Newsletter: Where Service Meets Reader Approval.
TMI Tax Updates - e-Newsletter
February 28, 2022
Case Laws in this Newsletter:
GST
Income Tax
Customs
Insolvency & Bankruptcy
PMLA
Service Tax
Central Excise
CST, VAT & Sales Tax
Indian Laws
Articles
News
Notifications
Circulars / Instructions / Orders
Highlights / Catch Notes
GST
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Seeking release of conveyance alongwith the goods - to force the owner of the conveyance to pay the tax, penalty and fine on the goods would mean that the owner of the conveyance is also foisted with the vicarious liability of any mis-declaration/fraud by the owner of the goods despite the proviso engrafted on to Sub Section 2 of Section 130 of the Act. - The argument of the learned State counsel is rejected and it is directed that the conveyance be released forthwith. The goods obviously would be confiscated and disposed of by the respondents in accordance with law - HC
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Validity of SCN - fulfillment of very ingredient of a proper show cause notice as required u/s 73 of the Act - The show cause notice is completely silent on the violation or contravention alleged to have been done by the petitioner regarding which he has to defend himself. The summary of show cause notice at annexure-2 though cannot be a substitute to a show cause notice, also fails to describe the necessary facts which could give an inkling as to the contravention done by the petitioner - It needs no reiteration that a summary of show cause notice in Form DRC-01 could not substitute the requirement of a proper show cause notice. - SCN quashed - HC
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Classification of goods - rate of GST - products are mixture of flours of cereals and dried leguminous or not - the above explanatory note and entry in serial number 59 of Schedule I of Notification No. 1/2017- Central Tax Rate, dated 28-6-2017speaks about the flours of cereals and dried leguminous vegetables. Whereas the products of the appellants do contain the flour and the same is not meant for supply as flour but meant as dosai mix, idly mix, vada mix, tiffin mix, health mix and porridge mix which are the products for human consumption by way of cooking as directed in the container label. Hence these products are not mere mixture of dried leguminous vegetable or cereals and hence not classifiable under HSN 1106. - AAAR
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Exemption from GST - Pure Services - rendering Consulting Services for Programme Management and Accompanying Measures for implementation of Integrated Strom Water Drain - it is established that the project is undertaken to improve the 'urban Infrastructure of the Chennai City'. 'Urban Planning' is one of the activities stipulated under the 'Twelfth Schedule' of the Constitution. Therefore, the activities of the applicant are 'in relation to' the activity of 'Urban Planning', an activity under Article 243W of the Constitution. - in this case the applicants are providing “Pure Services”, by way of rendering Consulting Services. - AAR
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Levy of service tax - services provided by clubs to its members - an explanation is added to say that the person and its members or constituents shall be deemed to be two separate persons and overriding effect has been given to the said explanation over anything contained in any other law for the time being in force and even to the judgements of any Court, Tribunal or any other authority. - GST is payable on the services provided by clubs to its members - AAR
Income Tax
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Difference in stock valuation - valuation of the closing stock - LIFO or FIFO method - It is an admitted case that the assessee has been continuously adopting the LIFO method which has been accepted by the revenue for all the earlier assessment years and in respect of the assessment year 2009-10, the matter travelled upto the tribunal and the manner of valuation of the closing stock done adopting LIFO method was approved. Therefore, in our considered view, the tribunal was right in affirming the order passed by the CIT(A). - HC
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Faceless assessment u/s 144B - time-limit to complete the assessment - Even if for a moment we hold that Relaxation Act is applicable to petitioner’s case, the time-limit provided by Notification No.38/2021 expired on 30th June 2021. Notification No.74/2021, on which respondents have relied upon to submit that time has been extended upto 30th September 2021, specifically excludes Section 144C(13) of the Act. If that also was to be included, Notification No.74/2021 would have expressly provided for it as it has provided in Notifications No.20/2021 and 38/2021. - HC
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Transfer of case u/s 127 - The Revenue authorities are the best judge in this matter and they have assigned clear and cogent reasons as to why the transfer is being made. The only requirement of the law is that while passing an order of transfer, the reasons must be assigned. We have absolutely no doubt in our mind that cogent reasons have been assigned by the Revenue for transferring the case from Dimapur to Kollam and therefore, it does not call for our interference. - HC
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Capital gains - nature of land sold - land converted into a barren land to establish an industrial estate - land sold by the assessee through sale deed in favour of Kerala State Industrial Development Corporation Limited (for short ‘KSIDC’) - In the case on hand, the assessee both factually and legally did not change the character of land from agriculture to non-agriculture. The assessee has demonstrated that the classification of land continued to be agricultural land in the revenue records even as on the date of sale. Though it is a peripheral, it is an important matter in appreciating the character of land sold by the assessee; namely, had the land been converted for the non-agricultural purpose/laid out in plots, then the stamp duty payable on registration would be on the nature of land sold at the relevant point of time. - HC
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Validity of Reopening of assessment u/s 147 - we are of a strong conviction that the sanctioning authority, i.e, the Pr. Commissioner of Income-tax-II, Amritsar had granted his sanction u/s 151 of the Act, in a mechanical manner, i.e, without application of mind to the facts of the case and the material available on record. - AT
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Service of notice u/s 148 - The service of Notice u/s 148 by ordering a substituted service, as contemplated in Order V-Rule 20 of the Code of Civil Procedure, 1908 (5 of 1908), in the absence of using of all reasonable and due diligence for locating the whereabouts of the assessee, not being as per the mandate of law cannot be subscribed on our part. Our aforesaid view that service of notice in case of an assessee residing abroad, by affixing the same on the main door of his local residence in India is not a valid service, is supported by the judgment of the Hon’ble High Court of Allahabad - AT
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Validity of reopening of assessment u/s 147 - The reasons, in the instant case recorded by the AO do not satisfy the requirements of Section 148 - reasons and the information referred is extremely scanty and sudden jump to the conclusions. There is no reference to any specific document except the Annexure which cannot be regarded as material or prima facie evidence to establish the link to point out escapement of income - AT
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TP Adjustment - Arm's Length Price (ALP) adjustment - The gross margins of assessee are much more than the gross margins of comparable companies chosen by the ld. TPO. Hence no adjustment to ALP is to be made in respect of import of finished goods even if the comparable companies chosen by the ld. TPO are upheld. - AT
Customs
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Time Limitation - validity of SCN - whether the SCN given under Section 124 of the Act after six months of seizure can be sustained under the law? - In the instant case, admittedly there has been no provisional release of the seized goods. Further extension of six months with the reasoned order by the Principal Commissioner of Customs or Commissioner of Customs also is completely missing. - It is quite unfathomable as to why the time limit is not adhered to and issuance of the show cause notice has been delayed beyond the statutory time period and hence, intervention will be necessary at the end of this Court - HC
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Confiscation of goods - prohibited/restricted goods or not - import of consignment of Sajji Khar - It is a settled law that any condition is imposed on the import shall not apply to the import already originated from the port of shipping - In the present case also the instruction dated 21.05.2020 was issued much after not only the import of goods but also after filing of warehousing Bill of entry. It is also undisputed fact that the same product i.e. Sajji Khar has been allowed to be imported without the condition as imposed by the department in the present case on the earlier occasions by various importers. - The goods are not liable for confiscation - AT
Service Tax
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Valuation - inclusion of interest in the gross value - The adjudicating authority has wrongly considered the interest received on security deposit as part of consideration received by appellant for providing the Business Auxiliary Service without establishing as to how the said security deposit is includable in the amount of consideration charged for the taxable value provided by the appellant - AT
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Levy of service tax - software maintenance services - The appellants are well established service tax registrants and therefore, we are of the considered opinion that the lapse of non-payment of service tax during the relevant period cannot be taken lightly - the appellants are entitled to utilise the balance credit after 1.4.2008, they will be liable to pay penalty under Section 76 of the Finance Act, 1994, as applicable during the relevant period. - AT
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Reversal of Cenvat Credit - ocean freight - point of taxation - the payment of service tax for six of the invoices under question was made on 30th June, 2017. The admitted figures in the table at admitted fact No.3, are sufficient to show that, in the given circumstances, the appellant has rightly availed the input credit of service tax paid by him though under Reverse charge mechanism. - The confirmation of demand by Commissioner (Appeals) is hereby set aside - AT
Central Excise
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CENVAT Credit - goods stored in the godown/depot near the ports - goods in stock or not - in the present case, the Adjudicating Authority as well as learned Tribunal rightly came to the conclusion that the goods in question could not be said to be lying with the assessee in stock as they had already been removed to the port area from the factory on the basis of issuance of invoices disclosing buyers name. - HC
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Refund of duty (sugar cess) paid - The issue in the said demand notice also relates to eligibility of Cenvat credit on sugar cess and when the same has already been decided in favour of the Appellant assessee, then the earlier demand notices become infructuous and cannot be sustained in the eyes of law. - Thus in the instant case, the refund claim of the Appellant needs to be allowed - AT
Case Laws:
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GST
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2022 (2) TMI 1160
Refund of GST - Time Limitation - refund claims filed by the petitioner rejected as the same are time-barred in terms of Section 54(1) of the CGST Act, 2017 - HELD THAT:- Petitioner states that the impugned order fails to take note of the orders passed by the Supreme Court extending the period of limitation due to Covid-19 pandemic in IN RE: COGNIZANCE FOR EXTENSION OF LIMITATION [ 2022 (1) TMI 385 - SC ORDER ] - Issue notice. Mr.Satish Kumar, learned counsel accepts notice on behalf of the respondents. He prays for some time to obtain instructions. List on 12th April, 2022.
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2022 (2) TMI 1159
Seeking release of conveyance alongwith the goods - fine prescribed under Section 130 (2) proviso of the Central Goods and Services Act, 2017, was paid - levy of vicarious liability - It is the contention of petitioner that the scheme of Section 130 of the Act makes it clear that the owner of the goods and the owner of the conveyance are two separate entities and the liability of one can not be foisted upon the other - HELD THAT:- This Court in M/S. SHIV ENTERPRISES VERSUS STATE OF PUNJAB AND OTHERS [ 2022 (2) TMI 296 - PUNJAB AND HARYANA HIGH COURT ] has held that the principle of vicarious liability can not be extended indefinitely. In the present case also to force the owner of the conveyance to pay the tax, penalty and fine on the goods would mean that the owner of the conveyance is also foisted with the vicarious liability of any mis-declaration/fraud by the owner of the goods despite the proviso engrafted on to Sub Section 2 of Section 130 of the Act. The argument of the learned State counsel is rejected and it is directed that the conveyance be released forthwith. The goods obviously would be confiscated and disposed of by the respondents in accordance with law - Petition allowed.
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2022 (2) TMI 1158
Seeking grant of Default Bail - bail sought on the ground that the prosecution failed to within the statutorily prescribed period, institute report/challan before the learned trial Judge concerned - HELD THAT:- It was imperative for the petitioner, to disclose tangible evidence in display, that he is not possessed of adequate financial resources, and that hence he is disabled, to comply with the modified default bail conditions, as became imposed upon him, by the learned Additional Sessions Judge concerned, as a pre-condition for his availing the benefit of default bail. Prima facie lack of financial empowerment, would also become the relevant factor, in concluding that the conditions imposed are exploitative, oppressive and harsh, and, completely negate the effect, if any, of the indulgence of default bail, as becomes granted to the petitioner. The learned counsel appearing for the petitioner on instructions meeted to him by the latter, has made a very candid submission, that the impugned modified conditions, as imposed upon the bail petitioner, are oppressive, harsh, and, exploitative, and would ultimately negate the indulgence of default bail, as becomes accorded to him, as he submits that the bail petitioner, is not possessed of financial emplowerments in commensuration to the modified impugned bail conditions, as become imposed upon him, by the learned Additional Sessions Judge, Ludhiana - this Court concludes, that the ill sequel thereof would be, that the personal liberty of the bail petitioner would become completely curtailed, merely on account of his inability to fulfil the harsh, oppressive, and, exploitative bail conditions. Consequently, this Court deems it fit to modify the conditions of default bail. The learned counsel for the petitioner, on instructions meted to him by the latter, made a statement at the bar, that the petitioner is ready and willing to furnish personal as well as three surety bonds (of whom two sureties, should be local) comprised in a sum of ₹ 10 lakhs each to the satisfaction of the learned trial Magistrate concerned. The above are both reasonable, and, just, and, would make fully efficacious the default bail granted to the petitioner. Obviously hence the other condition(s) as became imposed through the impugned order as made by the learned Additional Sessions Judge, Ludhiana, upon, the petitioner inasmuch as, his also furnishing FDR/bank guarantee comprising thereins a sum of ₹ 40 lakhs is quashed, and, set aside. Application disposed off.
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2022 (2) TMI 1157
Validity of SCN - fulfillment of very ingredient of a proper show cause notice as required u/s 73 of the Act - SCN issued in a format without striking out any irrelevant portions and without stating the specific contravention committed by the petitioner - proper opportunity of defending denied - violation of principles of natural justice - HELD THAT:- A perusal of the impugned show cause notice at Annexure-1 creates a clear impression that it is a notice issued in a format without even striking out any relevant portions and without stating the contraventions committed by the petitioner. The summary of the show cause notice under DRC-01 indicates that as per the statistics received from the headquarter/ government treasury, it has come to the notice of the department that the petitioner has received a sum as payment from the government treasury against works contracts services completed / partly completed during the above mentioned period April 2020 to March 2021 whereas the liability reflected by him through filed returns is less than the above mentioned sum as per GSTR-3B. As such, he was not reflecting the total payment received and consequent total liability accrued in the filed returns just to evade payment of due tax to the government. It needs to be mentioned here that even the summary of the show cause notice does not disclose the information as received from the headquarter / government treasury as to against which works contract service completed or partly completed the petitioner has not disclosed its liability in the returns filed under GSTR-3B. The show cause notice is completely silent on the violation or contravention alleged to have been done by the petitioner regarding which he has to defend himself. The summary of show cause notice at annexure-2 though cannot be a substitute to a show cause notice, also fails to describe the necessary facts which could give an inkling as to the contravention done by the petitioner - It needs no reiteration that a summary of show cause notice in Form DRC-01 could not substitute the requirement of a proper show cause notice. At the same time, if a show cause notice does not specify the grounds for proceeding against a person no amount of tax, interest or penalty can be imposed in excess of the amount specified in the notice or on grounds other than the grounds specified in the notice as per section 75(7) of the JGST Act. The impugned show cause notice as contained in Annexure-1 does not fulfill the ingredients of a proper show cause notice and amounts to violation of principles of natural justice - the writ petition is allowed.
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2022 (2) TMI 1156
Classification of goods - rate of GST - products are mixture of flours of cereals and dried leguminous or not - Dosai Mixes - Idly Mixes - Tiffen Mixes - Health Mix - Porridge Mixes - Circular No.80 dated 31.12.2018 issued by DOR, MOF, GOT - whether these products' classification as relied on circular No.80, would fall under mere mixture of flour of ground pulses and cereals and such flour improved by the addition of very small amounts of additives or not? HELD THAT:- On going through the details furnished by the appellant, it clearly shows that they are having ingredients of flour as major part, other spices are also added so as to entice the consumers to use them for consumption. Had it been mere mixture of dried leguminous vegetable flour, the common consumer does not attract to these products. Thus the products manufactured would certainly have value addition which would basically distinguish the products of the appellants from that of mere mixture of various flours of cereals. The explanatory note and entry in serial number 59 of Schedule I of Notification No. 1/2017- Central Tax Rate, dated 28-6-2017speaks about the flours of cereals and dried leguminous vegetables. Whereas the products of the appellants do contain the flour and the same is not meant for supply as flour but meant as dosai mix, idly mix, vada mix, tiffin mix, health mix and porridge mix which are the products for human consumption by way of cooking as directed in the container label. Hence these products are not mere mixture of dried leguminous vegetable or cereals and hence not classifiable under HSN 1106. The appellant has relied on the decision of Gujarat Advance Ruling Authority, in the case of IN RE: M/S. DIPAKKUMAR KANTILAL CHOTAI (TALOD GRUH UDYOG) , [ 2021 (1) TMI 693 - AUTHORITY FOR ADVANCE RULING, GUJARAT] claiming similarity between the products. Though Advance Ruling is applicable only to the person seeking the said ruling, the jurisdictional authority and the concerned Authority, it is pertinent to mention that the relied upon decision has been appealed by the Department and the Gujarat Appellate Authority in the said case of IN RE: SHRI DIPAK KUMAR KANTILAL CHOTAI (TALOD GRUH UDYOG) , [ 2021 (10) TMI 54 - APPELLATE AUTHORITY FOR ADVANCE RULING, GUJARAT] , has held that the Instant Mixes' are classifiable under CTH 2106 and are covered under Sr. No. 23 of Schedule-Ill of Notification No. 01/2017-C.T.(Rate) as amended and are leviable to GST @ 18%. Further the appellant at the time of personal hearing has stated that the learned State jurisdictional authority who has the administrative jurisdiction over the applicant, has stated that the applicant's products fall under the chapter heading 2106 attracting GST 5% as per Notification No.41/2017, dated. 14.11.2017 through their written submissions. It is worth mentioning that the remarks of the Jurisdictional Officer is not substantiated and it is his comments/opinion and this Authority is not bound by their observations. Further, Advance Ruling is a facility extended to the applicant to have clarity on the tax liability of their supplies being made/proposed to be made and this authority examines the facts independently - also, under Section 60 of the GST Act 2017, the appellants might have availed the opportunity of provisional assessment before the jurisdiction Assessing officer. Having failed to avail this, the appellant need not raise the issue before this forum. Appeal dismissed.
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2022 (2) TMI 1155
Exemption from GST - Pure Services, supplied by M/s GITEC-IGIP, GmbH, Cologne, Germany, having an office at Chennai, by way of rendering Consulting Services for Programme Management and Accompanying Measures for implementation of Integrated Strom Water Drain for M1 M2 Components of Kovalam Basin in the extended area of Greater Chennai Corporation, supplied to the Superintending Engineer, Strom Water Drain Department, Greater Chennai Corporation, Chennai - applicability of S.No.3 of the Notification No.12/2017-Central Tax (Rate) dated 28.06.2017 - HELD THAT:- The applicant under the contract is tasked with providing various activities of technical expertise, financial planning, training, supervision, etc, which are supply of various services for effective implementation of the project and as seen from the submissions, the activity does not involve 'Supply of any Goods'. Also, it is seen that the project undertaken is in relation to improving the 'Storm Water Drain' along the Kovalam basin, as a part of 'Urban Infrastructure Development' of the Greater Chennai and the services are provided to the Greater Chennai Corporation represented by its Storm Water Division. Whether the entry at Sl.No. 3 of Notification No. 12/2017-C.T.(Rate) dated 28.06.2017 in respect of CGST and Sl.No. 3 of Notification No.II(2)/CTR/532(d-15)/2017 dated 29.06.2017 in respect of SGST is applicable? - HELD THAT:- 'Pure Service' is not defined under GST and the same can be constituted in general term as any supply made without involvement of supply of goods along with supply of services. The detailed scope of consultancy services have been provided in the Terms of Reference, page 138 to 189 of consulting services contract agreement dated 03.12.2020 submitted by the applicants - the consultant have to prepare operation and maintenance manual, carry out citizen awareness campaigns, collaborate public and private storm water stakeholders and also involve civil society in the maintenance of assets created out of the project investments. In both cases, pure services are involved in the form of knowledge enhancement and efficiency enhancement and there is no procurement of goods in the Consultancy Services. The consultants are not required to do any construction services. It is therefore ascertained that the services provided by the applicants to the GCC as per the Contract are only 'Pure Services' - the GCC being a Municipal Corporation, constituted by the State, is a Local authority by the definition of 'local authority' at S.2(69) of the GST Act and the services rendered by the applicants are the services rendered to a local authority. Whether the services are provided in relation to activities entrusted to a Municipality under Article 243 W of the Constitution? - HELD THAT:- From the `Overall Programme Concept' found in the contract, the project is undertaken as a part of the Programme Sustainable Urban Infrastructure Development in India; and this commitment, to be implemented with the support of a Programme Management Consultant (PMC) shall be used to finance stormwater management measures for Kovalam Basin and Accompanying Measures(AM) to support the sustainability of the Programme. Thus, it is established that the project is undertaken to improve the 'urban Infrastructure of the Chennai City'. 'Urban Planning' is one of the activities stipulated under the 'Twelfth Schedule' of the Constitution. Therefore, the activities of the applicant are 'in relation to' the activity of 'Urban Planning', an activity under Article 243W of the Constitution. The applicants are providing Pure Services , by way of rendering Consulting Services. for Programme Management and Accompanying Measures for implementation of Integrated Strom Water Drain for M1 M2 Components of Kovalarn Basin in the extended area of Greater Chennai Corporation and the same is supplied to GCC, who is a Local Authority , represented by the Superintending Engineer, Strom Water Drain Department, Greater Chennai Corporation, Chennai. Also, the services are in relation to Entry No.1 of the List as per the Twelfth Schedule under Article 243W of the Constitution of India i.e., Urban Planning including Town Planning - the applicant is eligible for the exemption claimed for such pure services.
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2022 (2) TMI 1154
Levy of service tax - services provided by clubs to its members - applicability of Doctrine of Mutuality - Service tax liability pre and post 01.07.2012 - HELD THAT:- The GST laws expanded the scope of 'supply' to tax supplies between the club/association and its members, to overcome the principle of mutuality. A retrospective amendment (w.e.f. July 1, 2017) has been made vide Finance Act, 2021 by inserting a new clause '(aa)' after clause (a), in Section 7(1) of the CGST Act to widen the scope of term 'supply' by including therein activities or transactions of supply of goods or services or both between any person (other than individual) to its members or constituents or vice versa for cash, deferred payment or other valuable consideration. Consequently, Para 7 of Schedule II of the CGST Act has been deleted retrospectively (w.e.f. July 1, 2017) which was related to 'supply of goods by unincorporated associations or body of persons to a member thereof for cash, deferred payment or other valuable consideration' being activity/ transaction treated as supply of goods - Further, an explanation is added to say that the person and its members or constituents shall be deemed to be two separate persons and overriding effect has been given to the said explanation over anything contained in any other law for the time being in force and even to the judgements of any Court, Tribunal or any other authority. The Services provided by the Club to its members is taxable as per clause (aa) of sub-section (1) of Section 7 of the CGST Act, 2017 w.e.f. July 1, 2017.
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Income Tax
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2022 (2) TMI 1153
Benefit of Vivad Se Vishwas Scheme (V.S.V.Scheme) - Unexplained Long Term Capital Gains(LTCG) - unexplained cash-credits u/s 68 - Whether Tribunal has committed substantial error in law in deleting the addition of undisclosed income ignoring the larger scam of organized tax evasion by way of Bogus capital gain generated in Penny Stock? - HELD THAT:- As assessee by his letter to Joint Central Government advocate has acknowledged the receipt of the notice dated 05.08.2021 and also noted that the case would be fixed on 17.12.2021. The assessee further stated that he has opted for V.S.V. scheme and Form No.4 has been issued, copies of the Form Nos.1, 2, 3 and 4 were attached along with the said letter. However, in the affidavit of service which has been filed before us, those annexures/attachments do not find place. In any event, since the assessee himself by letter dated 14.12.2021 has stated that he has opted for V.S.V. Scheme, we dispose of the appeal on the said ground. Consequently, the substantial questions of law are left open.
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2022 (2) TMI 1152
Difference in stock valuation - valuation of the closing stock - LIFO or FIFO method - assessee unlawfully followed the Last In First Out (LIFO) method of accounting for valuation of closing stock in violation of the accounting Standard-2 - survey action conducted under Section 133A of the Act in the business premises of the assessee - HELD THAT:- We find that the assessing officer could not have based his conclusion solely on the alleged admission of the director of the assessee during the survey operations Directive issued by the CBDT is a straight answer to the contention advanced by the learned standing counsel. Thus, if the report of the survey team is eschewed, then it has to be seen as to in what manner the assessing officer could have completed the assessment. The crux of the issue revolves around the valuation of the closing stock. The revenue faults the assessee for not adopting the FIFO method. The tribunal has considered the correctness of the submission and pointed out that the assessee has consistently adopted the LIFO method which has been accepted by the assessing officer in all the previous years and in the assessee s own case in the respect of the assessment year 2009-10, the matter travelled upto the tribunal and the method of valuation of closing stock adopting LIFO method was approved. Therefore, the tribunal concluded that consistency has to be maintained in the matter. Learned counsel for the appellant would vehemently contend that in terms of the statutory rule, the accounting standard as prescribed under the rule ought to have been followed. The learned counsel submits that it is mandatory for the assessee to follow the Accounting Standard 2 in terms of the relevant rules from the year 1999 and the relevant rules of the year 2006 is applicable. It is an admitted case that the assessee has been continuously adopting the LIFO method which has been accepted by the revenue for all the earlier assessment years and in respect of the assessment year 2009-10, the matter travelled upto the tribunal and the manner of valuation of the closing stock done adopting LIFO method was approved. Therefore, in our considered view, the tribunal was right in affirming the order passed by the CIT(A). An identical issue came up for consideration in the case of Commissioner of Income Tax vs. Sharad Mohanlal Shah [ 2018 (11) TMI 1331 - GUJARAT HIGH COURT] wherein it was held that the assessee therein was following the LIFO method and the CIT(A) therein as well as the tribunal concurrently held that such method was already recognised in law and in any case consistently followed in several orders and, therefore, the appeal filed by the revenue was dismissed. The Special Leave Petition filed before the Hon ble Supreme Court was dismissed as reported in [ 2019 (7) TMI 1113 - SC ORDER] - Decided against revenue.
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2022 (2) TMI 1151
Reopening of assessment u/s 147 - correctness and validity of the reason to believe - Petition filed by the petitioners assailing the search and seizure proceedings followed by the assessment carried out and the demand raised by the respondent-authorities - HELD THAT:- Petitioners in the matter including assessment and the demand notices, we find that the search and seizure was carried out way back in the year 2018 which culminated in passing the orders of assessment in the year 2021 - Petitioners have filed appeal before the Appellate authority exercising their right of appeal. While the appeal is pending for last many months, the petitioners seek to invoke the jurisdiction of this Court. While the jurisdiction of this Court to examine the correctness and validity of the order cannot be disputed, at the same time, we are not inclined to exercise our discretionary jurisdiction to entertain the dispute brought before us for the reason that there is not only an alternative remedy available to the petitioners under the law but that remedy has been invoked by the petitioners and the appeal is pending consideration. The argument of petitioners that the explanation to the provision contained in Section 132 may not allow the Appellate authority to dwell into the reasons on which the authority initiated the search and seizure proceedings, in our opinion, would not in any manner affect the jurisdiction of the Appellate authority to examine the legality and validity of the order of assessment and demands on its own merits and decide the same in accordance with law. We are not inclined to go into the merits of the dispute raised in this petition. We leave it to the petitioners to pursue the appeal which is pending consideration before the Appellate authority. We are inclined to direct the Appellate authority to decide the petitioners appeal within a period of three months from the date of receipt of the copy of this order. The contention made by the petitioners before this Court including the challenge to the aspect of reason to believe and satisfaction shall be examined as permissible under the law.
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2022 (2) TMI 1150
Unexplained Cash deposit in Catholic Syrian Bank - HELD THAT:- This court is of the opinion that after considering the submissions made by the parties and analysing the entire materials placed before it, the Tribunal being the fact finding body, dismissed the assessee's appeal. Moreover, the issues involved herein are all questions of facts and the same do not involve any principle of law, warranting interference at the hands of this court. See METROARK LTD. VERSUS COMMISSIONER OF CENTRAL EXCISE, CALCUTTA [ 2004 (1) TMI 397 - SUPREME COURT] . That apart, it is settled law that a court of appeal interferes not when the judgment under attack is not right, but only when it is shown to be wrong - See Dollar Co. v. Collector of Madras [ 1975 (5) TMI 87 - SUPREME COURT] . - Decided against assessee.
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2022 (2) TMI 1149
Faceless assessment u/s 144B - time-limit to complete the assessment - whether the petitioner s case is covered under the Relaxation Act? - HELD THAT:- CBDT issued the first Notification No.20/2021. Clause A of this notification provides that where the specified Act is the Income-tax Act, and the completion of any action referred to in clause (a) of sub-section (1) of Section 3 of the Act relates to passing of an order under Section 144C(13) of the Act and 31st March 2021 is the end date, during which the time-limit specified in the Act falls for completion of such action, 30th April 2021 shall be the end date to which the time-limit for completion of such action shall stand extended. The notification, therefore, provides that if the time-limit to complete the assessment u/s 144C(13) was expiring on any date upto 31st March 2021, the said date for completion was extended upto 30th April 2021. Since in this case, the time-limit for completion of assessment was not expiring as of 31st March 2021, in our view, Notification No.20/2021 is not applicable. Coming to the applicability of Notification No.38/2021 issued on 27th April 2021 - The expiry of time-limit for completion of assessment or for passing the order in petitioner s case under Section 144C(13) of the Act on 30th April 2021 was not due to an earlier extension of time-limit by an earlier notification but was on account of the fact that the directions were issued by the DRP on 20th March 2021. As per Section 144C(13) of the Act, an assessing officer has one month from the date of the end of the month in which the directions are received by him to pass the final order / complete assessment, therefore, in our view, the time-limit of 30th April 2021 not being on account of extension by earlier notification, Notification No.38/2021 is also inapplicable to petitioner s case. Coming to Notification No.74/2021 issued on 25th June 2021, Clause (A) of the notification provides that where the specified Act is the Income-tax Act, and the completion of any action referred to in clause (a) of subsection (1) of Section 3 of the Relaxation Act, relates to passing of an order for assessment or re-assessment under the Act and the time limit for completion of such action under Section 153 or Section 153B thereof expires on 30th June 2021 due to its extension by earlier notifications, such time-limit shall further stand extended to 30th September 2021. There is no extension of time-limit under this notification for completion of assessment or passing of any order under Section 144C(13) of the Act. In our view, therefore, Notification No.74/2021 is also not applicable to the case at hand. Even if we hold that the Relaxation Act was applicable to petitioner s case as well, still, the extension vide Notification No.74/2021 is applicable only to cases where the time-limit has already been extended by earlier notifications. Since the time-limit in petitioner s case has not been extended by earlier notifications, Notification No.74/2021 was not applicable to petitioner s case. Even if for a moment we hold that Relaxation Act is applicable to petitioner s case, the time-limit provided by Notification No.38/2021 expired on 30th June 2021. Notification No.74/2021, on which respondents have relied upon to submit that time has been extended upto 30th September 2021, specifically excludes Section 144C(13) of the Act. If that also was to be included, Notification No.74/2021 would have expressly provided for it as it has provided in Notifications No.20/2021 and 38/2021. Notification No.20/2021 and Notification No.38/2021 specifically referred to the time-limit for passing the final assessment order under Section 144C(13) of the Act. There is, however, no specific reference to the time-limit under Section 144C(13) of the Act in Notification No.74/2021. Therefore, it is clear that CBDT has not extended the time-limit for passing any order under Section 144C(13) of the Act vide Notification No.74/2021 dated 25th June 2021, and hence, there is no extension of time-limit to 30th September 2021 to pass the order under Section 144C(13).
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2022 (2) TMI 1148
Validity of reopening of assessment u/s 147 - Scope of Section 148A as newly inserted - As argued notices are issued to a dead person and assessment period prior to 01.04.2021 notices issued after 2021 without following the procedure as provided under the substituted provisions for reassessment under the Income Tax Act, 1961 by the Finance Act, 2021 - Comparison between old and new provisions for reassessment - Individual identity of Section 148 as prevailing prior to amendment - applicability of the newly inserted provisions of Section 148A and the amendments brought inter alia w.e.f. 1.4.2021 HELD THAT:- In a recent Division Bench judgment of this Court in a similar circumstances has quashed the reassessment notice. In case of Sudesh Taneja Vs. ITO [ 2022 (1) TMI 1212 - RAJASTHAN HIGH COURT ] held that under no circumstances the extended period available in clause (b) of sub-section (1) of Section 149 which we may recall now stands at 10 years instead of 6 years previously available with the revenue, can be pressed in service for reopening assessments for the past period. This flows from the plain meaning of the first proviso to sub-section (1) of Section 149. In plain terms a notice which had become time barred prior to 01.04.2021 as per the then prevailing provisions, would not be revived by virtue of the application of Section 149(1)(b) effective from 01.04.2021. All the notices issued in the present cases are after 01.04.2021 and have been issued without following the procedure contained in Section 148A of the Act and are therefore invalid. By virtue of notifications dated 31.03.2021 and 01.04.2021 issued by CBDT substitution of reassessment provisions framed under the Finance Act, 2021 were not deferred nor could they have been deferred. The date of such amendments coming into effect remained 01.04.2021. In the result we find that the notices impugned in the respective petitions are invalid and bad in law. The same are quashed and set aside. The learned Single Judge committed no error in quashing these notices. All the writ petitions are allowed. Appeals of the revenue are dismissed.
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2022 (2) TMI 1147
Transfer of case u/s 127 - transferring the case from Nagaland to Kerala - HELD THAT:- Since the business interest of this particular group was located in Kerala as well as in Nagaland and purely for administrative exigencies and in order to have a better control, powers under Section 127 of the Act were exercised by the Revenue authorities. Section 127 of the Act gives power to transfer a case from one jurisdictional assessing authority to another. The very purpose of the powers, which have been given to the authorities under Section 127 of the Act, are the powers to be exercised in public interest. It has a larger public purpose as observed by the Hon ble Apex Court in the case of K.P. Mohammed Salim vs. Commissioner of Income Tax, Cochin [ 2008 (4) TMI 30 - SUPREME COURT ] The purpose of transferring the case is to facilitate the Revenue authorities in doing an effective and coordinate investigation and assessment. We have absolutely no doubt in our mind that the reasons were assigned by the authorities as it was required under Section 127 of the Act. Service of the notice - It is not a case where notice was sent at a wrong address. The notice was sent at an address of the company at Kerala which has also been received by the appellants/petitioners although they do not categorically refute that they did not receive the said notice. It is therefore sufficient compliance under Rule 127 as the notice was sent at the registered office of the company. Revenue department has categorically stated that the appellants/petitioners had received the notice dated 23.05.2018 on 26.06.2018, a fact which has been reiterated over and again by the Revenue department, and has not been negated by the appellants/ petitioners. All the same, since no response was filed before the Revenue authorities, another notice was sent on 26.06.2018. Unlike the first time, this time it came with an endorsement of the postal authority that it is unclaimed . A presumption can very well be drawn here that when the first notice was received at the same address, how can the second notice remain unclaimed and therefore, this plea of the petitioners/appellants that the second notice was never received by them has been rightly rejected by the learned Single Judge. As no objection was filed under the proceeding under Section 127 of the Act, the Revenue had no alternative but to pass the order which was ultimately done on 18.07.2018. As far as merits of the order dated 18.07.2018 is concerned, we are of the considered view that such a transfer has to be made on administration exigencies and for better assessment by the Revenue department. The Revenue authorities are the best judge in this matter and they have assigned clear and cogent reasons as to why the transfer is being made. The only requirement of the law is that while passing an order of transfer, the reasons must be assigned. We have absolutely no doubt in our mind that cogent reasons have been assigned by the Revenue for transferring the case from Dimapur to Kollam and therefore, it does not call for our interference. We find absolutely no reason to interfere with the finding of the learned Single Judge. The writ appeals are devoid of merit and the same are accordingly dismissed.
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2022 (2) TMI 1146
Capital gains - nature of land sold - land converted into a barren land to establish an industrial estate - land sold by the assessee through sale deed in favour of Kerala State Industrial Development Corporation Limited (for short KSIDC ) - assessee is a public limited company engaged in a range of activities such as cultivation, processing, and trading in tea, rubber, aquaculture; providing engineering services, etc - Whether Tribunal was right in holding that the land converted into a barren land to establish an industrial estate was an agricultural land u/s.2(14) and therefore, profit on sale not assessable to income tax for capital gains? - whether the sale of an asset constitutes sale of a capital asset or agricultural land, and is case-specific and to be determined on a case-to-case basis? - HELD THAT:- The schedule property, as admitted by the parties, is located in Kinalur and Kanthalad village in Quilandi taluk, nearly 20 kms away from Kozhikode Municipal Corporation limits. The schedule property, a plantation land, was an agricultural land both by classification and user till date of cutting of rubber trees. With the cutting of rubber trees, at best, the schedule property becomes arable land, which may not be an agricultural land with plantations. The user for agriculture is not denied by such cutting of rubber trees. This contention that barren land is not agricultural land is neither supported by authority nor material. This Court is of the view that the vacant agricultural land available upon cutting and carrying away of trees, at best, can be called arable land : meaning, land used for any agricultural purpose. Either to attract the meaning of capital asset or not to attract agricultural land, something more is required. The ipsi dixit objection, examined with admitted factors, would not decisively act in determining whether the schedule property satisfies capital asset or not. In the case on hand, the assessee both factually and legally did not change the character of land from agriculture to non-agriculture. The assessee has demonstrated that the classification of land continued to be agricultural land in the revenue records even as on the date of sale. Though it is a peripheral, it is an important matter in appreciating the character of land sold by the assessee; namely, had the land been converted for the non-agricultural purpose/laid out in plots, then the stamp duty payable on registration would be on the nature of land sold at the relevant point of time. The schedule property was described as land in conveyance deed. The schedule property consists of vast extents of agricultural land, admittedly outside a notified area. There is no change of user at the instance of assessee. The burden fastened on the assessee in the circumstances of the case has been discharged and the findings recorded by the Tribunal are available in the facts and circumstances of the case. We apply the principles enunciated in the cases referred to supra to the case on hand and the tests taken out as relevant by the Revenue and examined as tenable or not. The findings of fact recorded by the Tribunal, in the circumstances of the case, do not warrant interference of this Court. The three objections raised against the findings recorded by the Tribunal since are without merit, the substantial questions are answered in favour of the assessee and against the Revenue.
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2022 (2) TMI 1145
Delay in deposit of employees contribution to PF ESI - employees contribution to PF ESI was duly deposited on or before the due date of filling return of income u/s 139(1) - HELD THAT:- As decided in PRO INTERACTIVE SERVICE (INDIA) PVT. LTD. [ 2018 (9) TMI 2009 - DELHI HIGH COURT] in view of the judgement of the Division Bench of Delhi High Court in Commissioner of Income Tax versus AIMIL Limited, [ 2009 (12) TMI 38 - DELHI HIGH COURT] the issue is covered against the Revenue and, therefore, no substantial question of law arises for consideration in this appeal. The legislative intent was/is to ensure that the amount paid is allowed as an expenditure only when payment is actually made. We do not think that the legislative intent and objective is to treat belated payment of Employee s Provident Fund (EPD) and Employee s State Insurance Scheme (ESI) as deemed income of the employer under section 2(23)(x) of the Act - Decided in favour of assessee.
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2022 (2) TMI 1144
Penalty u/s 271(1)( c) - Addition of bogus purchases - Argument of defective notice - non specification of charge or striking of irrelevant portions in notice - difference taken by the assessee was not tenable and the assessee was guilty of furnishing inaccurate particulars - HELD THAT:- Legality or otherwise of assumption of jurisdiction by the learned Assessing Officer under a notice issued under section 271(1)( c ) of the Act without striking off of the relevant limb under which the penalty is proposed is no longer res integra, and the Hon ble jurisdictional High Court in the case of PCIT vs. Sahara India Life Insurance company limited case [ 2019 (8) TMI 409 - DELHI HIGH COURT] AND MANJUNATHA COTTON AND GINNING FACTORY [ 2013 (7) TMI 620 - KARNATAKA HIGH COURT] The notice issued by the learned Assessing Officer would be bad in law if it did not specify which limb of section 271(1)( c ) of the Act the penalty proceedings had been initiated under i.e., whether for concealment of particulars of income or for furnishing of inaccurate particulars thereof. AO to assume jurisdiction u/s 271(1)(c), proper notice is necessary and the defect in notice u/s 274 of the Act vitiates the assumption of jurisdiction by the learned Assessing Officer to levy any penalty. In this case, facts stated supra clearly establish that the notice issued under section 274 read with 271 of the Act is defective and, therefore, we find it difficult to hold that the learned AO rightly assumed jurisdiction to passed the order levying the penalty. - Decided in favour of assessee.
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2022 (2) TMI 1143
Exemption u/s 11 - disallowing the claim of the assessee for exemption u/s 10(23C)(vi) in violation of Section 13 - HELD THAT:- As per the order of the ITAT concerned CIT(Exemptions), Ahmedabad also passed an order on 18.06.2018 granting approval to the assessee under Section 10(23C)(vi) for the year under consideration, i.e. AY 2014-15, as well as the subsequent years. Relying on this development, the assessee made an alternative claim of exemption under Section 10(23C)(vi) of the Act during the course of appellate proceedings before the learned CIT(A) and the same was entertained by the CIT(A) and quite rightly so by relying on certain judicial pronouncements referred to and relied upon by him in the impugned order. He also sought comments from the AO on this new alternative claim made by the assessee for exemption Section 10(23C)(vi) of the Act and after taking into consideration the comments of the AO, submissions of the assessee and the entire material available on record, including the approval granted by the learned CIT(Exemptions), Ahmedabad to the assessee under Section 10(23C)(vi) CIT(A) allowed the alternative claim of the assessee for exemption under Section 10(23C)(vi) by passing a well discussed and well reasoned order; the relevant portion of which is already extracted hereinabove. We, therefore, find no infirmity in the order of the learned CIT(A) allowing the alternative claim of the assessee for exemption under Section 10(23C)(vi) of the Act and even the learned DR has not raised any material contention to rebut or controvert this position. The impugned order of the learned CIT(A) on this issue is, therefore, upheld and the appeal of the Revenue is dismissed. Disallowance of expenses incurred by the assessee under the head Advertisement and Promotion Expenses and Travelling and Conveyance Expenses - HELD THAT:- Although the learned DR has contended that the expenditure in question was disallowed by the learned CIT(A) vide his impugned order after having found that the same was not incurred for the purpose of educational activity of the assessee, we find that no opportunity was specifically given to the assessee to establish its case on evidence as per clause (a) of third proviso to Section 10(23C)(vi) of the Act that the expenditure in question was incurred wholly and exclusively for the objects for which it is established in order to avail the benefit of exemption provided in Section 10(23C)(vi) of the Act. We, therefore, consider it fair and proper, and in the interest of justice, to restore this issue to the file of the Assessing Officer for deciding the same in accordance with law after giving the assessee an opportunity of being heard. Appeal of the assessee is treated as allowed for statistical purposes.
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2022 (2) TMI 1142
Payment towards interest in land - assessee had treated the same as a part of the cost of land - whether said payment was not the part of the cost of the land and was outside the purview of section 37(1) - CIT-A deleted the addition - HELD THAT:- It is an undisputed fact that during the FY 2007-08, the assessee had requirement to purchase contiguous piece of land for its housing project and has entered into memorandum of understanding/ agreement with SBPL to provide contiguous piece of land which in turn it was to be acquired from various farmers and land owners - MOU entered on 17.04.2007 clearly shows that there was an arrangement/understanding between the SBPL and the land owners and SBPL was paid for assigning/relinquishing/transferring all its present and future rights in the land to be registered in the name of the assessee. Most important fact was that, all these payments were made in the FY 2007-08. Now, in the AY 2013-14, AO held that the MoU and the payments made in the FY 2007-08 cannot be allowed. In other words, the expenditure incurred in AY 2008-09 was disallowed in AY 2013-14 and that to be u/s 37(1) of the Act. On this ground alone, we do not find any basis or the reason as to how the payments and the cost with regard to FY 2007-08 (AY 2008-09) is disallowable in AY 2013-14. The terms of Agreement and MoU entered into between the assessee and SBPL and the conduct of the parties and the transactions undertaken with the land owners clearly show that there was clear cut understanding and arrangement between the assessee, SBPL and the land owners and the same cannot be termed as self-serving document as held by the Assessing Officer, because such an agreement has duly acted upon - agreement reveals that SBPL has got the land transferred directly in favour of the assessee and it is provided that SBPL was paid consideration for assigning, relinquishing and transferring all its present and future rights in the said land. All these documents and the conduct that the payment made to SBPL, cannot be held to be a make-believe arrangement and such payment cannot be disallowed. Accordingly, the order of the ld. CIT (A) deleting the said disallowance is upheld. TDS u/s 194H - Disallowance on protective basis u/s 40(a)(ia) - commission or brokerage paid by the assessee company - CIT-A deleted the addition - HELD THAT:- Addition is baseless because payments made to the consolidators of land have been made for the purpose of renouncing right/interest in the land and thus the assessee and the consolidator are transacting on principal to principal basis and cannot be regarded as commission or brokerage. Therefore, the assessee cannot be held to be liable to deduct tax at source in terms of section 194H of the Act as certainly its not in the nature of any commission or brokerage. Accordingly, the ld. CIT (A) deleting the said disallowance is upheld. Revenue appeal dismissed.
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2022 (2) TMI 1141
Validity of Reopening of assessment u/s 147 - Second set of reassessment proceeding - assessee had failed to explain the source of the cash deposit in his bank account - HELD THAT:- Now when the reassessment proceedings were initiated by the A.O, i.e, ITO, Ward-5(2), Amritsar, vide Notice u/s 148, dated 29.03.2016, for bringing to tax the unexplained cash deposits in the assessee s bank account that as per him had escaped assessment (which thereafter had culminated into an assessment u/s 147 r.w.s 143(3), dated 08.11.2016), he was clearly divested of his jurisdiction from initiating another set of reassessment proceeding, i.e, the impugned reassessment proceeding in question by issuing another Notice u/s 148, dated 29.03.2016, on the ground, that the assessee had failed to prove the source of cash deposit in his another bank A/c. The reassessment proceedings initiated by the A.O, vide the impugned Notice u/s 148, dated 29.03.2016, i.e, during the pendency of the other reassessment proceeding for the year under consideration, cannot be sustained. We, thus, are unable to persuade ourselves to subscribe to the validity of the reassessment proceedings, i.e, the proceedings that had culminated into the impugned assessment order u/s 144 r.w.s 147, dated 27.12.2016. Valid sanction/approval as contemplated in sub-section (1) of section 151 - Pr. Commissioner of Income Tax-II, Amritsar despite the aforesaid serious infirmity, wherein the AO, i.e, ITO, Ward-5(2), Amritsar had on the same day, i.e, 28.03.2016 approached hi for his sanction/approval for taking recourse to parallel reassessment proceedings against the assessee, i.e, for the same year and, he had in a most mechanical manner, on the same day, i.e, on 28.03.2016 granted his sanction/approval as contemplated in sub-section (1) of section 151 of the Act, i.e, for both the reassessment proceedings that were taken recourse to by the A.O. On a perusal of the sanction granted by the Pr. Commissioner Of Income Tax-II, Amritsar, we find that on both the occasions the same has been granted by him in a mechanical manner by simply scribbling. Manner in which the approval/sanction had been granted by the Pr. Commissioner of Income-tax-II, Amritsar, we may herein observe, that the same in the backdrop of the facts involved in the case before us, i.e., granting of sanction/approval by him to the parallel set of reassessment proceedings initiated by the AO, on the same date, and for the same year, therein clearly reveals the non-application of mind by him. While sanctioning the issuance of the second Notice u/s 148, dated 29.03.2016, which as observed by hereinabove had culminated into the impugned assessment order u/s 144 r.w.s 147, dated 27.12.2016, there is no reference or mention about the approval/sanction that was already granted by him on the earlier occasion, and the same therein leads to serious doubts as regards application of mind by him at the time of grant of approval to the impugned reasons to believe - we are of a strong conviction that the sanctioning authority, i.e, the Pr. Commissioner of Income-tax-II, Amritsar had granted his sanction u/s 151 of the Act, in a mechanical manner, i.e, without application of mind to the facts of the case and the material available on record. Thus neither able to concur with the lower authorities as regards the validity of the reassessment order passed by the AO u/s 144 r.w.s. 147 of the Act, dated 27.12.2016, for the reason, that the same were initiated at a point of time when reassessment proceeding vide another Notice u/s 148, dated 29/03/2016, i.e, as regards the unexplained cash deposits already stood triggered and were pending at the relevant point of time and, had thereafter culminated into an assessment u/s 147 r.w.s 143(3), dated 08.11.2016; nor are able to persuade ourselves to subscribe to the mechanical manner in which the approval under sub-section (1) of Sec. 151 of the Act had been granted by the approving authority, i.e., the Pr. Commissioner of Income-tax-II, Amritsar, therefore, quash the impugned assessment order passed by the AO u/s 144 r.w.s 147 - Decided in favour of assessee.
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2022 (2) TMI 1140
Validity of Reopening of assessment u/s 147 - Mandation of valid service on the assessee of a notice issued under Sec.148 - service of Notice u/s 148 by affixture on the main gate of house of assessee who is residing abroad - HELD THAT:- Though it is observed by the A.O that the whereabouts of the assessee were not available, but then, neither there is anything discernible from the records nor brought to our notice during the course of the hearing of the appeal, which would reveal that the A.O despite using all reasonable and due diligence could not get the foreign address of the assessee. On the contrary, the reason for ordering substituted serve, as per the A.O, was that he had a reason to believe that the assessee was avoiding the service of notice u/s 148 of the Act, which as observed by us hereinabove is an observation beyond comprehension. In sum and substance, it is not the case of the A.O that he had taken recourse to substituted service as contemplated in Order V- Rule 20 of the Code of Civil Procedure, 1908 (5 of 1908), for the reason, that the whereabouts of the assessee in Canada, despite using all reasonable and due diligence could not be gathered by him. We are of the considered view, that the A.O despite being in knowledge of the fact that the assessee had shifted and was residing abroad, i.e, in Canada, had however grossly erred in taking recourse to substituted service of the Notice u/s 148, i.e, by getting the same affixed at his old residential house in India, which residential house he had himself observed in the assessment order was sold by the assessee prior to his shifting abroad, i.e, to Canada. The observations of the A.O, as recorded in the assessment order, therein revealing beyond doubt his knowledge that the assessee had sold his old residential house at Village Bhaika Dayalpura, Tehsil Rampura Phul, District : Bathinda. We are unable to comprehend that as to what purpose the service of Notice u/s 148 by affixture on the main gate of the assessee s residential house (which as observed by the A.O was no more owned by the assessee and had been sold by him prior to shifting abroad) would have served. The service of Notice u/s 148 by ordering a substituted service, as contemplated in Order V-Rule 20 of the Code of Civil Procedure, 1908 (5 of 1908), in the absence of using of all reasonable and due diligence for locating the whereabouts of the assessee, not being as per the mandate of law cannot be subscribed on our part. Our aforesaid view that service of notice in case of an assessee residing abroad, by affixing the same on the main door of his local residence in India is not a valid service, is supported by the judgment of the Hon ble High Court of Allahabad in the case of CIT Vs. Habibullah [ 1985 (1) TMI 346 - ALLAHABAD HIGH COURT] A.O had framed the impugned assessment u/s 144 r.w.s 147, dated 18.03.2014 without effecting a valid service of Notice u/s 148 upon the assessee prior to the framing of the assessment, therefore, the same cannot be sustained and is liable to be vacated - Decided in favour of assessee. Penalty u/s 271(1)(c) - HELD THAT:- As the quantum assessment order passed by the A.O u/s 144 r.w.s 147, dated 18.03.2014 had been quashed by us for want of valid assumption of jurisdiction by the A.O for framing the impugned assessment, therefore, the penalty imposed on the assessee u/s 271(1)(c) cannot survive on a standalone basis and has to meet the same fate. As such, the penalty imposed on the assessee u/s 271(1)(c) of the Act is vacated.
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2022 (2) TMI 1139
Disallowance of deduction on donation made u/s 35(1)(ii) - bogus donations - HELD THAT:- As relying on KAUSTUBHBHAI DHIRAJLAL PATEL [ 2021 (2) TMI 956 - ITAT AHMEDABAD] we do not hesitate to allow the appeal filed by the assessee by deleting the disallowance made by revenue relating to the claim of donation made by the assessee to School of Human Genetics Population Health(SHG PH). We, therefore, delete such disallowance made by revenue.- Decided in favour of assessee.
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2022 (2) TMI 1138
Validity of reopening of assessment u/s 147 - Whether Reopening notice issued by the AO based on information received by him from the DDIT(Inv.) and not on his own satisfaction? - HELD THAT:- The first four lines consists of a factual information received from the DDIT (Inv.), Mumbai, the second part indicates that it has been established from the report that the assessee has taken accommodation entries and the third part consists of failure on the part of the assessee to disclose fully and truly all material facts necessary for the assessment. AO mentions so as to reopen the case, it was established that BL Jain Group was providing accommodation entries of unsecured loan and bogus purchases. Then, he goes on to mention that it is established from the report that the assessee has taken accommodation entries and hence he has reasons to belief that the income has escaped assessment. Primarily, we find that the reasons recorded by the assessee are too sketchy and does not instill any confidence with regard to the reasons recorded for reopening. It is not even clear whether the assessee has received entries pertaining to loans or purchases. The details of the report wherein it was alleged that the assessee has received bogus entries could not be made as a basis for reopening. The existence of belief has to be bonafide and has to be based on material which is relevant hence specific in nature. The basis of the belief should be discernable from the facts on record and ascertainable with regard to the escapement of income. In this case, a regular assessment u/s. 153B(1) has also been completed on 31.03.2014. The reasons, in the instant case recorded by the AO do not satisfy the requirements of Section 148 - reasons and the information referred is extremely scanty and sudden jump to the conclusions. There is no reference to any specific document except the Annexure which cannot be regarded as material or prima facie evidence to establish the link to point out escapement of income. Annexure is not a pointer and does not indicate escapement of income per se. Hence, going through the reasons recorded of the AO on 10.10.2014 and the judicial pronouncements mentioned above in the absence of any tangible material to establish the escapement of income for assessment, we hold that the action of the AO issuing the notice u/s. 148 cannot be held to be legally valid. - Decided in favour of assessee.
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2022 (2) TMI 1137
Completion of assessment u/s 144 - HELD THAT:- CIT(A) has concluded that assessment order has actually been passed under section 143(3) and not under section 144 which appears to be an inadvertent typographical error. Hence, this ground need not be adjudicated upon. Addition on account of alleged excess proprietary capital - addition on account of alleged bogus sundry creditors - assessee submitted that an opportunity may be granted to him to produce details, evidence etc. which the Ld. AO and the Ld. CIT(A) have alleged that the assessee has not produced before them - HELD THAT:- In the interest of justice, we are of the opinion that the assessee deserves to be given one last opportunity to present his case before the Ld. AO. We, therefore, remit the above two issues involved in this appeal to the file of the Ld. AO for framing the assessment afresh in the light of the details/information/documents already on record and which he may require the assessee to furnish during the course of fresh assessment proceedings before him. Undisclosed profit on suppressed turnover - HELD THAT:- CIT(A) has recomputed the amount of suppressed turnover and net profit rate to be applied thereon based on the audited balance sheet and accordingly granted part relief of ₹ 1,90,360/- to the assessee. We do not find any reason to interfere with the finding of the Ld. CIT(A) and therefore confirm the Ld. CIT(A)'s order on this issue.
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2022 (2) TMI 1136
TP Adjustment - Arm's Length Price (ALP) adjustment made in respect of Advertisement, Marketing and Promotional (AMP) expenses incurred by the assessee on the pretext that the assessee company had benefitted the Associated Enterprise (AE) by incurring the said expenditure - HELD THAT:- The facts with regard to the impugned dispute before us for the year are identical with earlier years. The ld. DR tried to distinguish the decision taken supra by stating that the tribunal had held that Bright Line Test (BLT) method adopted by the ld. TPO in earlier year was not a valid method to benchmark the transactions, and that during the year under consideration, the ld. TPO had only applied 'other method' for benchmarking the AMP expenditure. AR stated that the ld. TPO by merely mentioning 'other method' in his order had effectively applied only BLT method while doing the determination of ALP in respect of AMP expenditure. Hence the facts are exactly identical. In view of the above, the decision rendered by this tribunal for Asst Year 2013-14 [ 2020 (9) TMI 341 - ITAT MUMBAI] would be applicable for the year under consideration also and accordingly, we direct the ld. TPO to delete the ALP adjustment made in respect of AMP expenditure. Accordingly, the Grounds raised by the assessee in this regard are allowed. ALP adjustment made in relation to import of finished goods (i.e. pringles) - tested party for benchmarking the international transaction of import of finished goods - HELD THAT:- We find that the assessee had to carry on multiple functions as detailed above in order to market the imported Pringles in India. We find that the Singapore AE is remunerated on mere cost plus mark up basis and undertakes only limited functions. Hence we hold that for all practical purposes, Singapore AE would be the least complex entity. The statute requires that tested party selected should be the least complex party. Moreover, the main basis for rejection of the Singapore AE as tested party by the ld. TPO was in view of the fact that the financials of AE as well as foreign comparable companies were not produced before him. This fact has been found to be incorrect as the assessee had indeed furnished the financials of AE as well as foreign comparable companies which are also enclosed in the paper book filed before us. The ld. DR before us could not controvert this fact before us. Yet another argument on regional benchmarking of comparable companies carried out by the assessee had already been addressed by the Delhi Tribunal in Ranbaxy Laboratories Ltd. [ 2016 (5) TMI 157 - ITAT DELHI] and accepted by CBDT as stated supra. Hence that argument of the ld. DR also fails. Accordingly, we hold that it would be safe to treat the Singapore AE as the least complex entity and consequentially Singapore AE had been rightly taken as the tested party by the assessee. Selection of RPM as MAM - We hold that Singapore AE should be considered as the tested party, being the least complex entity, in the facts and circumstances of the case, which has been rightly done by the assessee. Hence no adjustment to ALP is required to be made. Even if the comparables chosen by the ld. TPO are considered, undisputably since the assessee is only engaged in purchase and resale of goods without any substantial value addition thereon, RPM would be the MAM and in case of RPM only the gross margins are to be compared. We find that gross margins of assessee are much more than the gross margins of comparable companies chosen by the ld. TPO. Hence no adjustment to ALP is to be made in respect of import of finished goods even if the comparable companies chosen by the ld. TPO are upheld. Hence we hold that no adjustment to ALP is required to be made in the instant case in respect of import of finished goods in either case. Accordingly, the said adjustment is hereby directed to be deleted. Accordingly, the Additional Grounds raised by the assessee are allowed
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2022 (2) TMI 1135
Deduction u/s. 80IA - Addition on the other income received from contractors at 5 production units - as submitted that this other income consists of electricity recovery from the contractors for the power consumed and other recoveries from the contractors - HELD THAT:- As relying on own case [ 2019 (8) TMI 345 - ITAT DELHI] making disallowance by the AO and confirmed by the ld. CIT(A) while computing the deduction allowable u/s. 80IA is not sustainable and all the items of income qua which deduction has been sought by the assessee u/s. 80IA are allowable deduction and order passed by the AO and ld. CIT(A) is not sustainable. So, the order passed by the lower authorities is set side directing the AO to recompute the deduction allowable to the assessee u/s. 80IA without excluding amount disallowed by the AO. Consequently, ground determined in favour of the assessee. Since, the issue before us is similar to the issue adjudicated by the Tribunal, in the absence any material change in the factual contents and the legal proposition, we are of the considered view that the disallowance made by the AO while computing the deduction is allowable u/s. 80-IA - Decided in favour of assessee.
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Customs
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2022 (2) TMI 1134
Smuggling - Gold Biscuits of Foreign Origin - production of evidence evidencing the legal import of gold or not - statements given under Section 108 of the Customs Act, 1962 not considered - Revenue has not established that the seized goods were smuggled ones and illicitly imported into India - burden of proof - seizure was made by Police without any evidence - HELD THAT:- This Court finds that as regards Mr. R. Kailash, though he has given a statement under Section 108 of the Customs Act, admitting that he has no duty paid receipts for the gold biscuits found in his possession, he rebutted the same by producing baggage receipts to prove that the gold biscuits and ingots seized from him have been brought into the country by paying respective charges. Though under Section 123 of the Customs Act the initial burden to prove that the gold seized from the possession of the accused was not smuggled goods lies on the person in whose possession the gold was seized, but once the accused produces the receipts for the import of gold, then the burden shifts to the Department and the Department will have to prove that the baggage receipts do not pertain to the gold which was found in possession of the accused. Since no such evidence has been produced before the Tribunal or before this Court, this Court does not deem it fit and proper to interfere with the findings of the CESTAT in the case of Mr. R. Kailash in giving him relief and setting aside the order of penalty confirmed by the Commissioner. The Special Court has gone into the evidence produced by the petitioners and has acquitted them by holding that they were not holding illicit gold in their hands. Since the gold found in possession of Mr. C. Srinivas was not found to be not of Indian origin, it cannot be said that he has committed any offence. Therefore, the decision given by the Tribunal setting aside the penalty order against Mr. C. Srinivas is upheld. The Appeals filed by the Department are accordingly dismissed.
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2022 (2) TMI 1133
Time Limitation - validity of SCN - whether the SCN given under Section 124 of the Act after six months of seizure can be sustained under the law? - HELD THAT:- Section 124 of the Act provides that no order of confiscation of any goods or imposing of penalty on any person is to be made under Chapter XIV, unless the notice has been served upon the person who is the owner of the goods, in writing with prior approval of the officer of customs not below the rank of an Assistant Commissioner of Customs informing the grounds on which it is to be confiscated or for imposition of penalty. The mode of service of notice prior to the amendment by Finance Act, 2018 included the summons or notice issued under Section 153 of the Act. This Court in DEEPAK NATVARLAL SONI VERSUS UNION OF INDIA [ 2018 (9) TMI 1912 - GUJARAT HIGH COURT] was considering the similar issue and addressed this question of issuance of the notice as envisaged under Section 110(2) vis-a-vis Section 124 and Section 153 which is no longer res integra. After a detailed discussion, it had been held that the action of respondents-authority in not returning the goods seized upon failure to comply with Sections 110(2), 124 and 153 of the Act, is illegal and the writ petition was allowed by directing the respondents to return all gold ornaments/gold items and two apple I-phones seized under panchnama to the petitioner within a specified period unconditionally subject to adjudication process to be carried out afresh in accordance with law. Mandate of Sub-section (2) of Section 110 of the Act is crystal clear that if no notice is given under clause (a) of section 124 of the Act for confiscation within six months of the seizure of the goods, the goods shall be returned to the person from whose possession they were seized provided that the Principal Commissioner of Customs for reasons to be recorded in writing can extend this period, not exceeding the period of six months and inform the concerned person from whom such goods were seized before expiry of the period so specified. It is further needed to be specified that where an order for provisional release of the seized goods has been passed under Section 110 A of the Act, the specified period of six months shall not apply - In the instant case, admittedly there has been no provisional release of the seized goods. Further extension of six months with the reasoned order by the Principal Commissioner of Customs or Commissioner of Customs also is completely missing. The period of six months from the date of signature expired on 03.10.2019. Even further period of six months as provided in the first proviso to Section 110(2) also got over on 03.04.2020. Of course, in absence of any order, much less reasoned order by prescribed authority, extension would need to be disregarded yet, the respondents chose not to return the seized currency or mobile phones and the request of the petitioner has not been addressed nor replied to. The Court notices that nothing has been explained in the entire reply of 27 paragraphs with regard to the non compliance of the statutory mandate under Section 110(1)(2) read with Section 124 of the Act. It is quite unfathomable as to why the time limit is not adhered to and issuance of the show cause notice has been delayed beyond the statutory time period and hence, intervention will be necessary at the end of this Court by keeping open the rights of the respondents to initiate adjudication process afresh in accordance with law. Petition allowed.
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2022 (2) TMI 1132
Seeking amendment/modification in the bills of entry - appellant wrongly indicated the number of pieces imported - HELD THAT:- Section 149 of the Customs Act, 1962 provides for making amendment to the Bill of Entry. As per the same, the Bill of Entry could have been modified by the Revenue authorities to correct the clerical error made by the appellant under self-assessment or in assessment by the Revenue. The said Bill of Entry was filed on the basis of commercial invoice indicating number of quantity as 2760 pieces of Backlit LED Panel, whereas on the Bill of Entry the total quantity has been mentioned as 5520 pieces. The error is evident as the invoice number is also matching. These errors can be considered for making amendment as provided for under Section 149. The matter needs reconsideration by the original authority for amending the Bill of Entry accordingly and reassessing the same - the matter is remanded back to the original authority with the direction to consider the application made under Section 149 of the Customs Act on the basis of documents submitted, as per law - Appeal allowed by way of remand.
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2022 (2) TMI 1131
Confiscation of goods - prohibited/restricted goods or not - import of consignment of Sajji Khar - Confiscation on the ground that as per FSSAI letter dated 19.03.2020, Sajji Khar was a non-specified product and approval under Non-Specified Food Regulations of 2017 was required - HELD THAT:- There is no dispute that the appellant have been issued license being a manufacturer/importer for manufacture of sweets and papad. It is also observed that CBIC directive issued on 21.05.2020 regarding the compliance of FSS (Approval of non-specified food and food ingredients) Regulations, 2017 whereas the Bill of entry for warehousing of goods was filed on 28.12.2019 and also the import has taken place much before the instruction dated 21.05.2020. The instruction dated 21.05.2020 cannot be applied retrospectively. It is a settled law that any condition is imposed on the import shall not apply to the import already originated from the port of shipping - In the present case also the instruction dated 21.05.2020 was issued much after not only the import of goods but also after filing of warehousing Bill of entry. It is also undisputed fact that the same product i.e. Sajji Khar has been allowed to be imported without the condition as imposed by the department in the present case on the earlier occasions by various importers. The goods are not liable for confiscation - Appeal allowed - decided in favor of appellant.
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Insolvency & Bankruptcy
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2022 (2) TMI 1130
Rejection of application filed under section 7 of IBC - Corporate Debtor failed to make repayment of its dues - Corporate Debtor clearly admitted its debt and mentioned that Appellant shall be paid - HELD THAT:- The Investment Agreement dated 01st April.2014 is on record which clearly mentions that Appellant has invested and paid 75 Lacs which was received by the Corporate Debtor. The Payment of ₹ 75 Lacs is evidenced by the Agreement itself. It is submitted that Appellant was allotted 2000 sq. ft. out of which 1000 sq. ft. was sought to be bought back by the Corporate Debtor with regard to which correspondences were entered - the notice which was issued by the Appellant on 12th July, 2018 was replied by the Respondent/Corporate Debtor where the Corporate Debtor clearly admitted the debt and mentioned that Appellant shall be paid. The Investment Agreement as well as the Reply submitted by the Corporate Debtor itself indicate that the amount was received by the Corporate Debtor and Corporate Debtor itself say that it has paid ₹ 25 Lacs and agreed to make payment of the remaining amount when the project shall start paying back, there is clear admission of the debt on behalf of Corporate Debtor and Adjudicating Authority has committed error in observing that there is no debt proved by the Appellant. Learned Counsel for the Appellant has also referred to several materials to indicate that project is complete and hence payment has become due. The Adjudicating Authority has committed error in rejecting the Application - appeal allowed.
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2022 (2) TMI 1129
Maintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its dues - Financial Creditors - existence of debt and dispute or not - time limitation - HELD THAT:- Period of Limitation following from date of NPA (30.06.2014) is 30.06.2019. The Petition has been filed on 07.05.2019 before the Adjudicating Authority. What has generally been considered , the date of default under Section 7 of the Code, particular, in case of Banks date of NPA is considered as Date of Default. As it is amply clear as per the RBI Circular, the Banks are required to declare the Date of NPA clearly and categorically without any ambiguity. In the present case of the Appellant, they were assigned the Debt from the Bank and the Bank has clearly defined the Date of NPA as 30.06.2014 and the date of assignment by ING Vyasya Bank Limited / Bank has been done on 19.09.2014. So clearly it is after the Date of NPA for amplifying. It is further mentioned that merger of ING Vyasya Bank Limited was made with Kotak Mahindra Bank from 01.04.2015 by the order of RBI - Section 7 of the Code is concerned with only two factors. There must be a debt and it must be due and payable in the law and there is a default . The Respondent is not refuting the Debt nor they are refusing that it was not due and payable in law except the Limitation issue and computation of default. It is amply clear that if Settlement offer or other way of acknowledgement of Debt has been done within the first period of limitation then Limitation gets extended again for the next three years - it is very much clear that the provisions of Limitation Act, 1963 which includes extension of limitation due to acknowledgment in writing, apply to the present case, the petition filed before the Adjudicating Authority is within the limitation period and both Debt and Defaults are not disputed and hence, provisions of Section 7 of the Code is applicable to the case and requires positive consideration towards its admission under the provision of the Code R/w the Limitation Act, 1963. The petition has been filed within the limitation period and hence Section 7 of the Code petition can be initiation against the Corporate Debtor - Appeal allowed.
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2022 (2) TMI 1128
Seeking replacement of Liquidator - Section 60(5)(c) of Insolvency and Bankruptcy Code, 2016, read with Section 276 of the Companies Act, 2013 and Rule 11 of National Company Law Tribunal Rules, 2016 - HELD THAT:- It is evident from the medical record, Annexure 2, that the applicant is suffering from essential hypertension and blood pressure and that he is a senior citizen. Further, Annexure-3 reveal that his son has been transferred to Bangalore and in this way, he is unable to act as liquidator - the ends of justice would be met, if the applicant Kuljeet Singh, Insolvency Professional, appointed as Liquidator in this case, is replaced. Application allowed.
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2022 (2) TMI 1127
Seeking direction to Respondents to accommodate the Corporate Debtor's assets/medical equipment on their property for a period of 6 (Six) months from the date of receipt of the order of Liquidation - HELD THAT:- The Learned Counsel appearing for the Applicant at this stage, while submitting that the Corporate Debtor is a hospital, though not a going concern and the equipments to be removed are valuable medical equipments and since the Liquidator has no time to take appropriate steps, as her appointment was done recently prays for passing stay orders for a limited period, i.e. till the Liquidator approach the Hon'ble Apex Court for filing appropriate application. It is submitted that the time for removal of equipments as granted by the Hon'ble Apex Court is going to expire on 19.02.2022. In normal circumstances though this Adjudicating Authority have all powers to pass appropriate orders/directions with regard to all matters concerning with CIRP or Liquidation of Corporate Debtor, however, since, the instant application is filed seeking extension of time granted by the Hon'ble Apex Court, the Liquidator is required to approach the Hon'ble Apex Court only if she is advised to seek any extension of time or in any manner to modify the order of Hon'ble Apex Court - application disposed off.
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PMLA
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2022 (2) TMI 1126
Money Laundering - attachment of property - Seeking grant of interim relief - whether the Petitioner is entitled for interim relief based on any distinct circumstances or as an exceptional case, much particular that since he has been exonerated by the Income Tax authority, by the Adjudicating Authority and by the State of Chhattisgarh where the Petitioner is in employment? - HELD THAT:- The Prevention of Money Laundering Act, 2002 was introduced as its statement of objects and reasons mentioned, to make money laundering an offence and to attach property involved under money laundering, so that serious threat to the financial system of India is adequately dealt with. It is worth setting out the statement of objects and reasons of the Act in full - The PMLA , being a Special Act, has provided certain mandatory provisions in order to ensure the effective investigation of the offence of money laundering. The economic offences not only affect individuals alone but damage the economy as well. Chanakya once said that the king who steals from the Rajkosh (treasury-public money) should be punished by the harshest sentence for he not only steals from an individual but the citizens of the Nation. It is high time where we as a society should take charge of it and sharp tools like PMLA to eradicate corruption once and for all. It is our responsibility that no one can take advantage of grey areas and loopholes. The provisions of the PMLA indicate that it is a Special Act and is a complete code itself, which does not come into the purview of other criminal law statutes. The provision of Code of Criminal Procedure do not prevail over the PMLA except in exceptional circumstances. The documents on record would show that the investigation under PMLA, 2002, is at very initial stage and, though, the Petitioner has been exonerated in other proceeding, but, at this stage, it would not be proper to arrive at conclusion that no offence under PMLA, 2002 is made out. The reply filed by the respondent authorities would show that under the PMLA, they have only got two opportunities to inquire from the Petitioner. The Petitioner is bound to submit his statements, documents to the respondent authorities to establish his innocence at the first instance, so as to avoid further proceedings under the provisions of the PMLA, 2002 - this Court does not find any sufficient ground where further proceeding of the impugned ECIR and addendum to the ECIR can be stayed. The Petitioner is not entitled to get any interim relief as prayed for. Application dismissed.
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Service Tax
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2022 (2) TMI 1125
Recovery of service tax - GTA Services - Rent-a-Cab service - applicability of N/N. 26/2012-ST dated 20/06/2012 - documents as produced by the Appellant with reply to the show cause notice, not appreciated - reverse charge mechanism - extended period of limitation - HELD THAT:- From the case records, it is seen that for the expenses incurred under the head motor car expenses, contains miscellaneous expenses for running of motor car including cost of fuel, toll tax, car parking charges, miscellaneous repair charges for car servicing, taxi fare reimbursement to staff whereas the ledger for Vehicle Hire Charges relates to the expenses in relation to the GTA services availed by the Appellant for the transportation of goods to customers of the Appellant. Further there has been no contrary evidence produced before us to deny the above facts. Also from the reconciliations produced, it is clear that the amounts as disclosed by the Appellant for GTA services in its ST 3 returns are much more than the amounts of vehicle hire charges and that there are other ledgers also on which tax has been paid under GTA services. The claim of the department that the amount under vehicle hire charges does not corelate to the amount paid under GTA services cannot be accepted as no visible efforts have been made by the department to corelate the same whereas the Appellant has produced all possible reconciliations for the same and on account of no contrary evidence being produced we are inclined to accept the contentions of the Appellant. Rent-a-Cab service - reverse charge mechanism - HELD THAT:- The demand was raised under the Rent-a-Cab service under reverse charge mechanism without actually identifying the supplier of service whereas the documents produced as part of appeal paper book and written submission shows the nature of expenses clearly not to be one of Rent-a-Cab service at all. Thus, the deeming fiction adopted by the Ld. Adjudicating authority cannot be sustained and thus, the demand cannot survive on this ground. As regards amount paid to Director for car hire charges, we find that the Appellant has not disputed the service tax liability on said amounts and that the same has been paid in the returns filed by the Appellant, we thus do not find any ground to make any observations on the same. Extended period of limitation - HELD THAT:- The demand has been raised for the period 2012-13 to 2015-16 in 2018. No explanation has been furthered by the Department in respect of such gross delay in proceeding with the matter. Therefore, we find that invocation of the extended period of limitation is not justified. The demand for recovery of service tax on Rent-a-Cab service only on assumption and presumptions cannot be sustained is accordingly set aside. Since demand of recovery of service tax is set aside, penalty and interest are also not sustainable - Appeal allowed - decided in favor of appellant.
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2022 (2) TMI 1124
Valuation - inclusion of interest in the gross value - Business Auxiliary Services - whether the amount of interest so received should be included while calculating the gross value of amount of consideration received by the appellant for providing Business Auxiliary Services to M/s. Khoday India Ltd.? - invocation of extended period of limitation - HELD THAT:- The perusal of provision of Section 67 of Finance Act, makes it clear that the taxable value is the amount of consideration (for providing the services whether mandatory or not mandatory form but the amount) charged by the service provider for the taxable service being provided by him. It also clarifies that if any benefit accrues to either of the parties whether to service provider or to service recipient which is not arising in lieu of taxable service, the same shall not be liable to be added to the valuation of services. The Hon ble Apex Court in the case of MORIROKU UT INDIA (P) LTD. VERSUS STATE OF UP. [ 2008 (3) TMI 513 - SUPREME COURT] while considering the value towards the provisions of services of renting of immovable property held that the price, which is the amount of consideration for providing service of renting of immovable property is just the rent received. It was specifically held that for the purpose of levy of Service Tax, it shall only be the amount accrued to service which shall be taxable, notional interest cannot be added to the value of such services. The adjudicating authority has wrongly considered the interest received on security deposit as part of consideration received by appellant for providing the Business Auxiliary Service without establishing as to how the said security deposit is includable in the amount of consideration charged for the taxable value provided by the appellant M/s. Khoday India Ltd. - This Tribunal, Mumbai Bench also in the case of MURLI REALTORS PVT. LTD., MAGRPATTA TOWNSHIP DEVELOPERS CONSTRUCTION CO. LTD., JAIN CONSTRUCTION, SAI CONSTRUCTION PVT. LTD., INDIA LAND INFRASTRUCTURE DEVELOPMENT PVT. LTD., RVS HOSPITALITY DEVELOPMENT PVT. LTD., VANSUM INDUSTRIES AND THE MANJRI STUD FARM PVT. LTD. VERSUS COMMISSIONER OF CENTRAL EXCISE PUNE-II [ 2014 (9) TMI 461 - CESTAT MUMBAI] while relying upon the decision of Hon ble Apex Court in the case of MorirokotUT India P Ltd. has held that there is no scope of adding any notional interest to the value of taxable service rendered. The demand in the present issue also pertains to the period beyond the year 2012 when the concept of negative list got introduced in Finance Act. According to the said Act, only such services, irrespective of its nature, were taxable which are not mentioned in negative list as were provided under section 66D of Finance Act 2012. The service by way of extending deposits, loans or advances in so far as the consideration is represented by way of interest or discount are mentioned in clause (n) and (i) of said section 66 D hence are not to be taxable. Coming to the applicability of Rule 3 and 4 of Valuation Rules based whereupon the demand was proposed in the impugned Show Cause Notice we hold that these Rules are nothing but the explanation of section 67. Once the value of interest received cannot be considered to be a part of the gross value for taxable service in terms of section 67 of Finance Act, the same cannot be made inclusive in terms of said Rule 3 of the Valuation Rules - the said amount of interest cannot form part of the gross value of taxable service as being provided by the appellant. The definition of consideration as mentioned in the explanation to section 67 further corroborates the said observations. It is held that the demand was proposed on mere basis of presumption and has been confirmed on a vague reasoning. Hence is liable to be set aside. Extended period of limitation - HELD THAT:- There is no denial that the appellant has been filing its Service Tax returns regularly. The appellant has already been registered with the Service Tax department. Department had the option to and had assessability to the entire information about receiving the disputed amount of interest by the appellant since the year 2009. Suppression of facts cannot be alleged against the appellant. The fact being in the knowledge of the department since august 2012, no question of invoking the extended period at all arise. With respect to the taxable service being provided by the appellant there is no denial for discharge of liability of service tax. Hence there was never any intentional evasion on part of the appellant. It becomes crystal clear that there was neither a wilful mis-declaration nor wilful suppression. The extended period therefore has wrongly been invoked. The question as framed is adjudicated in negative holding that the amount of interest received by the appellant, the service provider from the recipient should not be included in the gross value of the amount of consideration received by the appellant, it being the appellant s income from his own money deposited with the recipient of service. It accordingly is held to have no nexus with the service of Business Support service being provided to M/s. Khoday - appeal allowed - decided in favor of appellant.
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2022 (2) TMI 1123
Reversal of Cenvat Credit - ocean freight - point of taxation - it is alleged that Rule 8 B of the point of Taxation Rules 2011 has wrongly been invoked in the SCN but it is actually rule 7 which is applicable on the appellant according to which the date of payment is the point of taxation - HELD THAT:- The fact makes it clear that it is rule 7 which shall be applicable in the present case as this rule applies to the persons who are required to pay tax as recipients of service i.e. under reverse charge mechanism. This particular perusal is sufficient to hold that rule 8 has wrongly been applied by the adjudicating authorities. It was wrongly been proposed to be applicable in the impugned SCN. Further perusal of Rule 7 shows that the Point of Taxation shall be the date on which the payment of service tax made. From the above mentioned admitted fact No.2, it is clear that the payment of service tax for six of the invoices under question was made on 30th June, 2017. The admitted figures in the table at admitted fact No.3, are sufficient to show that, in the given circumstances, the appellant has rightly availed the input credit of service tax paid by him though under Reverse charge mechanism. The confirmation of demand by Commissioner (Appeals) is hereby set aside - Appeal allowed - decided in favor of appellant.
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2022 (2) TMI 1122
Levy of service tax - Works Contract - Commercial or Industrial Construction Service - demand on the ground that the service was not covered under the negative list - Period pre and post 2012 - HELD THAT:- As per the judgment of the Supreme Court in COMMISSIONER, CENTRAL EXCISE CUSTOMS VERSUS M/S LARSEN TOUBRO LTD. AND OTHERS [ 2015 (8) TMI 749 - SUPREME COURT] , service tax on Works Contract can be levied only under the head of Works Contract under section 65 (105) (zzzza) and not under any other service. Therefore, for the period up to 2012, the demand of service tax under the head of Commercial or Industrial Construction service in the impugned order cannot be sustained, as undisputedly, the services rendered (except one service for Labour Contract to M/s Pratibha Industries Limited for 2010-11) were Works Contract Services . There is no demand under the head of Works Contract Service . Therefore the demands up to 2012 cannot be sustained and needs to be set aside. As far as the period post 2012 is concerned, the appellant s contention is that although they are liable to pay service tax on the Works Contract , but they were entitled to abatement in terms of Rule 2A(ii)(A) of service Tax (Determination of Value) Rules, 2006 - major portion of the demand which pertains to period prior to 2012 cannot be sustained in view of the judgment of the Supreme Court in the case of Larsen Toubro Ltd. and it needs to be set aside and is set aside. In respect of the period post 2012 the impugned order is not clear as to how the Commissioner has concluded that the appellant had availed CENVAT credit on the inputs. For this period, the Commissioner s findings in the impugned order are sketchy in respect of two service recipients and there are no findings in the remaining two service recipients. Further, in respect of the labour contract, which is said to have been rendered during 2010-11 by the appellant to M/s Pratibha Industries Ltd., an amount of ₹ 39,196/- has been confirmed in the impugned order. It needs to be seen whether this amount is already covered by the service tax already paid by the appellant - matter is remanded to the Adjudicating Authority for determination of the liability post 2012 and in respect of the sole Labour Contract entered into by the M/s Pratibha Industries. The appeal is partly allowed and partly remanded.
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2022 (2) TMI 1121
Refund of accumulated CENVAT credit - input services deployed for rendering of service to M/s Rolex SA, Geneva - exports or not - July 2012 to December 2013 - rule 5 of CENVAT Credit Rules, 2004 - N/N. 27/2012-CE(NT) dated 18th June 2012 - HELD THAT:- There are two obligations that devolve on the appellant, viz, promotion and marketing of Rolex watches in India and undertaking repairs/replacement during the warranty period for which neither the customer nor the overseas entity are charged. That the consideration in the contract, having nought to do with actual turnover in India or the nature and extent of repairs, is for the contracted activity is plausible; in any case, the manner of computation does not, of itself, deprive the obligated financial flow from acceptability as consideration for service - It would appear that, for any post-warranty repair/ replacement, which dealers are unable to handle, the undertaking of such work by the appellant entitles them to bill the customer which is taxable service rendered in taxable territory and not in dispute here. The appellant does render service in taxable territory and that due tax is discharged on such transactions is common ground. The lower authorities have not identified the terminal entities that the appellant is purportedly intermediary for, the manner in which the intermediary service is recompensed in the channelizing of consideration from the customer to the supplier or the origin of the supply of service in the course of which the intermediary facilitation by the appellant occurs. The adjunct proposition of no service to obfuscate this lacuna brings the contradiction to the fore the determination of intermediary is founded upon the obligations in a contract which should not only have been redundant but also not acknowledgeable as contract if the proposition that the compensation terms therein, not being consideration in the absence of service , are an internal arrangement for reimbursement of expenses is also accepted. Logic and legality are obviously invisible in the conclusions of the lower authorities. The nature of the service is irrelevant for the purpose of rule 5. All that is required is compliance with the conditions laid down therein which, inter alia, include undertaking of exports as specified in rule 6A of Service Tax Rules. As pointed out by Learned Counsel, all the conditions therein had been complied with; any counters thereto in the impugned order are, for the reasons supra, without authority of law. Therefore, the denial of the refund is not within the authority of law. The appellant, as provider of service outside the taxable territory is entitled to be relieved of the tax burden in the value of service so exported - there is only passing mention of the entitlement in the event of eligibility; all that can be deduced is that the original authority does not controvert eligibility of ₹ 10,77,183/-. The claim is for a higher amount and the conformity of the remaining portion of the claim to the formulation in rule 5 of CENVAT Credit Rules, 2004 needs the attention of the competent authority. The matter remanded to the original authority for considering the submissions of the appellant for the remaining portion of the claim - appeal allowed by way of remand.
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2022 (2) TMI 1120
Levy of service tax - software maintenance services - Business Auxiliary service or not - applicability of exemption N/N. 20/2003 from 21.8.2003 to 8.7.2004 - CENVAT Credit - exempt as well as taxable service - separate accounts not maintained - Rule 6(3)(c) of CENVAT Credit Rules - Revenue Neutrality. Software maintenance services - HELD THAT:- Karnataka High Court has settled the issue in favour of the appellants in the case of THE PRINCIPAL COMMISSIONER OF SERVICE TAX VERSUS M/S. IBM INDIA PVT. LIMITED [ 2021 (2) TMI 513 - KARNATAKA HIGH COURT] following the Madras High Court decision in the case of KASTURI SONS LTD, CHENNAI VERSUS UNION OF INDIA OTHERS [ 2011 (2) TMI 76 - HIGH COURT OF MADRAS] holding that Admittedly as per the stand taken by the respondent themselves before the High Court of Madras, it is evident that activity of maintenance of computer software was exempt from the provisions of the Act prior to 2006 - the issue is no longer res integra and it is held that the appellants are not required to service tax on software maintenance services during the period July 9, 2004 to November 30, 2005. Availment of CENVAT credit - HELD THAT:- The appellants have utilised Cenvat credit up to 20% of the tax payable during the period June 2007 to March 2008. During that period, tax of ₹ 135.16 lakhs was to be paid without utilising the Cenvat credit. However, they have paid the same after 1.4.2008 by utilising the balance of credit of 80% from the year 2007-2008. The appellants are entitled to utilise the balance 80% of the credit availed before 1.4.2008 after 1.4.2008. Having come to this conclusion, the appellant s action in paying service tax which fell due during 2007-2008 after 1.4.2008 is to be seen as a delayed payment. Accordingly, the appellants are required to pay interest at the applicable rate in terms of Section 75 of the Finance Act, 1994. The appellants are well established service tax registrants and therefore, we are of the considered opinion that the lapse of non-payment of service tax during the relevant period cannot be taken lightly - the appellants are entitled to utilise the balance credit after 1.4.2008, they will be liable to pay penalty under Section 76 of the Finance Act, 1994, as applicable during the relevant period. Demand of service tax of ₹ 644.69 lakhs on maintenance and repair of software service for the period 9.7.2004 to November 2005 and the demand of service tax of ₹ 135.16 lakhs for the period June 2007 to March 2008 are set aside - the appellants are required to pay applicable interest on the service tax demand of ₹ 135.16 lakhs from the date on which such service tax was due till the date of actual payment - appellants are required to pay penalty under Section 76 of the Finance Act, 1994 on the above amount of ₹ 135.16 lakhs. Other penalties imposed are however set aside. Appeal allowed in part.
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Central Excise
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2022 (2) TMI 1119
CENVAT Credit - goods stored in the godown/depot near the ports - goods in stock or not - it is claimed that credit must be allowed in the goods stored in the godown/depot near the ports because the said goods had already been cleared from the factory prior to the issuance of the notification - Rule 9-A of the Cenvat Credit Rules, 2002 - HELD THAT:- It was noticed by the Adjudicating Authority that the documents, i.e. invoices and transport documents, submitted by the appellant showed that the goods in question had been removed from the factory for the period 11th November, 2002 to 28th March, 2003 and 27th November, 2002 to 27th March, 2003. The goods had been cleared on the basis of commercial invoices and were lying at the port for export. Admittedly, the goods had been removed to the port area on issuance of invoices disclosing the buyers name. The goods were not subjected to duty liability at the time of clearance from the factory. Since the goods had been removed from the factory area to the port area on the basis of invoices disclosing buyers name, the same were liable to be excluded from being considered as goods lying in stock . In this situation, Adjudicating Authority rightly came to the conclusion that the goods had already been removed from the premises of the appellant and had been discounted from the stock account maintained at the factory. Therefore, the appellant could not claim that the goods were still lying in its stock. As per Rule 9-A of the Rules, a manufacturer could avail credit vis- -vis equal to the duty paid on inputs of such finished product, lying in stock or in process or contained in finished products, lying in the stock as on 31st March, 2003 by making a written declaration. However, in the present case, the Adjudicating Authority as well as learned Tribunal rightly came to the conclusion that the goods in question could not be said to be lying with the assessee in stock as they had already been removed to the port area from the factory on the basis of issuance of invoices disclosing buyers name. Appeal dismissed.
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2022 (2) TMI 1118
Refund of duty (sugar cess) paid - Sugar Cess is not expressly stipulated as a levy on which credit can be taken under Rule 3 of the Cenvat Credit Rules, 2004. - part refund rejected on the ground that for the said amount covering the period August 2014 to June 2015, the Appellant has been served with a Show Cause Notice which is pending adjudication and hence the said amount being under dispute cannot be refunded to the Appellant - HELD THAT:- The issue in the said demand notice also relates to eligibility of Cenvat credit on sugar cess and when the same has already been decided in favour of the Appellant assessee, then the earlier demand notices become infructuous and cannot be sustained in the eyes of law. Further for the same period on the same issue, two demand notices cannot be sustained and hence the order of the learned First Appellate Authority needs to be modified to the above extent. Thus in the instant case, the refund claim of the Appellant needs to be allowed - Appeal allowed - decided in favor of appellant.
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CST, VAT & Sales Tax
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2022 (2) TMI 1117
Input tax credit - It is the specific plea of the appellant that the Assessing Officer, without furnishing the list containing the details of the sales made by the appellant's vendors has concluded that there is a mismatch between the purchases reported by the appellant and the corresponding sales reported by the vendors - violation of principles of natural justice - HELD THAT:- Even in the reply to the pre-assessment notices, the appellant specifically requested the Assessing Officer to furnish such a list to enable them to submit an effective representation. However, the respondent, without furnishing the list, has passed the orders dated 31.05.2016 impugned in the writ petitions, levying tax on the appellant, which are arbitrary, illegal and violative of the principles of natural justice, in the opinion of this court. However, the learned Single Judge while disposing of the writ petitions, granted liberty to the appellant to file appeals before the appellate authority. Such course adopted may be an empty formality, especially when the appellant complained of the violation of the principles of natural justice and admittedly, the required details were not furnished by Assessing officer, despite repeated demands. Therefore, on this score alone, the orders passed by the learned single Judge as well as the Assessing Officer are set aside and the matter remanded back to the respondent for fresh consideration. Appeal allowed by way of remand.
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2022 (2) TMI 1116
Input tax credit - grant of benefit of input tax credit to the dealer without verifying the nature of transaction as discussed by the assessing authority as well as by the first appellate authority - HELD THAT:- The record reveals that the purchases have been disbelieved by the Assessing Authority on the basis of some information received from the Special Investigation Officer. On the said information purchases shown by the opposite party was treated to be purchases from unregistered dealer and, therefore, rejected the claim of input tax credit - the first appellate authority being the court of fact ought to have verified the said information but instead of doing so, has remanded the matter. The second appeal filed by the opposite party. The Tribunal has recorded the finding of fact after verification from the official web site that during the relevant period purchases shown by the dealer from the parties were duly registered and all the payments were made through bank. The Tribunal being the last court of fact has recorded the finding of fact in favour of the opposite party that all the transactions were made through Bank and were duly accounted for as well as verified. Further, the purchases made from the respective dealers were duly registered and verifiable from the official web site of the Department and therefore, it cannot be said that purchases were made from unregistered dealers. There are no reason to interfere with the order of the Tribunal - revision dismissed.
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Indian Laws
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2022 (2) TMI 1115
Dishonor of Cheque - it is submitted that the present matter relates to the year 2016 and the trial has not proceeded as respondent No. 2 for one reason or the other has deliberately delayed the trial - HELD THAT:- A perusal of the impugned order dated 12.04.2021 would show that the Trial Court, while granting stay on the order dated 06.10.2018 erroneously relied upon Office Order No. 256/RG/DHC/2021 dated 08.04.2021, whereby it was directed that on non-appearance of the parties, no adverse orders be passed against them. It is noted that the said Office Order was passed in continuation of its earlier Office Order dated 20.02.2021. The benefit of the aforesaid Office Order cannot enure in favor of respondent No. 2 as he was declared an absconder on 06.10.2018 i.e., much prior to 20.02.2021 and also in view of the fact that the order dated 06.10.2018 came to be upheld by this Court on 22.03.2021. The respondent s No. 2 earlier petition before this Court also came to be dismissed while noting his conduct in delaying the trial. There is no gainsaying that the impugned order dated 12.04.2021 passed by the learned MM is not only ex facie bad in law but also in the teeth of the order dated 22.03.2021 passed by this Court and was passed on an erroneous reading of the aforesaid Office Order. During the course of submissions, it is also informed that an earlier petition filed on behalf of respondent No. 2 was dismissed with a direction to respondent No. 2 to pay cost of ₹ 10,000/ to the petitioner, which has not been paid till date. The respondent No. 2 shall file a written undertaking in the form of an affidavit to the effect that he shall appear before the Trial Court as and when the matter is fixed. The undertaking be filed within a period of one week from today - the respondent No. 2 shall pay an additional cost of ₹ 40,000/-, as well as the previous imposed cost of ₹ 10,000/-, totaling to ₹ 50,000/-, to the petitioner within a period of ten days from today - petition disposed off.
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