Whether the impugned circulars are intra vires and not whether any correct provision quoting the source of power was stated or there was an omission to quote the correct source? - HELD THAT:- In THE MUNICIPAL CORPORATION OF THE CITY OF AHMEDABAD VERSUS BEN HIRABEN MANILAL [ 983 (4) TMI 291 - SUPREME COURT ], the Hon ble Supreme Court has explained that the exercise of power, if there is indeed power, will be referred to a jurisdiction when the validity of the exercise of that power is in issue, which confers validity upon it and not to a jurisdiction under which it would be nugatory, though the Section was not referred, and a different or a wrong section of different provisions was mentioned. A wrong reference of the provision under which the Government takes action will not per se vitiate that action for it can be justified under some other power if the Government could lawfully do that act. Ben Hiraben Manilal was also cited with approval by the Constitution Bench in UUNION OF INDIA AND ANOTHER VERSUS TULSIRAM PATEL AND OTHERS [ 1985 (7) TMI 371 - SUPREME COURT ] where it was held that even the mention of a wrong provision or the omission to mention the provision which contains the source of power will not invalidate an order where the source of such power exists. Thus, no case is made out to strike down the impugned circulars or the impugned show cause notices inter alia on the ground that such show cause notices were issued by the officers who were not the proper officers as defined under Section 2(91) of the CGST Act - The respondents are permitted to give effect to the order dated 29.12.2023 disposing of the impugned show cause notices, subject no doubt to the petitioner s right of challenge to the order dated 29.12.2023 in accordance with law and on its own merits. Petition dismissed.

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• 2024 (2) TMI 807
  Appeal barred by Time Limitation - Cancellation of registration of petitioner - order for cancellation of registration has been passed without any application of mind - violation of principles of natural justice - HELD THAT:- In the present case, the facts are similar to one in SURENDRA BAHADUR SINGH VERSUS STATE OF U.P. THRU. PRIN. SECY. COMMERCIAL TAX (GST) LKO. AND 2 OTHERS [ 2023 (8) TMI 1262 - ALLAHABAD HIGH COURT ], wherein the appeal was barred by time under Section 107 of the Act. However, the Division Bench in Surendra Bahadur Singh's case took into consideration the original order and set aside the same being non-reasoned and allowed the petitioner therein to file reply to the show cause notice. The orders impugned herein are liable to be set aside. Accordingly, the order in original dated March 15, 2023 and the appellate order dated October 11, 2023 are quashed and set aside. The petitioner is directed to file its reply to the show cause notice within three weeks from date and the adjudicating authority is directed to proceed de novo and pass order after granting opportunity of hearing to the petitioner. Petition allowed.

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• 2024 (2) TMI 806
  Cancellation of GST registration of the petitioner with retrospective effect - wrongful availment or utilization of input tax credit or refund of tax - 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. The registration cannot be cancelled with retrospective effect mechanically. It can be cancelled only if the proper officer deems it fit to do so - 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 taxpayer 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. Further, the Show Cause Notice also does not put the petitioner to notice that the registration is liable to be cancelled retrospectively. Accordingly, the petitioner had no opportunity to even object to the retrospective cancellation of the registration - the order of cancellation is modified to the extent that the same shall operate with effect from 25.08.2023, i.e., the date on which the Show Cause Notice was issued. Petition disposed off.

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• 2024 (2) TMI 805
  Validity of assessment order - replies submitted by the petitioner and the documents provided by the petitioner were not taken into consideration - principles of natural justice - HELD THAT:- The petitioner has placed on record the reply issued to the show cause notice in Form DRC-01 and the reply issued to the notice dated 26.10.2023. On perusal thereof, it is evident that the petitioner has dealt with each alleged defect. The e-mail of 31.12.2023 is also on record. By such e-mail, the petitioner has annexed relevant documents corresponding to each alleged defect. For instance, as regards Defect No.13, the trial balance pertaining to Tamil Nadu appears to have been annexed. On examining the findings in the impugned order pertaining thereto, it appears that the assessing officer recorded conclusions based on the pan-India turn over on the ground that the petitioner did not submit a Tamil Nadu auditor's certified financial statement. The assessment order was issued without duly taking into consideration the replies and documents submitted by the petitioner, and the sequence of dates and events leads to the inference that the entire process appears to have been concluded in haste. For such reasons, the impugned assessment order calls for interference. The assessment order dated 31.12.2023 is quashed and the matter is remanded for re-consideration - Petition disposed off.

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• 2024 (2) TMI 804
  Cancellation of GST Registration of petitioner - no reasons mentioned in impugned order which necessitated the issuance of the Order of Cancellation of Registration - violation of principles of natural justice - HELD THAT:- A plain perusal of the impugned order dated 04.04.2022 and the contents therein coupled with the statement of oath made by the learned counsel for the petitioner that the show cause dated 14.03.2022 was never served upon the petitioner nor has he submitted any reply to the said show cause notice on 24.03.2022 as has been contended by the authority, and also taking note of the fact that the impugned order does not make a reference of the contents of the reply, if any, submitted by the petitioner. To make things worse, the impugned order also does not disclose the grounds on which the authorities concerned were compelled to issue the cancellation of the registration. Therefore, the impugned order is liable to be interfered with this ground alone. Since the impugned orders have been passed without affording any opportunity of hearing to the petitioner, it is ordered that the impugned order dated 04.04.2022 itself be treated as a show cause notice and the petitioner may enter appearance before respondent No.1 and submit a detailed reply on or before 29.02.2024 - Petition allowed.

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• 2024 (2) TMI 803
  Excess claim of Input Tax Credit - Violation of principles of natural justice - impugned order does not take into consideration the reply submitted by the petitioner and is a cryptic order - HELD THAT:- A perusal of the show cause notice shows that the Department has given specific details of alleged under declaration of output tax, excess claim Input Tax Credit [ ITC ], under declaration of ineligible ITC and ITC claim from cancelled dealers, return defaulters and tax non-payers. To the said show cause notice, a detailed reply dated 25.10.2023 was furnished by the petitioner giving full disclosures under each of the heads. In case the Proper Officer was of the view that reply is incomplete and further details were required, the same could have been sought from the petitioner, however, the record does not reflect that any such opportunity was given to the petitioner to clarify its reply or furnish further documents/details - Further petitioner was not provided with an adequate opportunity to defend the show cause notice by way of a hearing. The order cannot be sustained and the matter is liable to be remitted to the Proper Officer for re-adjudication. Accordingly, the impugned order and show cause notice is set aside. The matter is remitted to the Proper Officer for re-adjudication.

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• 2024 (2) TMI 802
  Excess claim of Input Tax Credit - no intimation of hearing was given to the petitioner - cryptic order giving no reasons - Violation of principles of natural justice - HELD THAT:- A perusal of the show cause notice shows that the Department has given specific details of alleged under declaration of output tax, excess claim Input Tax Credit [ITC], under declaration of ineligible ITC and ITC claim from cancelled dealers, return defaulters and tax non-payers. To the said show cause notice, a detailed reply dated 18.10.2023 along with Form GST DRC-06 dated 19.10.2023 was furnished by the petitioner giving full disclosures under each of the heads. In case the Proper Officer was of the view that reply is incomplete and further details were required, the same could have been sought from the petitioner, however, the record does not reflect that any such opportunity was given to the petitioner to clarify its reply or furnish further documents/details - It is noted that hearing was fixed on 07.11.2023, which was prior to the reply furnished by the petitioner. Further, petitioner was not provided with an adequate opportunity to defend the show cause notice by way of hearing. The order cannot be sustained and the matter is liable to be remitted to the Proper Officer for re-adjudication. Accordingly, the impugned order and show cause notice is set aside. The matter is remitted to the Proper Officer for re-adjudication - Petition allowed by way of remand.

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• 2024 (2) TMI 801
  Excess claim of Input Tax Credit - Violation of principles of natural justice - impugned order does not take into consideration the reply submitted by the petitioner and is a cryptic order - HELD THAT:- A perusal of the show cause notice shows that the Department has given specific details of alleged under declaration of output tax, excess claim Input Tax Credit [ ITC ], under declaration of ineligible ITC and ITC claim from cancelled dealers, return defaulters and tax non-payers. To the said show cause notice, a detailed reply was furnished by the petitioner giving full disclosures under each of the heads. In case the Proper Officer was of the view that reply is incomplete and further details were required, the same could have been sought from the petitioner, however, the record does not reflect that any such opportunity was given to the petitioner to clarify its reply or furnish further documents/details - Further petitioner was not provided with an adequate opportunity to defend the show cause notice by way of a hearing. The order cannot be sustained and the matter is liable to be remitted to the Proper Officer for re-adjudication. Accordingly, the impugned order and show cause notice is set aside. The matter is remitted to the Proper Officer for re-adjudication.

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• 2024 (2) TMI 800
  Attachment of bank account - Failure to pay tax due to due amounts from the main contractors had not been received - petitioner s submission is that he has to incur a huge expenditure for payment of salaries to his workforce and if his amount is attached and credited to the departmental account, the petitioner will be put to much hardship and the employees will be deprived of their salaries - HELD THAT:- Since tax payment is one of the burdens of the petitioner, this Court is not able to consider the request of the petitioner to raise the attachment. The learned Senior Counsel made an alternative prayer that for payment of the balance of the tax amount, the department may grant him reasonable time. This Writ Petition is disposed of giving liberty to the petitioner to submit a representation to the 1st respondent seeking time for payment of the balance of the tax amount within two (2) weeks from today, in which case, the 1st respondent shall consider the same, and after affording an opportunity of hearing to the petitioner, pass an appropriate order in accordance with law expeditiously, but not later than one (1) week from the date of receipt of the representation.

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• 2024 (2) TMI 799
  Grant of Regular Bail - availing irregular credit - petitioner was the part of the gang, which was engaged in operating a number of fake entities/firms - HELD THAT:- The petitioner was arrested in the present case on 08.08.2023 and is in custody for the last about 07 months. Even though, the allegations levelled against the petitioner points towards the seriousness of the charge, however, the petitioner cannot be ordered to be incarcerated for an indefinite period. In fact, all the allegations levelled by the complainant are yet to be adjudicated by the trial Court during the course of trial and further custody of the petitioner will not serve any useful purpose. The petitioner is ordered to be released on bail on his furnishing bail bonds/surety bonds to the satisfaction of the learned trial Court/Duty Magistrate/CJM concerned - Petition allowed.

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• 2024 (2) TMI 798
  Seeking grant of regular bail - Availing irregular ITC - floating seven bogus firms - got GST registrations and opened bank accounts of these firms by using forged and fabricated documents - fraudulently issued invoices without actual movement of goods to avail and pass input tax credit (ITC) for utilization in payment of GST - HELD THAT:- There is no dispute that under Section 132 of the CGST Act maximum punishment prescribed is five years and petitioner has already remained in custody for more than 23 months. He was granted interim bail on 22.11.2023 and regularly appearing before the Court below. There is no allegation that in case petitioner is granted bail pending trial, he will misuse the concession in any manner; thus, in such a scenario, sending him in custody at this stage would not serve any purpose. Interim bail granted to the petitioner, vide order dated 22.11.2023, is made absolute. He shall be admitted to bail on his furnishing bail/surety bonds to the satisfaction of learned trial Court/Chief Judicial Magistrate/Duty Magistrate concerned - Petition allowed.

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• 2024 (2) TMI 797
  Cancellation of GST registration of petitioner - cancellation on the ground that petitioner earlier failed to submit the cogent record showing that he is conducting trading operations from the same business premises where he was earlier conducting the manufacturing operations - HELD THAT:- The order of rejection of application for revocation of the cancellation dated 24.01.2024 passed by the 1st respondent is set aside and matter is remitted back to the 2nd respondent with a direction to consider the supportive documents said to be filed by the petitioner and also afford an opportunity of hearing to the petitioner and pass appropriate order regarding the cancellation of the registration expeditiously, but not later than two (2) weeks from the date of receipt of a copy of the order. The writ petition is disposed off by way of remand.

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• 2024 (2) TMI 796
  Seeking grant of anticipatory bail - ITC availed on the ground of fake bills showing fictitious bills - HELD THAT:- As per case of the prosecution petitioner along with co-accused Vishal had created a firm M/s Bhagwati Traders in the rented accommodation by using the mobile phone in name of their friend Sachin and infact, had no functional business therein. During investigation, it has surfaced that petitioner along with co-accused used to create fake bills showing fictitious transactions in the name of non existent firms and in this manner they had caused huge loss to the State exchequer to the tune of more than ₹7 crores, therefore, custodial interrogation of petitioner is required to unearth the modus operandi for committing crime. In these circumstances, considering the nature and gravity of the offence, it is observed that no case is made out in favour of the petitioner for grant of anticipatory bail, as a consequent the petition is hereby dismissed.

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• 2024 (2) TMI 795
  Rectification application - petitioner points out that 100% penalty was imposed although the show cause notice was issued under Section 73 - HELD THAT:- On examining the notices on record, it is clear that such notices were issued under Section 73 and not under Section 74 of the TNGST Act. Therefore, the impugned order calls for interference as regards the imposition of penalty at 100% on the SGST dues. The impugned order is quashed only insofar as it pertains to imposition of penalty under the two heads indicated in the revenue abstract of the impugned order. As a corollary, the matter is remanded to the assessing officer for re- consideration as regards the penalty imposed under the impugned order - Petition disposed off.

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• 2024 (2) TMI 794
  Rejection of appeal on the ground of time limitation - whether the appellate authority had power to condone a delay of thirty days over and above the prescribed three month limitation period? - HELD THAT:- The assessment order was issued on 10.05.2023. Section 107(1) of the TNGST Act prescribes a limitation period of three months from the date of receipt of the order. Under sub-section (4) thereof, the appellate authority is empowered to condone delay of up to one month if sufficient cause is shown. The present appeal was filed by the petitioner before the appellate authority on 11.09.2023. Since this exceeds the thirty day period prescribed in sub-section (4), the appellate authority cannot be faulted for rejecting the appeal. Nonetheless, the petitioner presented the appeal on 11.09.2023 and made the requisite pre-deposit. Apart from asserting that the petitioner was unaware about the show cause notice and assessment order, significantly, the petitioner has placed on record the death certificate of his mother and the said certificate indicates that she died on 11.08.2023. In these circumstances, without intending to establish a precedent in such matter, the petitioner should be provided an opportunity to prosecute the appeal. The impugned order is quashed and the first respondent is directed to receive and dispose of the petitioner's appeal on merits - Petition allowed.

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• Income Tax

• 2024 (2) TMI 793
  Reopening of assessment u/s 147 - reason to believe - new regime u/s 148A - availability of the information which suggests that there is an escapement of income is a pre- requisite for issuing notice u/s 148 - scope invocability inter alia of sections 147 148 of the 1961 Act which have been recast under the Finance Act, 2021 - HELD THAT:- On a conjoint reading of section 147 and section 148 of the Act, it is clear that the escapement of income is a sine qua non for initiating proceedings u/s 147. Therefore, availability of the information which suggests that there is an escapement of income is a pre- requisite for issuing notice under section 148. The argument that omission of phrase reason to believe has gotten away and has given way to information with the assessing officer which suggests that the income chargeable to tax has escaped assessment would mean that there should be no need for any reason seems incorrect. The phraseology of amended Section 148 makes in unmistakable terms clear that there should be a concrete information as defined in Explanation 1 to Section 148. Such information should be suggestive of income escaping assessment and such information should be objective in nature. In other words, the arguable subjectivity in the pre-amendment provision is given a go- by. For conducting assessment under section 147, there should be not only escapement but also the reason to believe that there is such escapement, the reason being the information itself. Hence, a plausible view could be taken that post-amendment of the provision, the escapement has to be established with concrete information. Section 148A would only assist the AO in coming to a conclusion whether such information is good enough to allow a notice to be issued u/s 148. The new provisions should be interpreted so as to make them workable in accord with the intent to achieve the purpose for which statutory change was brought about. To permit the AO to state that income has escaped assessment and re-open the same based on the very Return filed by the Assessee who has already disclosed the transaction, would enable him to by-pass the regular assessment procedures; that would virtually render Section 147 to be an enabling provision to make second assessment where the AO has missed the bus u/s 143. Such a course of action cannot be permitted as that would go against the very spirit of these sections and the time limits specified in Section 153. That would militate against the statutory scheme brought about by the amendment of sections 147 148; further, that would render the provisions prescribing limitation period u/s153 for assessment/re-assessment, otiose. We are therefore of the opinion that the jurisdictional facts in terms of information as defined under Explanation I to Section 148 which suggests that some income chargeable to tax has escaped assessment itself, were apparently lacking. This threshold having not been met, issuing a notice under Section 148A(b) and passing order under (d) of Section 148A are liable to be voided. Whether the ingredients of Section 148A have been scrupulously followed by the AO Revenue keeping in mind the objectives of the legislative scheme, that has been re-framed w.e.f. 1.4.2021? - The impugned orders passed by the AO u/s 148A(d) of the Act are bad because, Petitioners Objections have not been considered. Thus, apart from being in violation of principles of natural justice, the assumption of jurisdiction under Sec. 148 is perverse and unsustainable. Content and compliances of impugned notices - It is true that the Statements of Objections have been filed in these petitions and they are supported by affidavits. Several contentions have been taken up by the respondents supportive of the impugned notices orders. However, that would not come to their rescue. It hardly needs to be reiterated that the validity of the orders made by the statutory authorities has to be adjudged on the basis of the reasons contained in the womb of these orders; such reasons cannot be supplemented by way of affidavit or otherwise. As to whether matter merits remand or closure here itself? - There is no need for this court to undertake a deeper examination of the aspects argued at the Bar namely whether the transactions in question amounted to transfer at all in view of section 47(vid) of the 1961 Act which enacts a fiction as to what is not a transfer which otherwise in common parlance would have amounted to. Similarly, it was also debated at the Bar that as to whether the transactions in question were chargeable to income tax under the head income from other sources under section 56(2). In addition, it was also fiercely argued as to whether the subject transactions amounted to short term or long term capital gains. All the above aspects do not merit consideration in view of this court specifically faltering the impugned notices orders, inter alia on the ground of lack of jurisdictional facts. For the same reason, the matter does not warrant remand; the lis should attain finality at the hands of this court itself, all contentions having been argued at the Bar, have duly been considered on merits. Even otherwise, the remand would prove futile. In the above circumstances, these Writ Petitions having been allowed, Writ of Certiorari issues quashing the impugned orders both u/s 148A and also the two impugned notices issued by the answering respondent under Section 148 of the Income Tax Act, 1961.

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• 2024 (2) TMI 792
  Penalty u/s 271(1)(c) - addition made on account of mistake in treating the income from transfer of depreciable asset as long-term capital gain instead of short term capital gain as per provisions of Section 50 - HELD THAT:- Assessee had neither concealed any income nor furnished any incorrect particulars of such income. Admittedly, assessee had shown correct sale consideration of the property and also shown correct cause of depreciation in the return of income, so no income as such has been concealed. The only thing that assessee did was claiming a particular income (Capital Gain) under different head namely under long term capital gains as against short term capital gains. Assessee claims that it was done under bonafide belief that the asset was a long-term asset as it was held for more than three years. Just because assessee was a director in some companies cannot be a reason to state that claiming this short-term capital gain as long-term capital gain was to avoid payment of any tax - entire short term capital gain was paid even before the assessment order was passed. A mere making of claim, which is not sustainable in law, by itself, will not amount to furnishing incorrect particulars regarding the income of assessee. Such a claim made in the return cannot amount to furnishing inaccurate particulars as held in Reliance Petroproducts Pvt. Ltd. [ 2010 (3) TMI 80 - SUPREME COURT] - Decided in favour of assessee.

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• 2024 (2) TMI 791
  Applicability of Section 9(1)(vii) read with Section 44DA - HELD THAT:- Issue stands conclusively answered by the Supreme Court in its judgment rendered in Oil and Natural Gas Corporation vs. Commissioner of Income Tax Anr. [ 2015 (7) TMI 91 - SUPREME COURT] Applicability of Section 44BB - Special provision for computing profits and gains in connection with the business of exploration, etc., of mineral oils - essence of the contract was duly captured by the Income Tax Appellate Tribunal [ 2022 (7) TMI 1507 - ITAT DELHI] as held the scope of work clearly envisages that the assessee has to render certain services in connection with the mining activity carried on. Thus, once the activity carried on by the assessee falls within the expression mining or like projects , it goes out of the purview of FTS as defined under Explanation 2 to section 9(l)(vii) of the Act. That being the factual and legal position, the amount received by the assessee cannot be treated as FTS under section 9(l)(vii) of the Act. That being the case, the provision of the Act being more beneficial in such a scenario, as per section 90(2) of the Act, will be applicable. Therefore, there is no need for us to examine the applicability of the term 'FTS' under India France Tax Treaty. Thus, once the amount received by the assessee does not fall within the definition of FTS under section 9(1)(vii) of the Act, by default, section 44DD would not apply to such payment. A reading thereof would clearly and in our considered opinion qualify the pith and substance test and be viewed as being inextricably linked to the primary contract as propounded by the Supreme Court in Oil and Natural Gas Corporation and the principles reiterated by the Division Bench of this Court in Director of Income Tax vs. OHM Ltd. [ 2012 (12) TMI 422 - DELHI HIGH COURT] as held the amendment made by the Finance Act, 2010, with effect from April 1, 2011, in both the sections, cannot have the effect of altering or effacing the fundamental nature of both the provisions or their respective spheres of operation or to take away the separate identity of section 44BB. We do not, therefore, see how these amendments can assist the Revenues contention in the present case, put forward by the learned senior standing counsel. We, therefore, agree with the Authority for Advance Rulings that in the present case the profits shall be computed in accordance with the provisions of section 44BB of the Act and not section 44DA. We thus find that since the terms of the contract are not questioned or assailed before us they would clearly fall within the scope of the expression in connection with as appearing in Section 44BB of the Act. We, consequently find no ground to interfere with the view as expressed by the ITAT. We, additionally note that the ITAT while holding in favour of the assessee before this Court had also relied upon on its own order [ 2018 (12) TMI 1069 - ITAT DELHI] . We are informed by Mr. Chawla that the same has attained finality since no appeal was preferred by the Department.

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• 2024 (2) TMI 790
  Penalty u/s 271E - repayment of loan in cash - Default u/s 269T - HELD THAT:- As assessee on the aspect of bonafide belief on account of ignorance of law, we do not see any plausible reason to consider the plea of the Ld. AR. In a similar case, ITAT, Raipur has recently adopted a view regarding violation of provisions of section 269T in the case of Kamaljeet Kaur Gill v. Joint Commissioner of Income-tax in [ 2023 (9) TMI 432 - ITAT RAIPUR] wherein is equally applicable in the present case, wherein held that where assessee made repayment of loan in cash for reasons that she was insisted by financer of loan to do so due to poor track record of clearance of cheque and also she was ignorant of provisions of section 269T, since there were multiple other methods of repayment of loan envisaged in section 269T apart from payment through cheque and assessee had failed to come forth with any reasonable cause for such payment in cash, impugned penalty u/s 271E imposed upon her was justified. Ground no. 1 of the appeal of the assessee stands dismissed. Addition u/s 69A - Source of Cash deposit - Assessee contended that same is received in advance against the sale of property - Levy of penalty u/s 271D - Held that:- Since the AO had recorded a finding that the amount was the unexplained money of the assessee u/s 69A and thus, chargeable income of the assessee. Impliedly, the stand of Ld. AO while treating the amount received in cash as assessee s own money, establishes that it was neither any loan, a deposit nor specified sum. On one hand when the impugned cash receipts are characterized as assessee s own money the same, on the other hand cannot be a specified sum received from someone else in contravention to provisions of section 269SS, therefore, the very foundation and prerequisite to bring such amount within the realm of section 269SS was lost. Consequently, the penalty imposed under section 271D r.w.s. 269SS by the Ld. AO and confirmed by Ld. CIT(A), therefore, is liable to be quashed. Decided in favour of assessee.

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• 2024 (2) TMI 789
  Penalty u/s 271D - accepting cash loan of Rs. 2 lakh in aggregate without any reasonable cause in contravention to section 269SS - transactions between father and son - HELD THAT:- No cogent reasons have been assigned either by the Ld. Addl. CIT and / or the Ld. CIT(A) to reject the assessee s explanation. It is not disputed that the transaction took place between the assessee and his son, both carrying on their independent business. Confirmed copies of account of the assessee in the books of concern of his son and vice versa were brought on record. Genuineness of transaction has not been doubted. All the transactions were accounted for by the assessee and his son in their respective books of account. The impugned transaction is reportedly to meet business exigency. We are therefore of the opinion that the assessee established the existence of reasonable cause for the impugned transaction and therefore the penalty is not exigible. Decided in favour of assessee.

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• 2024 (2) TMI 788
  Penalty u/s 271-D and 271-E - accepting loan in cash from the director of the company - default u/s 269SS - details of loans accepted have also not been recorded in audit report of the assessee-company for the year under consideration - HELD THAT:- From the above judgment in the case of Thamira Green Farm (P.) Ltd [ 2023 (10) TMI 839 - ITAT CHENNAI] it is vivid that transaction done during the business exigency does not attract the penalty under section 271D of the Act. We note that in the assessee`s case under consideration the transactions between Directors and assessee-company are on account of business exigency. Besides, assessee-company and the director both have disclosed transactions in their respective books of accounts for the relevant previous year. In the assessee`s case, it was not a case of loan taken/given from/to public, but amount received/paid to director to meet the business exigencies. Therefore, delete the penalty under section 271D. Levying penalty u/s 271E - assessee-company has repaid loan during the year on various dates to two Company`s Directors, and these amounts paid being more than Rs. 20,000/- - HELD THAT:- As there is an issue of acceptance of loan accepted, issue of repayment of loan on same set of facts and circumstances, hence it does not require separate adjudication.

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• 2024 (2) TMI 787
  LTCG accrued on sale of two urban lands - determination of fair market value of the land - grievance of the assessee is that the AO committed patent error in working out sale consideration and indexed cost of acquisition without obtaining report from DVO and rejecting the valuation report furnished by the assessee - HELD THAT:- Looking to the totality of the facts and particularly, when the AO had himself referred the matter to the DVO to ascertain the FMV of the land in question and the valuation submitted by the assessee was not accepted, the impugned order is hereby, set aside and the AO is directed to frame the assessment afresh after considering the valuation report submitted by the DVO if any, in accordance with law. Request for admitting the claim u/s 54B not admitted - CIT(A) being the First Appellate Authority ought to have admitted the claim since the judgement of Hon ble Apex Court in the case of Goetz (India) Ltd [ 2006 (3) TMI 75 - SUPREME COURT] do not put any fetters on the powers of Appellate Authority. Moreover, law is well settled that if any, deduction is available under law, same shall be allowed to the assessee. Appeal of the assessee is partly allowed for statistical purposes.

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• 2024 (2) TMI 786
  Delay in payment of both the employer s and employees contributions to the PF authorities - HELD THAT:- The entire belated amount cannot be disallowed even as per the case of Checkmate Services (P) Ltd. ( 2022 (10) TMI 617 - SUPREME COURT] . In the interest of justice, we direct the AO to make 50% disallowance of the late payment. Thus, this ground of appeal raised by the Revenue is partly allowed. Miscellaneous expenses - As assessee company was a sick company during that period, it could not produce the details of miscellaneous expenses, AO made disallowance of 1/4th of the expenses for want of verification - CIT(A) appreciated the circumstances of the assessee case and held that the adhoc disallowance made by the AO without pointing out specific items which were not verifiable - HELD THAT:- Before us, the Ld.CIT-DR could not justify the deletion made by the Ld.CIT(A) and therefore, this ground raised by the Revenue is devoid of merit and, therefore, the same is dismissed. Disallowance of commission expenses - assessee-company did not provide any information on what basis commission was paid and also questioned whether TDS was deducted and also the commission expenses increased during this assessment year comparing with the earlier assessment years - HELD THAT:- CIT(A) held that the disallowance made by the AO without making any enquiries and without brining any material on record is unjustified. There is ample material to show that the sales were effected through selling agents and further the assessee also submitted proof of TDS to the commission agents, where major portion in US$ and exports of goods. Therefore, the disallowance made by the AO was deleted. Before us CIT-DR could not place before us any contra views or documents against the finding of the CIT(A). Therefore, this ground raised by the Revenue is devoid of merit and, therefore, the same is hereby dismissed. Nature of expenses - legal and professional charges - HELD THAT:- No legal infirmity in the order passed by the Ld.CIT(A), the expenditure incurred relating to sale of the immovable property and to be allowed as expense while calculating the Capital Gain, therefore, this ground raised by the Revenue is dismissed. Disallowance of bad and doubtful debts - CIT(A) had taken note of the shifting of assessee s operations from Kolkata to Ahmedabad and closure of old plant, which was sustaining losses and the circumstances where there is no likelihood of cost effective recovery of debts - HELD THAT:- No infirmity in the order passed by the Ld.CIT(A), since in the case of TRF Ltd.[ 2010 (2) TMI 211 - SUPREME COURT] held that it is not necessary for the assessee to establish that debt, in fact, has become irrecoverable, it is never if bad debt is written off as irrecoverable in accounts of the assessee. Respectfully following the ratio laid down by the Hon ble Apex Court, the above ground raised by the Revenue is devoid of merit and the same is hereby dismissed. Capital gain computation - Cost of acquisition of land - AO while calculating the capital gain has not accepted the fair market value of the land as on 01/04/1981 as Rs. 1.25 crores as claimed by the assessee, on the ground that no valuation report from Govt. Approved Valuer was submitted by the assessee - CIT[A] accepted the assessee s submission of the Government Approved Valuer s Report, and directed the AO to adopt the fair market value of the land as on 01/04/1981 at Rs. 1,17,40,000/- for the purpose of computing the capital gain - HELD THAT:- No infirmity in the order passed by the CIT(A). AO without making any reference u/s. 55A of the Act, suo moto estimated the cost of the land as on 01/04/1981 at Rs. 25 lakhs, which is legally not permissible under the Act. Whereas the assessee has submitted Government Approved Valuer s Report valuing the land as on 01/04/1981 at Rs. 1,17,40,000/- for computing the capital gains. Thus, ground raised by the Revenue is devoid of merit and the same is hereby dismissed. Determination of value u/s 50C - Validity of order of CIT(A) directing the AO to recalculate the capital gain on sale of land taking total value of property of Rs. 6.05 Crs. after deducting value of Rs. 1.75 Crs. towards Building, Plant Machinery - HELD THAT:- Section 50C provides that where the consideration received or accruing as a result of the transfer by an assessee of a capital asset, being land or building or both, is less than the value adopted or assessed by any authority of State Government for the purpose of payment of stamp duty in respect of such transfer, the value so adopted shall be deemed to be the full value of the consideration received or accruing as a result of such transfer, for the purpose of section 48 of the Act. Plain reading of the section makes it clear that the valuation is not only for land or building or both. In this case, there is no reference about the under valuation of the building and therefore land alone is valued at Rs. 6.05 crores by the State Government Authority, therefore the CIT [A] is not correct in holding that 50C valuation is not applicable to building. The assessee has not produced the copy of the Valuation Report to ascertain the value determined towards land alone or also building, plant machinery. Therefore, the direction given by CIT[A] is against the provision of law and liable to be reversed and the order of the Ld AO is to be restored, but the cost of acquisition as on 1-4-1981 to be adopted. Thus, the Grounds of Appeal raised by the Revenue is allowed.

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• 2024 (2) TMI 785
  Allowability of 80HHC from Gross Total Income - HELD THAT:- As decided in own case [ 2023 (6) TMI 1363 - ITAT DELHI] held by merely relying the decision of Hon ble Supreme Court in IPCA Laboratories Ltd. Case [ 2004 (3) TMI 9 - SUPREME COURT] 80HHC deduction can not be declined as adjusted business profit has to be recomputed and may not be in minus. Revenue recognition - Accrued interest income and pursuant to arbitration award, as income of the assessee - HELD THAT:- Legal battle shows the uncertainty of recovering the interest amount and also the principal. The Hon'ble Supreme Court in the case of Shoorji Vallabhji [ 1962 (3) TMI 6 - SUPREME COURT] and in the case of Godara Electricity [ 1997 (4) TMI 4 - SUPREME COURT] has laid down the ratio that the substance of the matter is the income which has to be recognized as per the system of accounting followed by the assessee in view of section 145 of the Act if the income does not result at all, there cannot be a tax, even though in book-keeping, an entry is made about a hypothetical income, which does not materialize. Similarly, in the case of Surya Agroil [ 2006 (4) TMI 554 - SC ORDER] certain dispute arose and the dispute was referred to the Arbitration Tribunal and the Tribunal passed order in favour of the assessee, and the award was challenged in the Hon'ble Delhi High Court, which was dismissed wherein as mentioned elsewhere, the fact of uncertainty has to be considered while recognizing the revenue and in our considered opinion, considering the peculiar facts of the case of uncertainty and keeping in mind the decision of the Hon'ble Supreme Court [supra], we do not find any merit in recognizing the revenue for the year under consideration since in the case of KJI, the assessee has subsequently recognized the revenue as and when it received as mentioned in the chart elsewhere. No addition is called for during the year under consideration and in so far as Surya Agroil is concerned, there is not even an iota of chance to recover the arbitral award. No addition is called for. Ground Nos. 3 and 4 taken together are allowed.

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• 2024 (2) TMI 784
  TDS u/s 195 - Sales commission paid to foreign company - non deduction of TDS - addition u/s 40(a)(i) - case made by the assessee is this that since the services rendered to the appellant by the said foreign company have been held not falling within the ambit of FTS or under Article 12 of the DTAA, the appellant is also not liable to deduct TDS on the payment so made - HELD THAT:- The issue is squarely covered in the case of M/s. Manthan System Inc. [ 2022 (9) TMI 1555 - ITAT BANGALORE] as held since it has already been decided by the Coordinate Bench that the services rendered to the assessee by the said Manthan Systems Inc. is not falling within the ambit of FTS or under Article 12 of the treaty, the assessee is not liable to deduct TDS on the payment made to the MSI. We find no ambiguity in the order passed by the Ld.CIT(A) in holding that there is no liability to deduct TDS and accordingly, deletion of addition made to the assessee s income in respect of sales commission under section 40(a)(i) is found to be just and proper so as to warrant interference - Decided in favour of assessee. Addition in respect of ESOP expenses - allowable revenue expenses or not? - HELD THAT:- The issue is squarely covered by the judgment of Hon ble Karnataka High Court in case of CIT, LTU vs. Biocon Ltd [ 2020 (11) TMI 779 - KARNATAKA HIGH COURT] as held incurring of the expenditure by the assessee entitles him for deduction under Section 37(1) of the Act subject to fulfillment of the condition. The deduction of discount on ESOP over the vesting period is in accordance with the accounting in the books of accounts, which has been prepared in accordance with Securities And Exchange Board of India (Employee Stock Option Scheme and Employee Stock Purchase Scheme) Guidelines, 1999. Thus as the assessee has incurred a definite legal liability and on following the mercantile system of accounting, the discount on ESOPs has rightly been debited as expenditure in the books of account. Disallowance of Provision for Doubtful debts - HELD THAT:- We find that the assessee reduced the provision for doubtful debts from sundry debtors in the balance sheet as filed before us. It further appears that the sundry debtors were shown net of provision for doubtful debts in the balance sheet. Thus keeping in view the ratio laid down by Hon ble Supreme Court in case of Vijaya Bank vs. CIT [ 2010 (4) TMI 46 - SUPREME COURT] , we hold that the provision for doubtful debts is allowable and thus the addition made by the revenue are hereby deleted.

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• 2024 (2) TMI 783
  Correct head of income - addition of interest income on margin money kept with Bank/Financial Institution taxable under the head income from other sources - CIT(A) allowed relief to the assessee on merit that interest income is derived from or attributed to the activity of the construction of the project and therefore same is eligible to be adjusted against the capital work-in-progress - HELD THAT:- In the case in hand, it is undisputed that interest has been earned by the assessee on the margin money kept with the bank under lien in respect of guarantees and the letter of the credit availed from consortium of banks. The fact that interest has been earned and the margin money was kept for purpose of guarantees and letter of credit in relation to setting up of the project has not been disputed, thus, same being linked inextricably with setting up of the plant, interest is eligible for deduction against the cost of the asset or capital work-in-progress. In view of the settled principle laid down in the case of CIT v. Bokaro Steel Ltd. [ 1998 (12) TMI 4 - SUPREME COURT ] we do not find any infirmity in the order of the Ld. CIT(A) on the issue in dispute and we accordingly uphold the same. Validity of assessment u/s 153A - Both the conditions that firstly, assessment is unabated i.e. no assessment proceedings pending as on the date of the search and secondly no incriminating material found during the course of the search, are to be cumulatively fulfilled. When we examine the above ratio of Continental Warehousing Corporation [ 2015 (5) TMI 656 - BOMBAY HIGH COURT ] confirmed by Supreme Court in Abhisar Buildwell P. Ltd. [ 2023 (4) TMI 1056 - SUPREME COURT ], we find that qua the issue in dispute, there is no reference of any incriminating material in the order of the Assessing Officer. CIT(A) followed the decision of Sidharth Gupta [ 2022 (7) TMI 294 - ALLAHABAD HIGH COURT ] but in view of the decision of Abhisar Buildwell P. Ltd.(supra), said ratio of the decision of the Hon ble Allahabad High Court is no longer in operation and therefore, the finding of the Ld. CIT(A) on the issue in dispute is set aside .Thus, no addition qua the interest on margin money could have been made in the case of the assessee even on the legal principle. Thus, the additional ground of the assessee to this extent is allowed. Overvaluation of the capital goods - goods imported by the assessee company, which were purchased as per offshore supply contract - HELD THAT:- In the entire process, the assessee was immune from escalation of project price on account of foreign currency fluctuation or delay in project execution. Therefore, the assessee was not concerned about the price at which the EPIL further purchased those goods, merely for the reason that associated company of EPIL i.e. M/s Glob Supplier, UAE had purchased those goods from OEM suppliers at lower prices, therefore, the assessee cannot be burdened with the charges of overvaluation in purchase of the capital goods. We further note that the very basis of the addition i.e. show-cause notice of the Directorate of Revenue Intelligence itself has been canceled by adjudicating authority. Since, the very basis of the making addition of overvaluation in purchase of capital goods has been cancelled; the addition made in the hands of the assessee on that very same basis cannot be sustained. Accordingly, we uphold the finding of the Ld. CIT(A) on the issue in dispute. The relevant grounds of the appeal of the Revenue are accordingly dismissed. Disallowance of interest calculated @ 12% on the funds borrowed for utilisation in alleged overvaluation of imported capital goods - CIT(A) deleted the disallowance on the ground that when the disallowance corresponding to overvaluation of the imported capital goods itself was deleted, therefore such disallowance of interest could not be sustained - HELD THAT:- As we have also upheld the deletion of disallowance by the Ld. CIT(A) for the addition of overvaluation of the imported capital goods and therefore, we do not find any infirmity in the order of the Ld. CIT(A) on the issue in dispute and accordingly we uphold the same - Decided against revenue. Disallowance u/s 37(1) - assessee has recorded excess expenses in the books of accounts in context with onshore supply contract with EPIL - HELD THAT:- We are of the opinion that AO has not held the excess payment of Rs. 70.77 crores paid by the assessee as non-genuine. If the assessee has actually paid the amount though it may be slightly more than the contracted price but if it is incurred wholly and exclusively for the purpose of the assessee, then merely for the reason that amount finally incurred has increased as compared to contracted price, AOhas no right to discard or ignore the excess price paid. It is for the assessee to decide whether it was required for the installation of the plant or for the purpose of the business and the Assessing Officer cannot decide what amount the assessee should pay to the EPC contractor - such disallowance made by the AO and sustained by the Ld. CIT(A) is not justified - direct the Assessing Officer to delete said addition. This ground of the appeal of the assessee is accordingly allowed. Addition of compensation received - character of compensation received from the EOL for failure in supplying Methane Gas for commissioning and dry run of the project - Receipts held by AO as business income - HELD THAT:- We find that the compensation paid mainly for the reason that the dry run of the project could not carried out which is part of the activity in the capital nature and therefore the compensation received also acquired the nature of the capital and eligible for adjustment against the capital work-in-progress. AO has made addition on substantive basis in the assessment year 2016-17 and on protective basis in assessment year 2017-18, for the reason that assessee has shown commissioning of the plant in that assessment year. In our opinion the Ld. CIT(A) has correctly characterized the compensation received by the assessee as in the nature of the capital and we do not find any infirmity in the order of the Ld. CIT(A) on the issue in dispute. Accordingly, we uphold the same. The relevant ground of appeal of the Revenue is accordingly dismissed.

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• Customs

• 2024 (2) TMI 782
  Levy of Safeguard Duty - Classification of imported goods - various capital goods from overseas, to be used in the manufacture of Solar Cells, from Diffused / Undiffused Silicon Wafers / Blue Wafers. Diffused / Undiffused Silicon Wafer / Blue Wafer is claimed to be the basic input / raw material required for the manufacture of Solar Cells - to be classifiable under Customs Tariff Item No. 8541 4011 as solar cells or under CTH 3818? - It was held by CESTAT that Considering the arrangement of Tariff, intermediate / semi-finished product is equated as parts of semi-conductor devices and thus, the contention of the appellant that the same is classifiable under CTH 8541 9000 is acceptable. HELD THAT:- After having perused the impugned judgment of the Customs, Excise and Service Tax Appellate Tribunal, it is found that there are no reason to interfere with the impugned judgment in the facts of the case. Accordingly, the appeal is dismissed.

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• 2024 (2) TMI 781
  Benefit of the Customs Tariff [Determination of Origin of Products under the Duty Free Tariff Preference Scheme for Least Developed Countries) Rules, 2015 - N/N. 96/2008-Custom, dated 13.08.2008 - benefit denied to the petitioner herein on the basis that there is no provision for third country invoicing in the relevant rules - HELD THAT:- While reaching this conclusion, the appellate authority did not engage with the submissions of the petitioner, either by way of grounds or by way of oral submissions made during the hearing. Instead, it appears that the same conclusions that were recorded in paragraphs 16 and 19 of the original order were reproduced. Since the impugned appellate order was issued without dealing with contentions advanced by the petitioner, the impugned order calls for interference. Consequently, the impugned order is quashed and the matter is remanded to the appellate authority for reconsideration. The appellate authority is directed to provide a reasonable opportunity to the petitioner, including a personal hearing, and, thereafter, issue a reasoned order after duly dealing with all contentions raised by the petitioner. The writ petition is disposed of.

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• 2024 (2) TMI 780
  Seeking release of 540 bags of areca nuts of Sri Lankan origin imported without providing a bank guarantee - extending the benefit of customs duty exemption under the applicable notification - indemnity bond may be called for - HELD THAT:- The record reflects that a certificate of origin was issued on 22.06.2023 by the Commercial Research Officer, Colombo. This certificate was issued under the ISFTA. In terms of Rule 6 of the CAROTA Rules, the proper officer requested that the authenticity of the certificate and the correctness of information provided therein be verified by the verification authority - These documents indicate conclusively that, upon verification of the certificate of origin, it was certified that such certificate was digitally signed by the authorized officer of the Department for signing certificates of origin under the ISFTA. In spite of such verification, the respondents contend that further information is required in light of the communication dated 14.09.2023 from D.L.K. Spice Export. The communication from D.L.K. Spice Export specifies the names of certain importers, but the name of the petitioner is not mentioned therein although the bill of entry is prior to the communication. The request for further information has not been placed on record. No doubt, under sub-rule 2 of Rule 6, it is permissible for the proper officer to request for additional information pursuant to verification. A certificate of origin was issued by the relevant Sri Lankan authority; such certificate was subsequently verified by the Department of Commerce, Government of Sri Lanka; the communication from D.L.K. Spice Export does not mention the petitioner; and the request for additional information is not on record, this is an appropriate case to direct the provisional release of goods, albeit subject to limited safeguards to protect revenue interest under the facts and circumstances. The petitioner is directed to provide an indemnity bond for 100% of the duty payable in case it is concluded in the assessment proceedings that the petitioner is not entitled to exemption from Customs duty - Petition disposed off.

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• 2024 (2) TMI 779
  Seizure of Gold - smuggling of gold - Extension of period for issuance of show cause notice - Interpretation of statute, sub-section (2) of Section 110 - Validity of intimation issued under Section 110(2) of the Customs Act, 1962 - HELD THAT:- The Principal Commissioner of Customs concluded that the investigation was delayed due to key persons, who are involved in the case, being at large and therefore their examination being stalled. For such reason, he also concluded that further investigation is required to be carried out and that an extension of time is necessary. These conclusions are said to have been reached on the basis of facts placed before the Principal Commissioner of Customs. It certainly cannot be inferred from the above that reasons in writing were not recorded. The other aspect to be taken into account is whether the recorded reasons are germane to the extension. Since it is recorded therein that the investigation was delayed due to persons being at large and that such persons are required to be examined or questioned in relation to the case, it certainly cannot be said that the recorded reasons are not germane to the extension. At the highest, the petitioner may be in a position to say that sufficient reasons were not recorded. However, in exercise of discretionary jurisdiction, it is ordinarily not appropriate to examine the sufficiency of reasons because appellate jurisdiction is not being exercised. Therefore, no case is made out for interference with the impugned intimation - Petition disposed off.

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• 2024 (2) TMI 778
  Levy of CVD - rubber scrap imported by the respondent - rubber scrap imported by the respondent herein is a different commercial commodity that has emerges as a result of manufacture / processing of old tyres and just because the respondent terms the process as cutting of old tyres into three pieces, it does not go out of ambit of manufacture - twin test of manufacture and marketability - HELD THAT:- The Respondent herein was faced with identical issues in various other ports, including Delhi. In a writ petition filed by them before the Delhi High Court, in TINNA RUBBER AND INFRASTRUCTURE LTD. VERSUS UNION OF INDIA AND ANR. [ 2014 (12) TMI 1279 - DELHI HIGH COURT] , a direction was issued to CBEC to consider the representation of the respondent herein keeping in view the decision of the Hon'ble Supreme Court in HYDERABAD INDUSTRIES LTD. VERSUS UNION OF INDIA [ 1999 (5) TMI 29 - SUPREME COURT] . Pursuant thereto, the Tax Research Unit (TRU), CBEC vide letter dated 02.01.2015 clarified that Tyre Scrap cut into two or three pieces are chargeable to CVD. The respondent challenged the said circular / clarification before the High Court of Delhi. The said Circular was set aside by Full Bench of the Delhi High Court TINNA RUBBER INFRASTRUCTURE LIMITED VERSUS UNION OF INDIA ANR. [ 2017 (5) TMI 183 - DELHI HIGH COURT] and it was held that imposition of 12% CVD on cut pieces of used tyres and tubes is ultra vires the Customs Tariff Act (CTA). In the light of the subsequent development viz., the order of the Hon'ble Supreme Court, whereby the Order of the Delhi High Court was set aside as incomplete adjudication, the very foundation on the basis of which the impugned order of the Tribunal was made, no longer survives and thus, the same is liable to be set aside. In view of the same, the impugned order of the Appellate Tribunal is set aside and the matters remanded for fresh consideration on merits and in accordance with law, after affording reasonable opportunity of being heard to the respondent herein. Appeal disposed off by way of remand.

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• 2024 (2) TMI 777
  Valuation - inclusion of royalty / technical know-how to the transaction value - requirement for revision of the transaction value or not - the invoice value accepted as the transaction value - case of Revenue is that that the original authority has not conducted sufficient investigation or any verification of documents and has merely relied upon earlier order of the Tribunal to accept the transaction value - principles of natural justice - HELD THAT:- On perusal of the grounds of appeal, it is seen that apart from the vague submission that the original authority did not conduct any thorough verification there is no specific grounds raised that there is undervaluation. There is no material pointed out to show that that the price quoted for similar goods as per NIDB data or contemporaneous imports is higher or different from the value adopted by the respondent. The argument in regard to amendment of Rule 10 is also not material to be considered for the reason that for the disputed period (2010-2013) the respondent has not paid any royalty or technical know-how fee. Therefore, the amendment has no bearing to decide the issue as to whether the transaction value accepted by the department is proper. The appeal filed by the department is without any merits. The appeal is dismissed.

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• 2024 (2) TMI 776
  Imposition of penalty under Section 112(a) of the Customs Act, 1962 - fraudulent import in the name of dummy IECs with mis-declaration in description and value inputs - whether the appellant has abetted the fraudulent export or he had acted in good faith? - HELD THAT:- The appellant himself vide his statement has acknowledged that he was fully aware that Ajay and Kirit were using proxy importers using dummy IECs for importing goods from his port. Kirit and Ajay Sandhu both have admitted this in their statement. There is no apparent denial that there are 427 calls between the appellant and kirit during the impugned period and that the appellant was entertained many times by said Kirit in Kirit s guest house. Admittedly, the appellant also attended marriage of Kirit s son in Mumbai in January 2013 at Kirit s expense as his guest and had also availed the flight tickets for to fro travel for self and his family and stayed in five star hotel in Mumbai with family at kirit s expenses. The entire trip was financed by Kirit. A postpaid mobile SIM No. 8120100005, with appellant was also taken from kirit only. All these facts apparent on record are sufficient to hold that appellant was intentionally aiding kirit and all his associates to let them commit illegal imports. Hence, we hold that there are sufficient ingredients for commission of offence by the appellant. The Appellant was well aware about the proxy imports of Ajay and Kirit which were being cleared from a non-EDI port which was under the Appellant's control. Being the in charge of the customs port it was his duty to discourage this fraudulent practice. However, he not only kept mum but also encouraged the proxy importers to undertake such proxy imports from his port and even facilitated such proxy importers which clearly show his connivance in promoting the fraudulent practices. Kirit and Ajay have admitted in various statements that they were importing goods in proxy, using dummy IECs and cleared the said goods from ICD Dhannad/ Kheda on the strength of manipulated invoices showing only a few items, which grossly understated values to evade duty. The appellant s own statement afford sufficient corroboration to those statements. Cross-examination is vital for meeting out the allegations But when there is sufficient corroboration to those allegations, denial of cross-examination cannot be held prejudicial - the CDR produced on record showing 427 numbers of calls made by the appellant to Kirit Singh during the relevant time are too many in number to prove that there was no bonafide or reasonableness on part of appellant. Phonecalls as many as 427 calls to one single person, do not justify the defence taken that the purpose was only to ascertain the whereabouts. There are no infirmity in the order under challenge, the same is therefore upheld - appeal dismissed.

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• Corporate Laws

• 2024 (2) TMI 775
  Manipulation of voters list for the tenure of office bearers of the association from 2021 to 2023 by the named appellant defendants - inclusion of members whose membership had expired but renewed illegally - Order 7 Rule 11 of the Civil Procedure Code - HELD THAT:- It is not necessary to go into the issue whether the dispute between the parties was covered by Section 241 of the said Act. The reason given by the learned judge that the remedy sought by the plaintiffs could not be availed of by them because of their lack in number is in my opinion a plausible one. I also agree with the learned judge that availing of this remedy was conditional upon grant of an application by the tribunal to waive the eligibility requirement which would result in unnecessary consumption of time. It is added that if the plaintiffs approached the tribunal for dispensing with the eligibility criteria, there was no guarantee that the tribunal would allow the application. In the event the tribunal rejected the application the plaintiffs would have to approach the civil court. The plaintiffs were justified in availing of a certain remedy rather than one which did not exist but could come into existence on fulfillment of an uncertain condition. The plaintiffs decision to directly approach this court to file the civil suit was a proper step. Hence there are no reason to interfere with the impugned judgment and order dated 8th February, 2023 - impugned judgement upheld. Appointment of independent officer or court appointed officer to act as an Administrator of the Association - appointment of independent officer or court appointed officer for smooth running of the day to day work of the Association and also only to meet the expenses of the Association to the extent to pay the salary of the employees of the AssociationInjuncting the present executive committee from taking any decision related to any financial matter on behalf of the Association or to spend any money - HELD THAT:- The election procedure of the association conducted in the year 2021 for election of the elected executive committee of the association from 2021- 2023 was challenged in this suit. It was said that the electoral roll was manipulated and fabricated showing membership of members whose membership had expired or wrongfully renewed. With this untrue voters list, the election was conducted by the defendants so as to elect executive committee members who were not eligible to be elected. During argument it was conceded by both learned counsel that even after extension by the Registrar of companies, the term of the executive committee had come to an end and could not be continued to run the association. The interest of the members of the association would be best subserved if an election of the executive members of the association was conducted under the aegis of the court through an administrator. The administrator would be first responsible for preparation of a true and correct voters list of eligible members and then convene and hold an Annual General Meeting of the appellant association. The appeal is disposed of by holding that the suit is maintainable before this court.

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• Insolvency & Bankruptcy

• 2024 (2) TMI 774
  Rejection of Resolution Plan - No proper consideration of the plan submitted by the Appellant even though he has submitted the EMD of Rs.1 Crore after the order dated 30.09.2022 - HELD THAT:- The minutes of 8th CoC meeting held on 08.10.2022 has been brought on the record. In the 8th CoC meeting, the Appellant as a Director of the Suspended board was also present. The CoC took note of the order dated 30.09.2022 an EMD of Rs.1 Crore submitted by the Appellant on 02.10.2022. Under the Agenda Item No.5, it was noticed that the CoC members requested the Appellant to explain the plan submitted by him. The Appellant has explained his plan. First submission of the Appellant that the plan submitted by the Appellant was not duly considered by the CoC is not found correct. A perusal of the minutes of the 8th CoC meeting and 9th CoC meeting as extracted above clearly indicate that the plan of the Appellant was duly considered. In the minutes, it was also noticed that the Appellant had proposed sale of the Calcutta factory in which State Bank of India had a charge. Thus, all aspects of the plan including the plan value of Appellant as well as Respondent No.16 were in the knowledge of the CoC and were deliberated before voting - the Resolution Plan was approved by the CoC after due consideration. It is well settled that the commercial wisdom of the CoC in approving the Resolution Plan is not open to judicial review and there are very limited ground to interfere with the decision i.e. only when the plan is in violation of any statutory provision like Section 30(2) of the Code. The submission of the Appellant that Swiss Challenge Method was not adopted with regard to plan of the Appellant also need no consideration. Swiss Challenge Method was adopted between Respondent No.5 and Respondent No.16 when the plan of the Appellant was not compliant and Respondent No.16 was declared as H-1. Thus, when plan of the Appellant was directed to be considered by the Adjudicating Authority on 30.09.2022, plan of the Appellant came for consideration in the 8th and 9th CoC meeting. Adoption of Swiss Challenge Method is enabling provision which can be adopted by the CoC. No infirmity can be found in the consideration of the plan of the Appellant if CoC did not adopt any Swiss Challenge Method. The plan submitted by the Appellant have been duly considered and voted upon which could not muster the requisite vote, there is no error in the order passed by the Adjudicating Authority allowing IA No. 1330 of 2022 approving the Resolution Plan. Appeal dismissed.

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• PMLA

• 2024 (2) TMI 773
  Powers of the High Courts in staying the investigations or directing not to take coercive action against the accused pending petitions u/s 482 of Cr.PC - allegation of defaults in the repayment of loan amount - a series of litigations under the SARFAESI Act before the DRT and High Court had ensued between the parties - High Court has stayed the proceedings of the FIRs registered against the concerned respondents-accused as also stayed the proceedings of ECIR registered by the Directorate of Enforcement against the concerned respondents, and further directed not to take any coercive action against the said respondents pending the said writ petitions HELD THAT:- As it s a matter of serious concern that despite the legal position settled by this Court in catena of decisions, the High Court has passed the impugned orders staying the investigations of the FIRs and ECIR in question in utter disregard of the said settled legal position. Without undermining the powers of the High Court under Section 482 of Cr.PC to quash the proceedings if the allegations made in the FIR or complaint prima facie do not constitute any offence against the accused, or if the criminal proceedings are found to be manifestly malafide or malicious, instituted with ulterior motive etc., we are of the opinion that the High Court could not have stayed the investigations and restrained the investigating agencies from investigating into the cognizable offences as alleged in the FIRs and the ECIR, particularly when the investigations were at a very nascent stage. It hardly needs to be reiterated that the inherent powers under Section 482 of Cr.PC do not confer any arbitrary jurisdiction on the High Court to act according to whims or caprice. The statutory power has to be exercised sparingly with circumspection and in the rarest of rare cases. In a way, by passing such orders of staying the investigations and restraining the investigating agencies from taking any coercive measure against the accused pending the petitions under Section 482 Cr.PC, the High Court has granted blanket orders restraining the arrest without the accused applying for the anticipatory bail under Section 438 of Cr.PC. This Court in State of Telangana vs. Habib Abdullah Jeelani and Others [ 2017 (1) TMI 1683 - SUPREME COURT] while dealing with the contours of Section 482 and 438 Cr.PC had emphasized that the direction not to arrest the accused or not to take coercive action against the accused in the proceedings u/s 482 Cr.PC, would amount to an order under Section 438 Cr.PC, albeit without satisfaction of the conditions of the said provision, which is legally unacceptable. As discernible from the record, number of proceedings had ensued between the parties pursuant to the actions taken by the IHFL against the complainant-borrower for the recovery of its dues under the SARFAESI Act, and the borrower M/s Shipra after having failed in the said proceedings had filed the complaints with ulterior motives. We do not propose to examine the merits of the said submissions as the writ petitions filed by the concerned respondents-accused seeking quashing of the FIRs on such grounds are pending for consideration before the High Court. It would be open for the High Court to examine the merits of the petitions and decide the same in accordance with law. The impugned orders passed by the High Court being not in consonance with the settled legal position, the same deserve to be set aside and are hereby set aside. The impugned interim orders passed by the High Court qua the concerned respondents-accused in the present appeals stand vacated forthwith.

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• 2024 (2) TMI 772
  Money Laundering - scheduled offences - Illegal arrest/detention - Non-application of mind and non-recording of compliance of the conditions/stipulations contained in Section 19 by the Special Court while passing the impugned orders - Illegal detention/wrongful restraint of the petitioners from 04.01.2024 to 08.01.2024 amounting to arrest on 04.01.2024 itself and consequential violations of Section 19 of PMLA read with Section 167 CrPC on account of non-production of petitioners within 24 hours - Violation of the provisions of Section 19(2) of the 2002 Act - Non-compliance of Section 19(1) of the 2002 Act. Non-application of mind and non-recording of the conditions/stipulations contained in section 19 by the Special Court while passing the impugned remand orders - HELD THAT:- A perusal of the Section 19 of PMLA would show that the same contains three Sub-Sections. Under Sub-Section 1, the concerned officer who could be the Director, Deputy Director, Assistant Director or any other officer authorized in this behalf by the Central Government, may arrest a person after, on the basis of the material in his possession, he has reason to believe, which belief has to be recorded in writing, that any person is guilty of an offence punishable under the Act. Sub-Section 1 further provides that after the arrest, the person so arrested, is required to be informed about the grounds of such arrest as soon as may be - Sub-Section 3 further provides that the person arrested shall within 24 hours be taken to the Special Court or Judicial Magistrate or a Metropolitan Magistrate, as the case may be having jurisdiction. The Hon'ble Supreme Court in the case of V.Senthil Balaji [ 2023 (8) TMI 410 - SUPREME COURT ] had observed that the provisions of Section 19 are mandatory and the compliance of the said provisions is a solemn function of the arresting authority which brooks no exception and that the officer concerned is to strictly comply with the mandate of Section 19 in its letter and spirit, failing which he would be visited with the consequences as have been mentioned under the 2002 Act. It is incumbent upon the Special Court/concerned Court at the time of remanding the accused to the custody of ED, to peruse the order of arrest and to see due compliance of provisions of Section 19 of the 2002 Act and also reflect the same in the order of remand by making a specific observation regarding the same. Whether the Special Court, in the present case, has passed the order of remand in accordance with law and in accordance with the provisions of Section 19? - HELD THAT:- Since, the petitioners were produced before the Special Court at Gurugram on 09.01.2024 thus, it was incumbent upon the said Court to consider the material to see as to whether as on 09.01.2024, any cause had arisen so as to produce the petitioners before the said Court and in case any such cause had arisen then to specifically state so in the order of remand. In the instant case, the same has not been done by the Court concerned. Importantly, the Special Court has also not made any observations with respect to the due compliance by the authority of Section 19(1). There is no reference in the order of remand to state that the Court had perused the order, if any, recording the reason to believe that the petitioners are guilty of the offence punishable under the 2002 Act or the grounds of arrest in writing and had satisfied itself that the arresting officer, on the basis of material in his possession, had reason to believe that the petitioners were guilty of the offence punishable under the Act. No such fact has been recorded in the impugned order. On the said aspect, it has only been observed in the impugned order that once ECIR has been registered and during investigation, a prima facie case for the commission of the offence under the 2002 Act has been found, then the Directorate of Enforcement is bound to trace the money for which it required to interrogate the petitioners in custody. The said order is thus, illegal and deserves to be set aside on the said ground alone. Illegal detention/wrongful restraint of the petitioners from 04.01.2024 to 08.01.2024 amounting to arrest on 04.01.2024 itself and consequential violations of section 19 of PMLA read with section 167 CrPC on account of non-production of petitioners within 24 hours - HELD THAT:- It is apparent that respondent authorities had illegally confined/unlawfully restrained the petitioners in the premises in question from 04.01.2024 to 08.01.2024 and thus, in effect had arrested the petitioners on 04.01.2024 itself but had not produced the petitioners before the concerned Court within 24 hours from the date of their actual arrest i.e. 04.01.2024 nor had complied with the other conditions mentioned in Section 19(1), 19(2), 19(3) and thus, arrest and all subsequent orders including remand orders are illegal and against law and deserve to be set aside. The judgment of the Single Bench of the Delhi High Court in case of Gautam Thapar (supra) relied upon by the counsel for the respondents would not further the case of the respondents. The facts in the said case were completely different from the facts in the present case inasmuch as the said case was not a case where there was unlawful restraint/illegal detention for a period of more than four days nor there was any averment of the respondent authorities in the said case in the reply as is there in the present case which clearly shows that the petitioners, in the present case, were confined to the four walls of the premises in question from 04.01.2024 to 08.01.2024. The judgments relied upon on behalf of the petitioners, relevant portion of which is reproduced hereinabove, are on the other hand fully applicable to the facts of the present case. The order of arrest and the impugned orders of remand and all the subsequent proceedings arising thereto deserve to be set aside on this ground also. Violation of provisions of section 19(2) of the Act, 2002 - HELD THAT:- In paragraph 311 of Vijay Madanlal Chaudhary [ 2022 (7) TMI 1316 - SUPREME COURT ] while considering the provisions of Section 5 (2) and 17(2) of the 2002 Act, which also require the competent officer to immediately after attachment under Section 5(1) and after search and seizure under Section 17(1), to forward a copy of the order along with material in his possession to the Adjudicating Authority, the Hon ble Supreme Court of India was pleased to use the term contemporaneously and had observed that the reasons to believe were required to be recorded in writing and contemporaneously forwarded to the Adjudicating Authority along with the material in possession in the sealed envelope. In the present case, admittedly, the compliance of Section 19(2) was not done till 09.01.2024, and the orders of remand dated 09.01.2024 of both the petitioners do not even remotely show that the Special Court had observed anything regarding its compliance. Even the order dated 16.01.2024 passed by the Special Court extending the remand of both the petitioners does not even remotely mention that there was any compliance of Section 19(2). It is apparent that compliance of Section 19 including Section 19(2) is mandatory and brooks no exception. Accordingly, in view of the facts and circumstances, it is held that there is violation of the provisions of Section 19(2) of the 2002 Act on account of which also the impugned action is bad in law and is liable to be set aside. Non-compliance of section 19(1) of Act, 2002 - HELD THAT:- In the present case it is the admitted case of the parties that both the petitioners are not accused till date in the 8 FIRs which have been reproduced in the grounds of arrest of both the petitioners. It is further the admitted case of the parties that no notice under Section 50 which empowers the competent authority to summon any person and also to produce the documents as required, has been issued to either of the two petitioners. From the discussion made hereinabove, it is also clear that the petitioners were in the premises where the search was being conducted from 04.01.2024 to 08.01.2024. A perusal of the grounds of arrest of both the petitioners would show that although it has been stated by the competent officer that the petitioners have adopted an attitude of non-cooperation by evading the queries and by giving misleading answers but no specific instance regarding the same has been mentioned. By filing the said additional reply dated 29.01.2024, respondent no.2 has tried to show the sequence of events in order to explain the delay in compliance of Section 19(2) but a closer perusal of the said paragraph would show that in case the preliminary scrutiny of documents had been done on 10.01.2024, subsequent to 08.01.2024 when the petitioners were arrested, then the question of the arresting officer having formed the reason to believe in writing that the petitioners were guilty of an offence under the 2002 Act on the basis of the material in his possession, becomes highly doubtful. Moreover, no reference has been made in the sequence of events as to when the reasons to believe as required under Section 19(1) of the 2002 Act were reduced into writing. The argument raised on behalf of the petitioners to the effect that such vague grounds of arrest violate the fundamental right of the petitioners as it is very difficult for the petitioners to prepare their defence in view of the provisions of Section 45 of the 2002 Act is also weighty. In the said circumstances, it cannot be said that respondent no.2 has rendered full compliance of the mandatory provisions of Section 19(1) of the Act. Since in the present case, the order of arrest, arrest memo and the remand order dated 09.01.2024 are held to be illegal and against law, thus, the subsequent order of remand and other consequential orders are also liable to be set aside. Moreover, this Court is of the view that even the order dated 16.01.2024 is illegal and thus, deserves to be set aside. Petition allowed.

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• Service Tax

• 2024 (2) TMI 771
  Benefit of SabkaVishwas Legal Dispute Resolution Scheme (SVLDRS), 2019 - entitlement to discharge the due amount under the Scheme up to 29th May, 2022 - issuance of discharge certificate to the Petitioner in terms of Section 127(8) of Sabka Vishwas Legal Dispute Resolution Scheme (SVLDRS), 2019. Whether in view of the order passed by Hon ble Apex Court in Suo-Motu Writ Petition IN RE: COGNIZANCE FOR EXTENSION OF LIMITATION [ 2022 (1) TMI 385 - SC ORDER] , the period prescribed under SVLDR Scheme, 2019 for payment of the amount pursuant to declaration stand extended or not? - HELD THAT:- A bare perusal of the order passed by Hon ble Apex Court, it would be evident that Hon ble Supreme Court took suo-motu cognizance of the situation arising out of the challenge faced by the country on account of COVID-19 vires and resultant difficulties thereupon faced by litigants across the country in filing their petitions/applications/suits/appeals/all other proceedings within the period of limitation. It is in that background and to obviate the difficulties, Hon ble Supreme Court extended the period of limitation of all such proceedings irrespective of the limitation prescribed under General Law or Special Law. The last extension was granted vide order dated 10.01.2022 and period of limitation between the periods 15.03.2020 till 28.02.2022 was excluded for the purpose of limitation prescribed under General or Special Law in respect of all judicial and quasi-judicial proceedings. Whether the case of the Petitioner would be covered under the aforesaid order of Hon ble Supreme Court and the period prescribed under SVLDR Scheme, 2019 and the corresponding Rules for payment of the amount as determined by Designated Committee would stand extended in view of the exclusion of the period of limitation by the Hon ble Apex Court for the period 15.03.2020 to 28.02.2022? - HELD THAT:- The order passed by Hon ble Apex Court in Suo Motu Writ Petition No.(C) 03 of 2020 had an effect of extending the period of limitation under the General Law or under Special Law pertaining to judicial and/or quasi-judicial proceedings, but the said order did not extend the time limitation prescribed for making payment of an amount which has already been determined pursuant to culmination of quasi-judicial proceedings. In the present case, admittedly, pursuant to declaration filed by Petitioner on 14.01.2020, the Designated Committee has accepted the said declaration and vide Statement issued in Form SVLDR-3 dated 06.02.2020, has communicated to the Petitioner the amount payable by it. The Petitioner never raised any dispute with respect to the amount payable as determined by the Designated Committee and there was no occasion to raise any dispute as Designated Committee has accepted the amount declared by the declarant. Under the said circumstances, the process of adjudication being quasi-judicial in nature already ended on 06.02.2020 i.e. the date on which Statement in Form SVLDR-3 was issued to the Petitioner. There are no reason to interfere with the instant writ petition and, accordingly, writ petition is dismissed.

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• 2024 (2) TMI 770
  CENVAT Credit - credit availed on the strength of bogus invoices raised by M/s Spring Vincom Pvt. Ltd. Kolkata (M/s SVPL) in contravention of Rule 2(l) and Rule 3 of CCR, 2004 - entire case of the Department is based on the statements recorded - Department has failed to make compliance of Section 9D of Central Excise Act, 1944 - levy of penalty - HELD THAT:- The proceedings in question are quasi criminal in nature as there is not only the demand of the reversal of cenvat credit, but also the imposition of penalties in question, it is held that Section 9D is to be construed strictly. It is already observed to be mandatory provisions, resultantly, it is held that the statements as were recorded during investigation are not admissible into evidence. Coming to the remaining evidence on record, we observe that to prove its case, the appellant has provided thirteen work orders as were issued to M/s SVPL to seek to receive such services from M/s SVPL as are mentioned in those work orders. The rate of consideration for receiving said services is also mentioned against each work order, a tabulated description of these work orders is also recorded in the Order-in-Original. It is appellant s case that M/s SVPL has executed the aforesaid work orders during the period from December 2010 to March 2011 and there upon has raised thirteen invoices on the appellant on different dates for a total value of Rs. 19,55,61,900/- including the service tax of Rs. 1,82,61,900/- (the amount in question), the appellant has submitted the Chartered Engineer s Certificate certifying the aforesaid contention of the appellant, there is no evidence on record other than the statements which have already been held in admissible, to falsify the said Chartered Engineer s Certificate, it is held that the Adjudicating Authority below has wrongly discarded the said certificate. No other expert opinion has been obtained by the department. The said documentary evidence is held to have wrongly been rejected while giving precedents to the oral evidence. There is no other evidence produced by the department except the statements recorded during investigation apparently and admittedly none of the deponents were allowed to be cross examined by the appellants, there deposition is highly insufficient to preceed over the documentary evidence produced by the appellants. The documentary evidence produced by the appellant is sufficiently proving the element of service tax alongwith on value of services received from M/s SVPL, no question arises to deny him the credit of the said element paid. The findings in the order under challenge, are therefore, not sustainable - the impugned order is set aside - appeal allowed.

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• Central Excise

• 2024 (2) TMI 769
  Maintainability of SLP - Low tax effect - SSI exemption - dummy units - it was held by High Court that without issuing the SCN to the other units, the clearance of those units could not be combined with that of the Respondent - HELD THAT:- In view of the low tax effect, it is not required to interfere with the impugned judgment passed by the High Court. The Special Leave Petitions are dismissed.

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• 2024 (2) TMI 768
  Distribution of input service credit by the Principal manufacturer to its Contract Manufacturing Units (Job workers) - permitting distribution of credit by principal manufacturer to its job workers is correct or not - Job worker i.e. Sweety Industries were manufacturing biscuits under the brand names belonging to Principal Manufacturer - duty paid by job worker in Parle Biscuits retail sale price (MRP) less permissible abatement u/S 4A of CEA - Job worker s factory was dedicated for Parle Biscuits and was an extended factory of Parle, manufacturing biscuits under Notification No. 36/2001- CE (NT) dated 26.06.2001 - amendment to Rule 7, CCR was clarificatory in nature or not - conscious or deliberate suppression of facts or mis-statement on the part of the Appellants or not - invocation of Extended period of limitation. HELD THAT:- All the issues involved in the present case have been answered by the larger bench in the case of M/S. KRISHNA FOOD PRODUCTS, M/S. MARIAMMA R. IYER, M/S. PARLE BISCUITS PVT LTD. VERSUS THE ADDITIONAL COMMISSIONER OF CGST C. EX [ 2021 (5) TMI 906 - CESTAT NEW DELHI ] where it was held that It would not be necessary to answer the issue that whether the appellant would, irrespective of the answer to the first issue, be entitled to avail CENVAT credit when input service is attributed to the goods on which excise duty is paid and includes the cost of services on which credit was taken. From the above judgment, it can be seen that the issue involved in the present case has been settled in favour of the assessee. Accordingly, the impugned order in the present case is also not sustainable. The impugned order is set aside. Appeals are allowed.

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• 2024 (2) TMI 767
  Classification of micronutrient fertilizers - Presence of nitrogen as a chelating agent - essential constituent - Analysing implementation of the observation/direction of the Hon ble Supreme Court [ 2008 (5) TMI 14 - SUPREME COURT] in remanding the case for deciding the classification of the products viz. micronutrients - classifiable under Chapter Heading 3105 of Central Excise Tariff Act, 1985 or under chapter sub-heading 3808.20 of CETA, 1985? - Extended period of Limitation - HELD THAT:- The adjudicating authority, pursuant to the remand, commenced the de novo proceeding by appointing a Committee of Officers to examine the process of manufacture of the impugned products and submit their report accordingly. The Committee comprising of two Superintendents visited the factory of the Appellant, examined the process of manufacture and submitted their report to the Commissioner on 08.5.2009. Based on the said legal advice/opinion, the Commissioner himself visited the factory premises of the appellant on 16.12.2009 and examined the process of manufacture of the impugned products - The procedure adopted by the learned Commissioner in carrying out the direction/observation of the Hon ble Supreme Court, in the denovo proceeding has been assailed by the appellant. The Ld. Commissioner while analyzing the said allegations of the appellant held that since his predecessor after receiving the report of the Committee of officers neither commented nor recorded his opinion on the report, therefore, with a change of adjudicating authority, a reference was made to the departmental standing counsel seeking legal opinion on delegation of the task of examination of method of manufacture to the Committee of officers. The opinion of the learned Standing Counsel was that constitution of a Committee without express permission of the Hon ble Supreme Court would be ultra vires of the direction of the apex court. It is found that reading the Committee s Report on the process of manufacture and that of recorded by the Ld. Commissioner after visit to the factory premises of the appellant, we do not see any material difference on the facts. What is noticed is that in addition to stating the process of manufacture, the committee of officers in its report proceeded further by interpreting the order of the Hon ble Supreme Court, applicability of Note 6 of Chapter 31 and Circular dated 19.5.1998 observing that the goods are rightly classifiable under Chapter 31.05 and the products may not be called as Plant Growth Regulator. Their Lordships analysing the scope of the terms micronutrient, PGR and other fertilizers, in the backdrop of rival claims, observed that admittedly nitrogen is present as a chelating agent, not as a fertilizing agent; even if it is a fertilizing agent, would not amount to an essential constituent under explanatory note 6 of chapter 31. In the de novo proceeding, the learned Commissioner after verifying the process of manufacture held that it is purely a physical process of mixing of various constituents; the Nitrogen which is added in the form of urea does not undergo any chemical reaction with any of the constituent of the impugned product, it remains as it is, therefore, adding the same at the beginning or at the end of the process of physical mixing would not make any difference. Accordingly, he has concluded that the process of mixing undertaken by the appellant could not lead to their claim that adding Nitrogen containing chemical urea converts PGR into nutrient falling under Chapter 31.05. The said finding of the Ld. Commissioner answers/satisfies the question raised by the Hon ble Supreme Court in remanding the case to ascertain whether process of manufacture would demonstrate the presence of Nitrogen as an essential constituent though present as a chelating agent . The finding of the Ld. Commissioner that the impugned goods merit classification under CSH 3808.20 (38089340) of CETA, 1985 upheld - confirmation of demands with interest is also upheld. Since the issue relates to classification and interpretation of law, imposition of penalty under Rule 25 on the company and personal penalty under Rule 26 CER, 2002 on the Appellant Shri Mahesh G Shetty is unwarranted and accordingly set aside. Appeal allowed in part.

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• CST, VAT & Sales Tax

• 2024 (2) TMI 766
  Seeking grant of regular bail - evasion of tax under Haryana VAT Act and in light of Section 37 read with Section 38 - power of custodial interrogation - HELD THAT:- There is no denial to the fact that the economic offences constitute a separate class of their own, but trite it is that presumption of innocence is one of the bedrocks on which the criminal jurisprudence rests. Time and again, Apex Court has reiterated the need to integrate the right of investigating agencies to have effective interrogation of the accused with the right of liberty of the accused. While dealing extensively with the rights of the accused in the economic offences, Apex Court in the case of Satender Kumar Antil vs. Central Bureau of Investigation and another, [ 2022 (8) TMI 152 - SUPREME COURT] held There need not be any insistence of a bail application while considering the application under Section 88, 170, 204 and 209 of the Code. Keeping in view the facts, without commenting on the merits of the case, the incarceration suffered by the petitioners and the fact that investigation already stands concluded and in view of dictum of law laid down in Satender Kumar Antil's case, the present petitions are allowed. The petitioners are ordered to be released on bail on their furnishing bail bonds/surety bonds to the satisfaction of the Trial Court/Duty Magistrate concerned. Petition allowed.

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• Indian Laws

• 2024 (2) TMI 765
  Dishonour of Cheque - vicarious liability of the director - Whether a Director who has resigned from such position and which fact stands recorded in the books as per the relevant rules and statutory provisions, can be held liable for certain negotiable instruments, failing realization? - HELD THAT:- The veracity of Form-32 has neither been disputed by the Respondent nor has the act of resignation simpliciter been questioned. As such, the basis on which liability is sought to be fastened upon the instant appellant(s) is rendered questionable. The record reveals the resignations to have taken place on 9th December 2013 and 12th March 2014. Equally, it is found that the cheques regarding which the dispute has travelled up the courts to have been issued on 22nd March 2014. The latter is clearly, after the appellant(s) have severed their ties with the Respondent- Company and, therefore, can in no way be responsible for the conduct of business at the relevant time. Therefore, there are no hesitation in holding that they ought to be then entitled to be discharged from prosecution. All criminal proceedings pertaining to the instant appellant(s) arising out of the complaints filed by the respondent herein are quashed - Appeal allowed.

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