TMI Tax Updates - e-Newsletter
February 28, 2023

Case Laws in this Newsletter:

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

Articles

• REFUND OF IGST, ERRONEOUSLY PAID, CANNOT BE ADJUSTED AGAINST THE DUES OF CGST/SGST
• DOCTRINE OF ‘EJUSDEM GENERIS’
• Demand order passed beyond the period of 7 days from the date of service of notice is contrary to the provisions of the CGST Act
• Bail granted for alleged availment/passing of fake ITC to avoid prolonged detention beyond the statutory period

News

• Japan’s Official Development Assistance (ODA) to India

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• Department for Promotion of Industry and Internal Trade (DPIIT) to co-lead post-budget webinar

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• Chair Summary & Outcome Document of the G20 Finance Ministers and Central Bank Governors (FMCBG)

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• USD 523.8 million worth of onions exported from April to December 2022

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Highlights / Catch Notes

GST

• Governmental Authority or Local Authority? - Government of Karnataka holds 99.99% of equity in the Corporation - Chamundeshwari Electricity Supply Corporation Limited cannot be considered either as “Governmental Authority” or “Local Authority”. - The Applicant is not exempted from filing of Annual Return in Form GSTR-9 and Form GSTR-9C under the Second Proviso to Section 44 of the CGST and KGST Act. - AAR
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• Rate of GST - Coir-Pith Compost - If the registered person sells coir-pith compost in 25 kg and less pre-packed and labelled bags to nurseries who buys for consumption, then also the said pre-packed and labelled bags are exigible to GST at 5% (CGST @2.5% and SGST 2.5%) - AAR
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Income Tax

• Reopening of assessment u/s 147 - scope of enactment of Section 148A - Before taxing any person it must be shown that he falls within the ambit of the charging section by clear words used in the section, and if the words are ambiguous and open to two interpretations, the benefit of interpretation is given to the subject. There is nothing unjust in the taxpayer escaping if the letter of the law fails to catch him on account of the legislature's failure to express itself clearly. - HC
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• Bar against direct demand on assessee u/s 205 - Withholding tax payable on salary - Adjustment of the withheld tax not been deposited by the deductor - the petitioner is right inasmuch as neither can the demand qua the tax withheld by the deductor/employer be recovered from him, nor can the same amount be adjusted against the future refund, if any, payable to him. - HC
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• Exemption u/s 11 - loss incurred out of corpus fund - What is taxable is the real income. If the AO’s view is to be accepted, it would lead to incongruous results. We say so because in the event, the assessee had earned profit in the instant transaction, the Revenue would have imposed tax on assessee. There cannot be different standards of examining facts when the assessee earns profit and when it suffers loss. - HC
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• Liability of directors u/s 179 - AO is required to make efforts for recovery of the outstanding dues from the assessee private limited company which has committed default in payment of the outstanding demand. The petitioners have prima facie shown that non recovery cannot be attributed to any gross negligence, misfeasance or breach of duty as Directors of the assessee company. - HC
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• Assessment u/s 153A - approval with respect to "each assessment year" - In the instant case, the draft assessment order in 38 cases, i.e. for 38 assessment years placed before the Approving Authority on 31.12.2017 was approved on same day i.e. 31.12.2017, which not only included the cases of respondent-assessee but the cases of other groups as well. It is humanly impossible to go through the records of 38 cases in one day to apply independent mind to appraise the material before the Approving Authority. The conclusion drawn by the Tribunal that it was a mechanical exercise of power, therefore, cannot be said to be perverse or contrary to the material on record. - HC
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• Condonation of delay in filing the appeal before the CIT(A) - delay of 1950 days’ in filing the appeal - There is no quarrel on the point if the assessee has chosen a wrong remedy then the time consumed in pursuing the wrong or improper remedy has to be excluded for the purpose of limitation in seeking the proper remedy by way of filing the appeal. But in the absence of filing any petition under section 154, no benefit can be allowed to the assessee merely because the assessee was thinking so. - AT
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• Best judgment Assessment u/s 144 read with section 147 - non issuance of notice u/s 143(2) - Once the language of the statute is plain, simple, clear and unambiguous, full effect is to be given, and no part could be held to be surplus, as Parliament was fully aware while enacting law. Thus, we reject this contention of the assessee that reassessment is bad in law owing to non issuance of notice u/s 143(2). - AT
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• Transfer pricing adjustment - No interest having been charged by the assessee to the non-AE outstandings, its transaction of outstanding receivables with AE without charging any interest on the same is therefore held to be justified to be at arm’s length. No adjustment is to be made on account of non charging of interest on outstanding receivables of AE. And the adjustment made on account of the same is therefore directed to be deleted. - AT
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Customs

• Clandestine removal of the goods from SEZ - diversion of goods in DTA - it is not proved that the original goods were loaded in the container and the same was cleared from SEZ - The entire case was based on the document but no physical movement or diversion could be established. In this fact, the demand of customs duty is not sustainable and consequently, the confiscation of goods is also incorrect and illegal. - AT
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• Valuation of import goods - Alloy Wheels of motorcycles - When the proprietor had admitted the re-determined value and also paid the differential duty with interest and penalty imposed by the competent authority, it is not open to the appellant to now contend, after goods have been cleared, that the market value could not have been re-determined - AT
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• Quantum of levy of penalty and redemption fine - low amount of redemption fine and penalty imposed - use of Dummy IEC - Attempt to export helicopters without obtaining an IEC from the DGFT as required under the Foreign Trade Policy - Revenue appeal dismissed - AT
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IBC

• CIRP - applicability of provisions of PMLA - Provisional attachment order - Merely because the impugned order records alleged fraudulent transactions and diversion of funds, it cannot automatically lead to a conclusion that the properties acquired by the petitioners are proceeds of crime. In order to arrive at a conclusion that ‘reason to believe’ exists, there must be some material to suggest such formation of opinion. - HC
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• Right of the Resolution Professional - Non-cooperation by the Directors of Corporate Debtor - NCLT rejected the application of RP with cost of Rs. 25000/-- non-application of mind by the Adjudicating Authority - The prosecution under Section 236 is a different aspect from running a CIRP as per timeline prescribed in the IBC. - Decided in favor of RP - AT
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PMLA

• Seeking grant of Anticipatory bail - Money Laundering - the observations made by the High Court that the provisions of Section 45 of the Act, 2002 shall not be applicable in connection with an application under Section 438 Cr.PC is just contrary to the decision in the case of Dr. V.C. Mohan and the same is on misunderstanding of the observations made in the case of Nikesh Tarachand Shah. Once the rigour under Section 45 of the Act, 2002 shall be applicable the impugned judgment and order passed by the High Court granting anticipatory bail to respondent No. 1 is unsustainable. - SC
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• Provisional Attachment Order - scheduled offences or not - when the accused person has been acquitted in the scheduled offence under the PMLA, the closure of the proceedings under the PMLA against the accused person and persons said to connected to the accused person would be the natural consequence. - HC
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Service Tax

• Works Contract or not - The appellant has carried out the painting work on this plant, machinery, building - a civil construction or a part thereof covers the plant machinery, building on which the appellant has carried out the painting work - The activity of the appellant is squarely covered under the definition of “works contract”. - AT
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Case Laws:

• GST

• 2023 (2) TMI 1088
  Availment/utilization of excess Tax Deducted at Source - whether the petitioner is entitled to migrate in its electronic credit ledger the credit of amount of Excess Tax Deducted at source under section 45 of the JVAT Act, 2005 amounting to Rs. 1,19,41,937/- available as on 30.06.2017 under section 140(1) of the JGST Act being a credit of the amount of the Value Added Tax which a registered person is entitled to migrate in its electronic credit ledger? HELD THAT:- The issue before this Court in W.P.(T) No. 2404/2020 [ [ 2023 (1) TMI 1023 - JHARKHAND HIGH COURT] ] was Where the amount deducted towards TDS under section 44 of the Jharkhand Value Added Tax is a credit of the amount of Value Added Tax which a registered person is entitled to migrate in its electronic credit ledger - This Court has interpreted the proviso to section 140(1) of the JGST Act and has held therein that the proviso restricts the migration of credit, if the credit pertains to transactions which were prohibited under section 17(5) of the JGST Act in which no input tax credit is available. Since the issue involved in this case is squarely covered by the judgment, the impugned order dated 30.07.2021 passed in revision and Demand Notice dated 31.07.2021 are quashed and set aside - Application allowed.

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• 2023 (2) TMI 1087
  Maintainability of petition - availability of alternative remedy of appeal - Validity of SCN - SCN challenged on the ground that the same is without jurisdiction, arbitrary and illegal - HELD THAT:- In the case of Malladi Drugs and Pharma Limited [ 2004 (3) TMI 67 - SC ORDER ], the Apex Court has found that the appellant was a bulk drug manufacturer and used platinum catalyst. A show cause notice was issued as to why not to pay the duty. The reply was filed to the said show cause notice and then the writ petition was preferred. On the ground that the High Court s order was passed way back in the year 1997, neither party knew whether the department had proceeded further and whether any order had been passed pursuant to the show cause notice. The Court held that the High Court was right in dismissing the writ petition against a mere show cause notice. Thus, mere ground of alternative remedy being available will not be the reason for this Court to not entertain this petition. Issue raised will also require consideration and the decision of Malladi Drugs and Pharma Limited makes it quite clear that the aspect of non-maintainability is on account of self-imposed limitations and the restraints on exercise of powers to issue a writ. The entertainability and maintainability of the writ being a distinct aspect, this Court issues the Rule.

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• 2023 (2) TMI 1086
  Validity of summary assessment orders - ex-parte assessment order - no sufficient opportunity of hearing granted - violation of principles of natural justice - HELD THAT:- This Court, notwithstanding the statutory remedy, is not precluded from interfering where, ex facie, it is opined that the order is bad in law. This is for two reasons- (a) violation of principles of natural justice, i.e. Fair opportunity of hearing. No sufficient time was afforded to the petitioner to represent his case; (b) order passed ex parte in nature, does not assign any sufficient reasons even decipherable from the record, as to how the officer could determine the amount due and payable by the assessee. The order, ex parte in nature, passed in violation of the principles of natural justice, entails civil consequences. The impugned orders are set aside - petition disposed off.

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• 2023 (2) TMI 1085
  Confiscation of goods alongwith conveyance - interpretation, and the inter se application of Section 129 and 130 of the Central Goods and Service Tax Act 2017 - HELD THAT:- An identical issue is also involved in [ 2022 (12) TMI 1291 - GUJARAT HIGH COURT ] wherein co-ordinate Bench of this Court has granted interim relief with certain conditions. Petitioner further submitted that the conditions specified to be fulfilled for grant of interim relief in SCA 11235 of 2022, has been fulfilled in this case. The petitioner has paid Rs.6,09,240/- towards 200% of tax, leviable pursuant to Section 129 of the Act and has also paid penalty of Rs 3,04,620/- in lieu of confiscation of vehicle. The petitioner has also furnished a bond of Rs 16,92,330/- towards value of goods and therefore all the conditions as directed in the order of SCA No11235 of 2022 are fulfilled. In view of conditions being fulfilled by the petitioner, respondent no.2 are directed to release the goods and conveyance forthwith upon receipt of order of this Court. Application disposed off.

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• 2023 (2) TMI 1084
  Works contract - rate of GST - Service provided to a governmental authority under GST Laws or not - services provided to Bengaluru Water Supply and Sewerage Board - applicable GST rate on supply of works contracts services in relation to sewage treatment made by the Applicant to Bengaluru Water Supply and Sewerage Board, on or after 1st Jan 2022. Governmental Authority or not - HELD THAT:- BWSSB was set up by The Bangalore Water Supply and Sewerage Act 1964, to supply water in Bangalore Metropolitan area and to make adequate provision for the sewerage and disposal of sewage in the Bangalore Metropolitan area. These duties performed by BWSSB are covered under the functions entrusted to a Municipality under article 243W of the Constitution that is 5th and 6th entry of 12th schedule of the constitution - Since the BWSSB is set up by the Act of State Legislature to carry out any function entrusted to a Municipality under article 243W of the Constitution, the same can be considered as Governmental Authority. Applicable GST rate on supply of works contracts services in relation to sewage treatment made to BWSSB, on or after 1st Jan 2022 - HELD THAT:- The entry 3(iii) of Notification No. 11/2017 Central Tax (Rate) dated 28.06.2017 itself was omitted and now the works contact services supplied by the Applicant to BWSSB is covered under entry No.3(xii) of the same Notification - thus the works contract services provided by the Applicant to BWSSB are covered under this entry and the same is exigible to GST at 18%.

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• 2023 (2) TMI 1083
  Governmental Authority or Local Authority? - Government of Karnataka holds 99.99% of equity in the Corporation - Corporation is fully owned by the Government of Karnataka and audited by the Comptroller and Auditor General of India, whether filing of Annual Return in Form GSTR-9 and Form GSTR-9C is exempt under the Second Proviso to Section 44 of the CGST and KGST Acts? - input tax credit - inward supply of goods and services which are capitalized in the books of accounts - inward supply of services against output taxable supplies of support and auxiliary services and other supply of taxable goods - corporation to claim proportionately on the taxable output supply of support services and goods (scrap etc.) - reverse charge mechanism - taxability of Additional Surcharge collected from Open Access Consumer as per sub-section (4) of Section 42 of the Electricity Act, 2003 - taxability of Wheeling and Banking Charges. Since the Government of Karnataka holds 99.99% of equity in the Corporation, whether the Corporation is considered as Governmental Authority or Local Authority? - HELD THAT:- The definition of Governmental Authority is applicable only for the purposes of interpretation of the entries in the Notification No. 12/2017- Central Tax (Rate) dated 28.06.2017 and not for any other purposes - Even the Explanation to clause (16) of section 2 of the Integrated Goods and Services Tax Act, 2017 (13 of 2017) is issued only for the purposes of that clause only and not applicable for all purposes. Hence, there is no definition of governmental authority which is universally applicable under the GST Acts and it is not clear in what context the applicant has sought to know whether he is covered or not. Article 243W of the Constitution and Twelfth Schedule to the Constitution relating to the functions entrusted to a Municipality is verified and found that the supply of electricity is not covered. Article 243G of the Constitution and Eleventh Schedule to the Constitution relating to the functions entrusted to a Panchayat is verified and found that the Rural Electrification including the distribution of electricity is covered. But the applicant company is not set up or established only to provide Rural Electrification and hence the second condition is not satisfied - Hence, even for the purposes of Notification No. 12/2017- Central Tax (Rate) dated 28.06.2017, the applicant cannot be covered under the definition of governmental authority and hence the same is clarified. Since the Corporation is fully owned by the Government of Karnataka and audited by the Comptroller and Auditor General of India, whether filing of Annual Return in Form GSTR-9 and Form GSTR-9C is exempt under the Second Proviso to Section 44 of the CGST and KGST Acts? - HELD THAT:- As per the second proviso of the Section 44 of CGST Act, it is seen that the same is applicable only to a department of Central Government or State Government or to a local authority. The applicant is a company fully owned by the Government of Karnataka and hence this proviso is not applicable to the applicant. Whether the Corporation is eligible to claim input tax credit on the inward supply of goods and services which are capitalized in the books of accounts? - HELD THAT:- Every registered person is entitled to take credit of input tax charged and input tax means tax charged on any supply of goods or services or both made to him - Goods or services procured by the applicant and capitalized, if used or intended to be used in the course or furtherance of business, then the applicant is entitled to take credit of input tax. Whether the Corporation is eligible to claim input tax credit on the inward supply of services against output taxable supplies of support and auxiliary services and other supply of taxable goods? - HELD THAT:- Since the applicant is effecting both supplies of taxable goods and exempted goods, the eligible input tax credit claimed shall be restricted as per Section 17(2) of the CGST Act as prescribed in Rule 42 and 43 of the CGST Rules - subject to section 17(2) of the CGST Act read with Rule 42 and 43 of CGST Rules, the applicant is eligible to claim input tax credit on the inward supply of services against output taxable supplies of support and auxiliary services and other supply of taxable goods. Whether the Corporation is eligible to claim input tax credit (on inputs, input services and capital goods) proportionately on the taxable output supply of support services and goods (scrap etc.) as per the provisions of Rule 42 and 43 of the CGST and KGST Rules? - HELD THAT:- As per the provisions of Rule 42 and 43 of the CGST and KGST Rules, the appellant is eligible to claim input tax credit. Whether the Corporation is eligible to claim taxes paid under RCM, as input tax credit? - HELD THAT:- It is clear that the tax on a transaction is paid under reverse charge basis would still be a tax on the inward supply of goods or services or both and would be eligible as input tax credit under Section 16(1) of the CGST Act subject to apportionment of input tax credit in terms of Section 17(2) of the Act, ibid read with Rules 42 and 43 of the Rules, ibid. Whether Additional Surcharge collected from Open Access Consumer as per sub-section (4) of Section 42 of the Electricity Act, 2003, clause 8.5.4 of the Tariff Policy 2016, Clause 5.8.3 of the National Electricity Policy and Clause 11 (vii) of the KERC (Terms and Conditions for Open Access) Regulations, 2004, is taxable under the GST Acts? - HELD THAT:- It is seen from the submissions made by the applicant that an open access consumer receiving electricity from a person other than the distribution licensee of his area of supply, shall have to pay to the distribution licensee an additional surcharge to meet the fixed cost of such distribution licensee arising out of his obligation to supply - This is nothing but a charge levied for tolerating an act which is a supply under section 7(1) of the CGST Act and hence is taxable under GST Act. It is also important to note that these charges are made from the consumers who have moved out of the applicant and hence cannot be linked to the supply of electricity or distribution of electricity. Whether Wheeling and Banking Charges allowed by Commission (KERC) as 5% and 2% of the energy input into the distribution system by Open Access consumer is taxable under the GST Acts? - HELD THAT:- It is clear that the consideration need not be in the form of money only and is very clear from the words used money or otherwise and also by the words monetary value of any act or forbearance and hence the wheeling and banking charges collected by the applicant in kind, i.e., in terms of energy units but not in terms of cash, is taxable, if the same is found to be taxable, under the GST Act. Regarding the nature of wheeling services, it is seen that the applicant has stated that if the generator and the buyer are connected at the distributed voltage level, appropriate wheeling charges and losses are required to be paid. The wheeling charges include recovered of the fixed costs related to network assets and line loss (i.e., distribution loss). The wheeling charges is based on the account of investments being made in the sector for meeting the load growth, AT C loss reduction and improving the performance standards (network assets) - the regulatory authority has distinguished that the wheeling charges and the transmission charges are different in nature. Entry No. 25 of Notification No. 12/2017- Central Tax (Rate) dated 28.06.2017 states that Services of transmission or distribution of electricity by an electricity transmission or distribution utility . Hence the wheeling charges collected is for the services of transmission of electricity and hence is covered under this entry and hence exempted from the levy of tax under the GST Act. - Regarding Banking charges, the applicant charges the user for the energy used by the user in excess of the energy input made into the system of transmission. Hence it is nothing but the amount of consideration charged for the energy consumed and is the consideration charged for supply of electrical energy. This is covered SI.No. 104 of Notification No.2/2017- Central Tax (rate) dated 28.06.2017 and is exempt from the levy of GST. Thus, Wheeling charges and Banking charges collected by the applicant is exempt from the payment of GST.

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• 2023 (2) TMI 1082
  Rate of GST - Coir-Pith Compost - liability of registered person, selling coir-pith compost in 30 kg and above quantity bags with un-registered brand name SURYA - GST on coir-pith compost in 30kg and above quantity bags are sold without any label (in plain bags) - GST on coir-pith compost sold in 25 kg and less prepacked and labelled bags to nurseries who buys for consumption - nurseries, who are un-registered dealers, come under the definition of Institutional consumers or not - liability of GST, when registered persons sells coir-pith compost with 30Kg and above pre-packed and labelled bags to nurseries who buys for consumption - applicability of Rule 3(b) of Legal Metrology (Packaged commodities) Rules, 2011. Whether Notification No. 7/2022-Central Tax (Rate), dated 13-07-2022 applies to Coir-Pith Compost (HSN 53050040) mentioned in serial number 132-A of the Notification No.2/2017-Central Tax (Rate) dated 28-06-2017 as amended vide notification No. 19/2018-Central Tax (Rate), dated 26-07-2018? - HELD THAT:- The entry 132A of Notification No.2/2017-Central Tax (Rate) dated 28.06.2017 as amended by Notification No.7/2022-Central Tax (Rate), dated 13-07-2022 applies to Coir-Pith Compost other than pre-packaged and labelled. The registered person sells coir-pith compost in 30 kg and above quantity bags with un-registered brand name SURYA . In such cases, whether the registered person is liable to tax under the GST Acts? - HELD THAT:- The Applicant states that he sells coir pith compost in a sack of 30 kg and above with unregistered brand name 'SURYA' and wants to know the taxability on the same - the provisions of Chapter II of The Legal Metrology (Packaged Commodities) Rules, 2011 applies to cement and fertilizers even though they are sold in bags up to 50 Kg. In view of the definition of organic fertilizer and the process adopted by the applicant to manufacture coir pith compost, it can be said that coir pith compost is an organic fertilizer which is covered under the definition of Fertilizer mentioned above i.e., organic fertilizer is a subset of fertilizer. Thus, anything which increases the fertility of soil is Fertilizer. Since Manure is also used to increase the fertility of soil, the same is also a Fertilizer whether organic or chemical - If the Applicant sells coir pith compost which is a fertilizer, in a sack of 30 kg and above i.e., prepacked and labelled with unregistered brand name i.e., 'SURYA' then it is exigible to GST at 5%. If the coir-pith compost in 30kg and above quantity bags are sold without any label (in plain bags), whether would it attract GST? - HELD THAT:- 'Pre-packaged and labelled' means a 'pre-packaged commodity' (as defined in clause (1) of section 2 of the Legal Metrology Act, 2009) where, the package in which the commodity is pre-packed or a label securely affixed thereto is required to bear the declarations under the provisions of the Legal Metrology Act, 2009 and the rules made thereunder. Thus, if the Applicant sells coir-pith compost pre-packed in 30kg and above quantity bags without label also it is taxable (as explained in para 12 supra) since it is already prepacked and bearing a label is mandatory. If the registered person sells coir-pith compost in 25 kg and less prepacked and labelled bags to nurseries who buys for consumption, whether in such cases GST is payable? - HELD THAT:- Chapter -II of The Legal Metrology (Packaged Commodities) Rules, 2011 is about provisions applicable to packages intended for retail sale. Rule 3(a) of the same says that these rules are not applicable to packages of commodities containing quantity of more than 25 kg or 25 litre. Since the applicant intends to sell coir-pith compost in bags of 25 kg and less i.e pre-packed and labeled the same is exigible to GST at 5% as per entry No. 215 of Notification No.1/2017-Central Tax (Rate) dated: 28.06.2017 as amended vide Notification No.6/2022-Central Tax (Rate), dated 13.07.2022. Whether the nurseries, who are un-registered dealers, come under the definition of Institutional consumers ? - HELD THAT:- A plant nursery is an establishment that raises, propagates, multiplies, and sells seedlings, saplings, and other planting materials for commercial purpose and thus it does not qualify to be an institution. Further, nurseries buy coir pith compost to grow the plants and then sell the same i.e nothing but for commercial purpose. Since the nurseries use coir pith compost for commercial purposes, they are not covered under the definition of 'institutional consumer'. If the registered persons sells coir-pith compost with 30Kg and above pre-packed and labelled bags to nurseries who buys for consumption, whether in such cases GST is payable? - HELD THAT:- Since coir pith compost is a fertilizer as explained in para 12.2, Chapter II of the Legal Metrology (Packaged Commodities) Rules, 2011, that is provisions applicable to packages intended for retail sale are applicable to fertilizer even though they are sold in bags up to 50kg. As explained in para 15 supra, nurseries are not covered under 'institutional consumer'. Thus if the applicant supplies coir-pith compost of 30Kg and above which is prepacked and labeled even to nurseries, then it is exigible to GST at 5% (CGST 2.5% and SGST 2.5%) Rule 3(b) of Legal Metrology (Packaged commodities) Rules, 2011, provides that the provisions of Chapter II of that Rules shall not apply to cement, fertilizers and agricultural farm produce sold in above 50 kg bags. Whether the coir-pith compost, which is also the bio-fertilizer, sold by the registered person, falls under this category and exempt from GST? - HELD THAT:- Rule 3(b) of Legal Metrology (Packaged commodities) Rules, 2011 says that these rules are not applicable to packages of commodities containing quantity of more than 25 kg or 25 litre excluding cement and fertilizer sold in bags up to 50 kg i.e Chapter II of that Rules shall not apply to fertilizers sold in above 50 kg bags and hence they are not exigible to GST if sold in above 50 kg bags.

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• Income Tax

• 2023 (2) TMI 1081
  Reopening of assessment u/s 147 - scope of enactment of Section 148A - benefit of relaxation/extension under the Taxation and Other Laws (Relaxation And Amendment of Certain Provisions) Act' (TOLA) 2020 - legislative scheme of Section 148 of reopening of assessment pre and post amendment by the Finance Act 2021 - effect and scope of the Enabling Act (TOLA' 2020) on the notices issued under Section 148 after completion of the inquiry and passing of orders in terms of Section 148 A(d) - Whether timeline provided in the unamended Section 149 would extend uptil 31.03.2021 under the Enabling Act, 2021, with further extensions by the notifications dated 31.03.2021 and 27.04.2021 issued under TOLA, in the timeline provided under the amended Section 149 of the Finance Act, 2021? - HELD THAT:- Extension in time untill 30.6.2021 can be granted to the time limit provided in the amended Section 149 of the Income Tax Act brought by the Finance Act, 2021 by plain provisions of clause (A)(a) of the Notification No. 20 of 2021 dated 31.3.2021 ignoring Explanation to the same (quashed by this Court). Similarly extension in time as per the plain provision of clause (A)(a)(b) of the Notification No. 38 dated 27.4.2021 ignoring Explanation to it, may be granted as and when the said extensions are applicable for issuance of notice under Section 148 as per the time limit specified in Section 149 or sanctions under Section 151 of the Income Tax Act as amended by the Finance Act, 2021, after making all compliances, as required under the Income Tax Act, 1961 (amended provisions). As profitably be noted, at this stage, that it is settled law that a taxing statute must be interpreted in the light of what is clearly expressed. It is not permissible to import provisions in a taxing statute so as to supply any assumed deficiency. In interpreting a taxing statute, equitable considerations are out of place. Nor can taxing statutes be interpreted on any presumptions or assumptions. The court must look squarely at the words of the statute and interpret them; Interpreting taxing statute in the light of what is clearly expressed: it cannot imply anything which is not expressed. Before taxing any person it must be shown that he falls within the ambit of the charging section by clear words used in the section, and if the words are ambiguous and open to two interpretations, the benefit of interpretation is given to the subject. There is nothing unjust in the taxpayer escaping if the letter of the law fails to catch him on account of the legislature's failure to express itself clearly. Conclusions:- (i) The reassessment proceedings initiated with the notice under Section 148 (deemed to be notice under Section 148-A), issued between 01.04.2021 and 30.06.2021, cannot be conducted by giving benefit of relaxation/extension under the Taxation and Other Laws (Relaxation And Amendment of Certain Provisions) Act' (TOLA) 2020 upto 30.03.2021, and the time limit prescribed in Section 149 (1)(b) (as substituted w.e.f. 01.04.2021) cannot be counted by giving such relaxation from 30.03.2020 onwards to the revenue. (ii) In respect of the proceedings where the first proviso to Section 149(1)(b) is attracted, benefit of TOLA' 2020 will not be available to the revenue, or in other words, the relaxation law under TOLA' 2020 would not govern the time frame prescribed under the first proviso to Section 149 as inserted by the Finance Act' 2021, in such cases. (iii) The reassessment notices issued to the petitioners in this bunch of writ petitions, on or after 1.4.2021 for different assessment years (A.Y. 2013-14 to 2017-18), are to be dealt with, accordingly, by the revenue.

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• 2023 (2) TMI 1080
  Validity of Reopening of assessment u/s 147 - audit party objections had come and the AO issues notice - independent application of mind by AO v/s borrowed satisfaction - HELD THAT:- Assessing Officer himself initiated the reassessment proceedings without his own conviction and only at the instance of the audit party which was termed to be a coulourable exercise of jurisdiction and the same was not sustained. Here is a case where, admittedly, audit party had expressed the opinion on a question of law. It had also pointed out to the Assessing Officer and that information which had been given was on question of law. when the audit party had pointed out to the Assessing Officer, it not only was disagreeing with the information given on the law point, it had completely disagreed after examining the objections raised by the audit party. Twice at paragraph 3 and paragraph 6, it has said that on examining carefully, the objections are not acceptable and they need to be dropped. The Assessing Officer, without any conviction, when has issued the notice, this surely is not a case where the reopening of the case is on the basis of any factual error pointed out by the audit party so as to be covered by the decision of the P.V.S.Beedies (P) Ltd.[ 1997 (10) TMI 5 - SUPREME COURT ] There is no material worth the name emerging that to indicate any independent application of mind could be noticed. On the contrary, there are glaring facts which have been pointed out that the Assessing Officer had no subjective satisfaction while issuing the notice of reopening. Therefore also, in this background, it is a settled law that any notice of reopening issued by the Assessing Officer without any independent application of mind would laid the validity. Accordingly, this petition is allowed.

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• 2023 (2) TMI 1079
  Bar against direct demand on assessee u/s 205 - Withholding tax payable on salary - Adjustment of the withheld tax not been deposited by the deductor in the Central Government Account against the refund due and payable to the deductee/assessee - whether the respondents/revenue can do indirectly what they cannot do directly? - petitioner was an employee of Kingfisher Airlines - Revenue says that the credit for withholding tax can only be given in terms of Section 199 of the Act, when the amount is received in the Central Government account - HELD THAT:- According to us, Section 205 read with instruction dated 01.06.2015, clearly point in the direction that the deductee/assessee cannot be called upon to pay tax, which has been deducted at source from his income. The plain language of Section 205 of the Act points in this direction The adjustment of demand against future refund amounts to an indirect recovery of tax, which is barred under Section 205 of the Act. The fact that the instruction merely provides that no coercive measure will be taken against the assessee, in our view, falls short of what is put in place by the legislature via Section 205 of the Act. Therefore, in our view, the petitioner is right inasmuch as neither can the demand qua the tax withheld by the deductor/employer be recovered from him, nor can the same amount be adjusted against the future refund, if any, payable to him. Thus,we are inclined to quash the notice dated 28.02.2018, and also hold that the respondents/revenue are not entitled in law to adjust the demand raised for AY 2012-13 against any other AY. It is ordered accordingly.

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• 2023 (2) TMI 1078
  Exemption u/s 11 - loss incurred out of corpus fund - taxability of real income - disallowing the claim of the appellant on the loss of Investment when the redemption of the Investment was made solely for the purpose of protecting the funds of the trust - Whether investments were made out of corpus fund when interest is earned thereon or the capital gain accrues on such transfer, are to be treated as income for purposes of computation Section 11? - AO disallowed the deduction claimed by the assessee and concluded that the investment was made out of the corpus fund and therefore any loss incurred out of corpus fund cannot be claimed as deduction inasmuch as corpus itself is exempted from tax - assessee s contention is that transactions were delivery based and redemption was undertaken to protect the interest of the assessee-Trust and not for trading on commercial line - HELD THAT:- Undisputed facts of the case are, assessee had made investments in mutual funds permitted under Section 11(5) of the Act. The unit of mutual funds in which investments was made was sold in the previous year relevant to A.Y. Due to sale, assessee suffered loss this amount has been claimed as deduction. ITAT has recorded in para 21 of its Order that the facts of this case are similar to the one in Hindustan Welfare Trust Vs. Director of Income Tax [ 1991 (9) TMI 16 - CALCUTTA HIGH COURT ] It has extracted the views taken by the AO and CIT(A) and agreed with the view taken by the AO. The view taken by the AO s is, the investments were made out of corpus donations and such donations are not regarded as income under Section 11 of the Act. Therefore, the loss on sale of such investment will also not be relevant while determining the income of the Trust. Admittedly, the assessee foundation has invested in units of mutual funds which are permissible under Section 11(5) of the Act. On redemption it has suffered a capital loss. AO has disallowed the deduction on premise that the corpus fund was exempted from tax. It is not in dispute that the assessee-foundation has suffered loss. It is settled that tax can be imposed on real profits and it cannot be done without deducting the losses. What is taxable is the real income. If the AO s view is to be accepted, it would lead to incongruous results. We say so because in the event, the assessee had earned profit in the instant transaction, the Revenue would have imposed tax on assessee. There cannot be different standards of examining facts when the assessee earns profit and when it suffers loss. Therefore, the AO s order confirmed by ITAT is perverse and unsustainable in law.Therefore, the AO s order confirmed by ITAT is perverse and unsustainable in law. Decided in favour of assessee.

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• 2023 (2) TMI 1077
  Revision u/s 263 by CIT - Excess allowance of deduction u/s 36(1)(viii), Wrong disallowance of liability in respect of contribution to gratuity fund and pension fund,Allowance of provisions for depreciation on investments, Interest under Section 115P was not levied on the delay in payment of dividend tax, Allowance of expenditure incurred on new logo was allowed as deduction - HELD THAT:- Out of the five issues taken up u/s 263 of the Act, issues no. i, iii and v are covered by decisions noted supra. The issue no. ii is with regard to the accounting standards and Assessee is following AS-15 and made remittances in respect of contribution to gratuity fund, therefore, it is entitled for deduction in terms of Section 43B of the Act. With regard to issue no. iv, Shri. Suryanarayana is right in his submission that a separate order is required with regard to interest and the same cannot be computed in order passed u/s 143(3) of the Act. Thus, in our considered view, the conclusions arrived by the AO is neither erroneous nor prejudicial to the interest of the Revenue. Decided in favour of assessee.

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• 2023 (2) TMI 1076
  Loss on gold - loss of 99.055 kgs of gold valued - AO has recorded in his order that assessee s auditor had mentioned that the said quantity of gold has been charged off from the stock - Assessee submitted that the inventory of 99.055 Kgs of gold was untraceable and the loss of gold was only 0.047% of the total gold transactions during the year 2011-12 which is accepted in the manufacture of ornaments - ITAT has allowed assessee s appeal on this aspect on the premise that the loss of gold accounts for only 0.047% of the total gold transactions without any rationale - HELD THAT:- Loss of gold is only 0.047% of the total transaction. Secondly that during the search the Revenue could not find any material. There is no logical explanation by the ITAT as to why loss of 0.047% must be allowed. The total loss claimed is 99.055 Kgs. The assessee s explanation at the first instance before the AO is that the gold was misappropriated. Before the First Appellate Authority the explanation is that assessee did not know about the loss till conducting annual inventory. Both explanations are not supported by any evidence. If 99.055 Kgs gold were to be misappropriated, management of any prudent company would take necessary action such as filing a police complaint etc. The second explanation that the assessee did not know about the loss at all, is on the face of it, unacceptable. In our view, the reasons recorded by the ITAT are perverse and therefore, unsustainable in law - Decided against assessee.

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• 2023 (2) TMI 1075
  Deduction u/s 10(26AAB) - Income received by way of fee by assessee - agricultural income - expression agricultural produce would cover the subject products [i.e., fish, poultry and eggs] regulated by the respondent/assessee or not? - HELD THAT:- Admittedly, the respondent/assessee earned a fee. The facts, as disclosed, are that the wholesalers of the produce bring their products, which include fish, poultry and eggs, to the designated spots where they are cleaned, sorted and sold to the traders. It is on this account that the fee is earned by the respondent/assessee. The fee that the respondent/assessee obtains helps the purpose for which it is constituted i.e., regulating the marketing of agricultural produce.Since agricultural produce is not defined in the 1961 Act, the Tribunal, as noted above, has taken recourse to Section 2 of the 1998 Act. The respondent/assessee has been constituted under the Delhi Agricultural Marketing (Regulation) Act 1976 and was appointed as regulator under the 1998 Act to facilitate trading in fish, poultry and eggs. The definition of agricultural produce, as contained in Section 2(1)(a) of the 1998 Act, read with schedule, as extracted above, is wide, which includes all kinds of produce, including fish, poultry, and eggs. Therefore, even otherwise, the fee earned by the respondent/assessee, as held by the Tribunal, would constitute income derived from regulating agricultural produce. Thus, according to us, the conclusion reached via the impugned order by the Tribunal is unimpeachable and does not need any interdiction by this court. The appeal is dismissed.

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• 2023 (2) TMI 1074
  Validity of notice u/s 143(2) issued in the name against the amalgamated company - HELD THAT:- After the AO was informed on 06.12.2013, that the amalgamation had taken place, and was furnished a copy of the scheme, he continued to proceed on the wrong path. This error continued to obtain, even after the DRP had made course correction. Thus, we are unable to persuade ourselves with the contention advanced on behalf of the appellant/revenue, that this is a mistake which can be corrected, by taking recourse to the powers available with the revenue u/s 292B - Decided against revenue.

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• 2023 (2) TMI 1073
  Liability of directors u/s 179 - recovery of the outstanding dues of the private limited company - petitioners liability to pay the outstanding tax in capacity of the Directors of the assessee company - Proof of gross negligent, misfeasance or breach of duty on part of the petitioner in relation to the affairs of the company - HELD THAT:- AO is required to make efforts for recovery of the outstanding dues from the assessee private limited company which has committed default in payment of the outstanding demand. The petitioners have prima facie shown that non recovery cannot be attributed to any gross negligence, misfeasance or breach of duty as Directors of the assessee company. In the impugned order, AO has failed to consider the fact that the petitioners have tendered their explanation and the petitioners have not remained negligent nor there is any misfeasance or breach of trust on part of the petitioners and only because the petitioners have been unable to deposit 20% of the demand raised in the assessment order, the petitioners cannot be said to be negligent and respondent no.1 cannot therefore, invoke jurisdiction under section 179 of the Act. This Court in case of Sadhna Ramchandra Jeswani [ 2018 (9) TMI 77 - GUJARAT HIGH COURT] notice that in showcause notice the Assessing Officer has not laid down sufficient foundation for invoking section 179 leave alone broadly pointing out he has not even alleged that non-recovery was on account of gross negligent, misfeasance or breach of duty on part of the petitioner in relation to the affairs of the company. His final conclusions in the impugned order are therefore based on the material at his command which was never shared with the petitioner. Petition succeeds and is accordingly allowed.

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• 2023 (2) TMI 1072
  Assessment u/s 153A - approval with respect to each assessment year - prior approval of the Joint Commissioner to the draft assessment order prepared by the Assessing Officer, as per the mandate of Section 153D - HELD THAT:- Section 153D requires that the Assessing Officer shall obtain prior approval of the Joint Commissioner in respect of each assessment year referred to in Clause (b) of sub-section (1) of Section 153A which provides for assessment in case of search under Section 132. Section 153A(1)(a) requires that the assessee on a notice issued to him by the Assessing Officer would be required to furnish the return of income in respect of each assessment year falling within six assessment years (and for the relevant assessment year or years), referred to in Clause (b) of sub-section (1) of Section 153A. The proviso to Section 153A further provides for assessment of the total income in respect of each assessment year falling within such six assessment years (and for the relevant assessment year or years). The careful and conjoint reading of Section 153A(1) and Section 153D leave no room for doubt that approval with respect to each assessment year is to be obtained by the Assessing Officer on the draft assessment order before passing the assessment order under Section 153A. In the instant case, the draft assessment order in 38 cases, i.e. for 38 assessment years placed before the Approving Authority on 31.12.2017 was approved on same day i.e. 31.12.2017, which not only included the cases of respondent-assessee but the cases of other groups as well. It is humanly impossible to go through the records of 38 cases in one day to apply independent mind to appraise the material before the Approving Authority. The conclusion drawn by the Tribunal that it was a mechanical exercise of power, therefore, cannot be said to be perverse or contrary to the material on record. As the facts are admitted before us, the questions of law framed on the factual issues related to the findings recorded by the Assessing Officer are not open to agitate within the scope of the present appeal being in the nature of second appeal. No substantial question of law

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• 2023 (2) TMI 1071
  Disallowance towards interest u/s.36(1)(iii) - Funds borrowed for purchase of land and shown as stock-in-trade in the balance sheet - interest expenditure on borrowed funds incurred by the assessee for purchase of land at Pali has to be capitalized as work-in-progress (WIP for short) - HELD THAT:- The said capital was borrowed for the purpose of the business of the assessee by way of purchase of land at Pali for its real estate purchase. AR has also relied on the decision of Tetron Commercial Ltd. [ 2003 (1) TMI 67 - CALCUTTA HIGH COURT] wherein the said proposition was reiterated by the fact that the borrowed capital utilized for the purchase of business of the assessee, whether or not the same is in the nature of capital expenditure or revenue expenditure, the interest payable for the said loan is to be allowed u/s. 36(1)(iii) of the Act. From the above observation and by respectfully following the cited decision, we are of the view that the assessee s claim of expenditure u/s. 36(1)(iii) of the Act is to be allowed. We do not find any infirmity in the order of the ld. CIT(A) and, therefore, ground no.1 raised by the Revenue is dismissed. Interest paid on borrowings for investments in equity shares and assessed under the head short term capital gain - AO made disallowance as expenditure incurred subsequent to the purchase of assets cannot be considered as cost of acquisition - CIT(A) held that the assessee can capitalize the impugned interest as part of cost of acquisition u/s. 48 of the Act which is to be allowed as deduction against the STCG on transfer of shares - HELD THAT:- As relying on TRISHUL INVESTMENTS LTD. [ 2007 (7) TMI 252 - MADRAS HIGH COURT] we are of the considered view that the assessee s claim of interest on borrowings against STCG is to be allowed. We find no infirmity in the order of the ld. CIT(A) and we hereby dismiss ground no.2 filed by the Revenue.

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• 2023 (2) TMI 1070
  Revision u/s 263 - repayment of unsecured loans to the alleged shell companies considering the provisions of Section 69C r.w.s. 115BBE - HELD THAT:- The issue under consideration was duly examined by the AO in the assessment proceedings and conscious decision was taken after due application of mind. Accordingly, it is not a case of lack of inquiry by the Assessing Officer. Secondly, as regards applicability of section 69C of the Act, we observe that section 69C applies in case of unexplained expenditure, source of which remains unexplained. In the assessee s case, repayment of loan does not constitute any expenditure and further, the source of such repayment was also explained by the assessee both before the Assessing Officer as well as PCIT. Accordingly, in our view section 69C of the Act cannot be invoked in the instant facts. In the instant facts even if one were to invoke section 68 of the Act since repayment of loan is not credit in the books of accounts, the same is outside purview of section 68 of the Act. On the issue that the ld. Assessing Officer should have enquired into the transaction on the ground that the assessee had made repayment to bogus/shell companies, the assessee before us submitted that at the time when the aforesaid unsecured loans were received by the assessee from the above three parties, the receipts have already been taxed in the hands of the assessee u/s. 68 of the Act in the assessment for A.Y. 2013-14. The assessee had filed appeal against the aforesaid order and the appeal was finally closed under the Vivad Se Vishwas Scheme. Accordingly, once the unsecured loans have been taxed in the hands of the assessee at the time when they were received by the assessee in A.Y. 2013-14, the same cannot be again taxed in the hands of the assessee at the time when such loans are repaid back by the assessee to such alleged bogus companies, since the same would amount to double taxation. Further, on perusal of the order passed by ld. PCIT, it is seen that the ld. PCIT has not established as to how the repayment of loans falls u/s. 69C of the Act when the assessee has not claimed the same as expenditure and also when the source of such repayment has not been disputed by the PCIT. Scope of proceedings u/s 263 - An inquiry made by the Assessing Officer is considered inadequate by the Commissioner of Income Tax, cannot make the order of the Assessing Officer erroneous.The order can be erroneous if the Assessing Officer fails to apply the law correctly on the facts of the case. As far as adequacy of inquiry is considered, there is no law which provides the extent of inquiries to be made by the AO. Assessing Officer s prerogative to make inquiry to the extent he feels proper. The Commissioner of Income Tax by invoking revisionary powers u/s 63 cannot impose his own understanding of the extent of inquiry. Decided in favour of assessee.

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• 2023 (2) TMI 1069
  TDS credit - mismatch in credit of tax deducted at source claimed by the assessee in the return of income - As submitted tax credit claimed by the assessee in the return of income is in accordance with the credit available as per Form 26AS - as per CIT-A assessee is entitled to credit of TDS deducted in respect of interest income and advance received from Kerala Government during the year under consideration - HELD THAT:- In the case of Arvind Murjani Brands (P.) Ltd. [ 2012 (5) TMI 138 - ITAT MUMBAI] ITAT held that where amount on which tax was deducted at source is not at all chargeable to tax, command of section 199 will have to be harmoniously and pragmatically read as providing for allowing credit for tax deducted at source in year of receipt of amount, in which tax was deducted at source. As decided in M/S. ZELAN PROJECTS P. LTD. VERSUS DCIT, CIRCLE 3 (3) HYDERABAD [ 2015 (6) TMI 66 - ITAT HYDERABAD] where TDS was deducted from mobilisation advance paid to assessee-erection contractor, credit of same was to be allowed, even if no income was assessable to tax as contract was not fully executed in relevant year. As decided in SUPREME RENEWABLE ENERGY LIMITED. VERSUS INCOME TAX OFFICER. [ 2008 (8) TMI 432 - ITAT MADRAS-C] assessee becomes entitled to credit of TDS even if he has not directly offered the relevant income for tax on the basis that it is not liable to tax. In the case of Sadbhav Engineering Ltd. [ 2014 (1) TMI 233 - ITAT AHMEDABAD] held that once the TDS deducted, credit of the same to be given to assessees, irrespective of year to which it relates. In the case of NCC Maytas JV [ 2013 (9) TMI 1294 - ITAT HYDERABAD] ITAT held that a part of TDS cannot be denied on the ground that the corresponding turnover has not been shown in the A.Y. in which credit is being claimed, if income relating to such TDS has already been offered for taxation in an earlier assessment year. Accordingly, in view of the above observations, we find no infirmity in the order of Ld. CIT(A) who has allowed the appeal of the assessee after appreciating all relevant factors. In the result, the appeal of the Department is dismissed.

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• 2023 (2) TMI 1068
  Estimation of income - Bogus purchases - CIT(A) estimated the profit percentage at 15% - HELD THAT:- It is not in dispute that the assessee had declared gross profit of 10.75% on overall sales (i.e both domestic and export) in its return. It is not in dispute that the sales made out of disputed purchases were not doubted by the revenue in the instant case. Hence it would be just and fair to bring to tax only the profit element embedded in the value of such disputed purchases. Considering the peculiar business model operated by the assessee and considering the fact that the stock registers furnished by the assessee were not disputed by the revenue, we hold that adoption of gross profit percentage of 15% less gross profit declared by the assessee at 10.75% would meet the ends of justice in the peculiar facts and circumstances of the instant case. Accordingly, the ground numbers raised by the assessee and ground raised by the revenue are partly allowed.

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• 2023 (2) TMI 1067
  Addition of interest income on the basis of form 26AS - assessee failed to explain the reason for short accounting of interest income from SBI whereas it has claimed credit of TDS on full amount - HELD THAT:- There is no dispute to the fact that the Form -26AS has been generated by the revenue based on the information furnished by the deductor i.e. the SBI bank in the present case in its TDS return. The assessee as such has no role as far as Form-26AS is concern. Assessee has duly discharged the onus by submitting the Form-16A and the interest certificate issued by the bank. Now the onus has shifted upon the Revenue to disprove the contention of the assessee based on the documentary evidence. In fact, in our considered view, the income reported in Form- 26AS cannot be treated as the gospel truth that the assessee has earned so much of the income. The income reported in form 26AS can be a reason for suspicion/doubt about the actual income earned by the assessee in the income tax return in the event there is a mismatch. But it cannot be a sacrosanct document to hold the issue against the assessee. As such the revenue, was expected to carry out necessary verification from the bank before reaching to the conclusion that the assessee has suppressed the interest income especially in the given facts and circumstances. It is for the reason that the assessee in the given case has discharged the onus by furnishing Form-16A and interest certificate issued by the bank. Accordingly, we hold that the assessee cannot be held guilty merely on the basis of 3rd party information until and unless it is cross verified - we set aside the finding of the learned CIT (A) and direct the AO to delete the addition made by him. Hence the ground of appeal of the assessee is hereby allowed. Disallowances u/s 14A - AO during the assessment proceedings found that the assessee during the year has earned exempt income but no corresponding expense was disallowed as prescribed under section 14A - AO being dissatisfied with the explanation and working of disallowances furnished by the assessee resorted to the provision of section 14A(2) read with rule 8D - HELD THAT:- For disallowance of interest expenses, the assessee on one hand incurred interest expenses of Rs. 47,23,474/- but on other hand has also earned interest income of Rs. 46,27,470/- only. Accordingly, as contended that only net interest cost should be considered for disallowance. We find force in the contention of the assessee which is covered in its favor by the judgment of Hon ble jurisdictional High Court in the case of PCIT vs. Nirma Credit Capital (P.) Ltd. [ 2017 (9) TMI 485 - GUJARAT HIGH COURT] . Assessee was having interest free/own fund in the form of capital and reserve at Rs. 11,65,02,192/- against the investment in shares of Rs. 1,06,67,432/- only. Thus, it is transpired that the assessee was having sufficient interest free fund to meet the requirement of investment which yielded exempted income. Therefore, presumption should be drawn that that the interest free/own fund were utilized for making the investment. Accordingly, no interest income is required to be disallowed under the provision of section 14A(2) r.w. rule 8D - we are hereby set aside the finding of the learned CIT(A) to the extent of disallowance of interest expense of Rs. 1,97,672/- and direct the AO to delete the same. Hence the ground of appeal of the assessee is hereby partly allowed. Addition of Employee contribution of EPF/ESI u/s 36(1)(va) - assessee has deposited Employees contribution towards PF/ESI account after the due date prescribed under respective Act and has also not furnished any explanation of such late deposit - HELD THAT:- We note that the issue in hand has been covered against the assessee by the judgment of Hon ble Jurisdictional High Court in case of CIT vs. GSRTC [ 2014 (1) TMI 502 - GUJARAT HIGH COURT] - Decided against assessee. Mark to market loss - assessee has booked loss representing mark to market loss with respect to the unsettled transaction in the year under consideration - As per the AO, the loss claimed by the assessee was unrealized loss and contingent/uncertain in nature, the amount of loss claimed by the assessee represents the provision for the contingencies which is not allowable as deduction under the provisions of the Act - HELD THAT:- In the present case, the assessee has recorded securities being future and option transactions at their market price on the date of the balance sheet. This is done to provide a realistic picture of the company's financial status on the basis of accounting principle of 'prudence'. When compared to the purchase price, if purchased during the year, or on the first day of accounting year, it may result into a gain or loss. While gain is not considered in the profit and loss account on the ground of prudence that no businessman will credit gain without it being realized, the loss so resulted is debited in the profit and loss account on the principle of cost price or net realizable value, whichever is lower. The Hon'ble Apex Court in M/S WOODWARD GOVERNOR INDIA P. LTD. M/S HONDA SIEL POWER PRODUCTS LTD. [ 2009 (4) TMI 4 - SUPREME COURT] upheld the claim of the assessee for the reasons that in mercantile system of accounting the value of the asset on two different dates has to be compared to arrive at a profit for that period. Such loss was considered as allowable u/s 37 of the Act. We hold that the assessee is entitled for the losses incurred with respect to the unsettled contracts as on the balance sheet date. Thus, we set aside the order of the learned CIT-A and direct the AO to delete the addition made by him. Hence, the ground of appeal of the assessee is allowed. Depreciation claimed on the membership card of ASE and BSE - As per the AO the membership of ASE and BSE on demutualization was converted into the shares as per the direction of the SEBI and as the membership of ASE and BSE were no longer in existent and therefore, the assessee was not entitled for the depreciation, treating the membership as intangible asset - HELD THAT:- Admittedly, the assessee has been claiming depreciation on the membership cards of the stock exchange since the last many years as evident from the details placed - The shares allotted to the assessee on corporatization of stock exchange have been classified as investment by the assessee in its books of accounts separately and no depreciation of whatsoever was claimed on such investments. In other words, the cost incurred by the assessee on the acquisition of the membership cards of the stock exchange were classified as intangible assets by the assesse and accordingly depreciation was claimed which was accepted by the revenue in the earlier years. Accordingly, the principles of consistency need to be adopted in the given facts and circumstances - We are inclined to hold that once the revenue has allowed the depreciation on the membership cards in the earlier years, then in subsequent year on same facts and circumstances principal of consistency should be applied. Decided in favour of assessee. Non-deduction of TDS under the provisions of section 194C/, 194J and 194-I read with section 40(a)(ia ) - As submitted that there was short a deduction of TDS with respect to the payment made towards VSAT charges - HELD THAT:- We hold that the assessee was not subject to the provisions of TDS under Section 194-J/194-I of the Act as alleged by the authorities below. Accordingly, no disallowance on account of non-deduction of TDS is warranted. It is also important to note that there cannot be disallowance of the expenses in the case of short deduction of TDS i.e. VSAT charges in respect of which TDS was deducted at the rate of 2.40% as against 10% up to 30 September 2009. Thus, we set aside the finding of the learned CITA and direct the AO to delete the addition made by him. Hence, the ground of appeal of the assessee is hereby allowed. Fresh claim during assessment proceedings - Disallowance of setoff of speculation loss - AO found that the assessee has neither shown such claim in the original return nor filed any revised return of income - HELD THAT:- There is no dispute to the fact that the assessee during the assessment proceedings can make the fresh claim which was not made during in the return of income. Admittedly, the Hon ble Supreme Court in the case of Goetze (India) Ltd [ 2006 (3) TMI 75 - SUPREME COURT ] has restricted the power of the AO to entertain the fresh claim of the assessee during the assessment proceedings which was not made in the return of income. But there was no such restriction to admit the fresh claim made by the assessee to the higher authorities. It is also a fact on record that the learned CIT-A has denied the claim of the assessee in the absence of necessary document. Assessee before the AO during the assessment proceedings has filed the assessment order framed under section 143(3) of the Act pertaining to the assessment year 2009-10 to justify the brought forward losses. Furthermore, at the outset, we note that assessee before us requested to set aside the issue to the file of AO for fresh adjudication and there was no objection raised by the learned DR appearing for the revenue. Therefore, in the interest of justice and fair play, we set aside the issue to the file of the AO to decide afresh as per the provisions of law and in the light of the discussion as stated above. Hence, the ground of appeal of the assessee is hereby allowed for statistical purposes.

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• 2023 (2) TMI 1066
  Condonation of delay in filing the appeal before the CIT(A) - delay of 1950 days in filing the appeal - outbreak of Covid-19 pandemic - right to file appeal within the period of limitation provided under section 249(2) - processing of return of income u/s 143(1) whereby the claim of exemption under section 11 and 12 was denied and the entire gross receipts of the assessee was assessed as total income of the assessee - AR has contended that initially the assessee was advised to file the rectification petition under section 154 and time limit for filing the petition was upto March, 2020 however, in the meantime, there was a Covid-19 pandemic outbreak and a complete lockdown from 22nd March, 2020 which led to the delay in filing the application before CIT(A) - whether the explanation and reasons for delay was bonafide or was merely a device to cover an ulterior purpose such as laches on the part of litigant or an attempt to some limitation in underhand way? - HELD THAT:- There is no dispute that the order under section 143(1) passed by CPC is highly unreasonable and very harsh for the assessee as the total gross receipts of the assessee was assessed to tax being a total income of the assessee without allowing the deduction of various expenditures which were part of the return of income. Thus, there is an apparent mistake from the order of CPC passed under section 143(1) however, the illegality or a mistake in the order of tax authorities itself cannot be a ground to be considered as reasonable cause for delay of 1950 days in filing the appeal. Assessee has not brought on record anything or any material to show that the assessee has finally filed a rectification petition under section 154 or if such petition is filed, the details of filing of such petition and the outcome of the said petition. In the absence of any detail or facts regarding filing of the petition under section 154 of the Income Tax Act we are unable to accept this argument and explanation of the assessee. There is no quarrel on the point if the assessee has chosen a wrong remedy then the time consumed in pursuing the wrong or improper remedy has to be excluded for the purpose of limitation in seeking the proper remedy by way of filing the appeal. But in the absence of filing any petition under section 154, no benefit can be allowed to the assessee merely because the assessee was thinking so. It is always a question whether the explanation and reasons for delay was bonafide or was merely a device to cover an ulterior purpose such as laches on the part of litigant or an attempt to some limitation in underhand way. In the case in hand, the assessee is completely silent about the cause of delay from 27th April, 2017 till March, 2020 when there was an outbreak of Covid-19 pandemic. In the absence of any explanation by the assessee for non-filing of the appeal before the CIT(A) or any petition under section 154 of the Income Tax Act the assessee was not able to explain the reasonable cause for inordinate delay in filing the appeal before the CIT(A). The CIT(A) has passed a speaking order and came to the conclusion that the assessee has failed to explain the reasonable cause for the delay of 1950 days in filing the appeal. The fact remains same before us as the assessee is not able to explain a reasonable cause for delay at least from April, 2017 to March, 2020 for not taking any steps for filing the appeal before the CIT(A). - Decide against assessee.

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• 2023 (2) TMI 1065
  Revision u/s 263 - Deduction u/s 80IC - HELD THAT:- Since this was the first year of claim of deduction by the assessee with respect to the Rudrapur unit u/s. 80IC of the Act, the Assessing Officer should have enquired into the eligibility of claim of deduction u/s. 80IC of the Act in detail during the course of assessment proceedings. Since this was the first year of claim of deduction, the AO should have enquired whether the Rudrapur unit was a new unit or whether it was merely an extension of existing unit, whether the conditions of splitting up or re-constitution of business have been satisfied etc. We observe that no specific query was made by the AO either by way of notice dated 14-09-2012 nor through any order sheet entry during the course of assessment proceedings with regard to claim of assessee u/s. 80IC - Though, the assessee submitted details relating to purchases, production and sales etc, however, no specific inquiry/investigation was made by the Assessing Officer as to the eligibility to the claim of the assessee in respect of the new unity u/s. 80IC for the Rudrapur unit. Accordingly, we are of the considered view that the AO has not enquired into eligibility of Rudrapur unit to claim deduction u/s. 80IC of the Act. No infirmity in the order of ld. PCIT by holding that the order passed by the Assessing Officer is erroneous and prejudicial to the interest of the Revenue and directing the Assessing Officer to conduct a proper inquiry and verification relating to the eligibility of the claim of the assessee in respect of profits of Rudrapur unit u/s. 80IC of the Act.Appeal of the assessee is dismissed.

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• 2023 (2) TMI 1064
  Capital gain Computation - sale of property liable to be taxed - assessee share in property - Admission of additional evidences rejected by CIT-A - assessee s share in the property sold was 1/12th and not 1/9th as taken by the AO - HELD THAT:- We find that while the ld.CIT(A) states that all additional evidences filed by the assessee were admitted by him, but in the subsequently states that vis- -vis the shares of the assessee in the property sold, he refuses to admit additional evidence. There appears to be no clarity in the order of ld.CIT(A) on this aspect of the matter. Even otherwise, we find that the share of the assessee being a crucial aspect for determining the capital gains earned by the assessee, the ld.CIT(A) was not right in rejecting the admission of additional evidences. We therefore hold that rejection of the assessee s claim of share in the property sold being 1/12th by the Revenue authorities was without any basis and highly unjustified. We find that the assessee had clearly demonstrated his share in the property at 1/12th and accordingly, we direct the AO to re-compute the capital gain taking the assessee s share in the property as 1/12th. This contention raised by the ld.counsel for the assessee is accordingly allowed. Stamp duty value/jantri value of the land sold on the date of entering into agreement to sell should have been adopted as per the provision of section 50C - The agreement to sell has been found to have stamped on 6.10.2009 while the agreement was entered into much later on 5.2.2010. There is also over-writing on the date mentioned in the agreement to sell. Most importantly, the original agreement to sell was never produced before the Revenue authorities. The fact that as per prevailing law of the State of Gujarat, a partnership firm could not have purchased an agriculture land, this agreement to sell between a partnership firm(M/s Vishwas Builders)as the buyer and the assessee as seller was in any case invalid. Further, the agreement to sell finds no mention in the final sale deed entered into between the parties. The fact that the agreement to sell is in relation to land admeasuring 15580 sq.meters, and the land actually sold as per the registered sale is only 8741sq.meters also remained un-reconciled. We agree with the ld.CIT(A) that this agreement to sell was only an after-thought of the assessee, and the ld.CIT(A) therefore has rightly denied the benefit of proviso to section 50C of the Act. This contention of the ld.Counsel for the assessee of substitution of the sale consideration with the jantri value on the date of entering into agreement to sell is accordingly rejected. Claim of exemption under section 54F on account of investment of capital gain/ sale consideration in purchase of residential property - denial of claim as per CIT(A) is for the reason that the investment in the new property was not made within the period stipulated as per law - HELD THAT:- We are not in agreement with the Ld.CIT(A) on the issue. It is not denied that the assessee had made complete investment of Rs. 21 lacs for purchase of property well within the stipulated time. It is only that the construction was completed later on and sale deed entered into on completion of construction. Courts have held the conditions for claiming exemption u/s 54F of the Act to be fulfilled in such circumstances. The Hon ble Karnataka High Court in the case of CIT Vs Smt. Shantha Kumari (2015) 233 taxmann.com 347(Kar) has held that if after making complete payment merely because a registered sale deed has not been executed be it because construction was not completed in all respects, that would not disentitle the assessee from claiming the benefit u/s 54F of the Act. We hold that the assessee has substantially complied with the provisions of section 54F of the Act by making complete investment in purchase of flat. The assessee we hold is eligible to claim deduction u/s 54F of the Act of the amount invested of Rs.21 lacs. The contention vis-a-vis share of the assessee in the property sold being 1/12th is accepted, as also his claim to deduction u/s 54F of the Act. The plea for taking jantri value on the date of entering into agreement to sell in terms of proviso to section 50C is rejected. The AO is directed to re-compute the capital gains accordingly.

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• 2023 (2) TMI 1063
  Nature of expenses - Employees Stock Expenses (ESOP) as an allowable expense u/s 37(1) - AO had disallowed the expenditure by holding it to be capital in nature and not allowable u/s 37(1) - HELD THAT:- We find that CIT(A) after considering the various High Court s and Tribunal s decisions held the ESOP expenses to be allowable u/s 37(1) of the Act. Before us, Revenue has not placed any material on record to point out any fallacy in the findings of CIT(A) nor has placed any contrary binding decision in its support. In such a situation, we find no reason to interfere with the order of CIT(A) and thus the ground of Revenue is dismissed.

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• 2023 (2) TMI 1062
  Deduction u/s 80P(2)(a)(i) - proportionate adjustments disallowance - interest earned from nominal members - assessee received interest on investments in BDCC Bank on RFD of which the assessee claimed deduction u/s 80P(2)(a)(i) whereas the AO has disallowed proportionate adjustments as calculated by him in his order - HELD THAT:- Since the case was not properly presented before the lower authorities also noted that in the grounds of appeal, the assessee has quoted three judgments which are as under The Mavilayi Service Coop Bank Ltd Others [ 2021 (1) TMI 488 - SUPREME COURT] , Tumkur Merchants Souharda Credit Cooperative Ltd [ 2015 (2) TMI 995 - KARNATAKA HIGH COURT] , Guttigedarara Credit Cooperative Society Ltd Vs Income Tax Officer [ 2015 (7) TMI 874 - KARNATAKA HIGH COURT] Considering the grounds of appeal raised by the assessee interest of justice, the case is remitted back to the AO for a fresh consideration in the light of the above three judgments and the assessee is directed to file necessary documents in support of his claim and not to seek unnecessary adjournments for early disposal of the case. Needless to say that reasonable opportunity of being heard to be given to the assessee. AO will decide the issue as per law. Appeal of the assessee is allowed for statistical purposes.

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• 2023 (2) TMI 1061
  Assessment u/s 153A - Proof of search and seizure operation on the assessee - HELD THAT:- We are inclined to hold that the AO was not validly entitled to issue notice u/s 153A and to frame assessment order u/s 153A r.w.s. 143(3) of the Act for AYs 2008-09, 2009-10 and 2010-11 as there was no search and seizure operation on the assessee. Therefore, the notice u/s 153A of the Act and assessment orders framed in pursuance thereto deserves to be quashed being void ab initio and bad in law passed without having valid jurisdiction. Therefore, we quash the same. Decided in favour of assessee.

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• 2023 (2) TMI 1060
  Revision u/s 263 by CIT - value of cost of acquisition adopted by the assessee while computing capital gain on sale of agricultural land - Unrealistic approach or scientific method valued the property at unrealistic value - As per CIT assessee claimed excess of cost indexation by which needs to be disallowed - HELD THAT:- As it is revealed it is not the case that the AO has not made any enquiry. Indeed, the Pr. CIT initiated proceedings u/s 263 of the Act on the ground that the AO has not made enquiries or verification which should have been made in respect value of land adopted by the registered valuer. It is not the case of the Pr. CIT that the Ld. AO did not apply his mind to the issue on hand or he had omitted to make enquiries altogether. In the instant set of facts, the AO had made enquiries and after consideration of materials placed on record accepted the genuineness of the claim of the assessee. At this juncture, it is also important to note that the learned PCIT in his order passed under section 263 of the Act has made reference to the explanation 2 of section 263 of the Act. It was attempted by the learned PCIT to hold that there were certain necessary enquiries which should have been made by the AO during the assessment proceedings but not conducted by him. In this regard, we make our observation that the learned PCIT has not invoked the explanation 2 of section 263 of the Act in the show cause notice about the same. Therefore, the opportunity with respect to the explanation 2 of section 263 of the Act was not afforded to the assessee. Thus, on this count the learned PCIT erred in taking the recourse of such provisions while deciding the issue against the assessee. Thus we hold that there is no error in the assessment framed by the AO under section 143(3) causing prejudice to the interest of revenue. Thus, the revisional order passed by the learned PCIT is not sustainable and therefore we quash the same. Hence, the ground of appeal of the assessee is allowed.

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• 2023 (2) TMI 1059
  Exemption u/s 11 - depreciation from the assets while computing its income - Scope of Section 11(6) inserted by Finance (No.2) Act, 2014 denying depreciation while computing income of charitable trust - HELD THAT:- It is not the case of the assessee before us that the assets acquired by the assessee without claiming the application of income in respect of such asset for which the assessee is claiming the depreciation. In our view, once the assessee has claimed the application of income in acquiring the assets either in the current year or in the previous year, then the assessee is not entitled to claim depreciation on such assets. Hence, we do not find any merits in the contentions raised by the assessee and the order passed by the ld.CIT(A) giving the reasons, is in accordance with the bare provision of the Act and hence, the present appeal is devoid of any merits and accordingly, the appeal of the assessee is dismissed. So far as the judgments relied upon by the assessee are concerned, all those decisions are prior to the amendment by virtue of section 11(6) of the Act was inserted in the Act. Various Hon ble High Courts including decision of Sri Sri Adichunchunagiri Shikshana Trust 2016 (7) TMI 1046 - KARNATAKA HIGH COURT] , Medical Trust of the Seventh Day Adventists [ 2017 (8) TMI 931 - MADRAS HIGH COURT] and Seth Anandram Jaipuria Edu. Society Cantonment [ 2017 (3) TMI 896 - ALLAHABAD HIGH COURT] have held that, Section 11(6) inserted by Finance (No.2) Act, 2014 denying depreciation while computing income of charitable trust, is prospective in nature and operates with effect from 1-4-2015. The assessment for the year under consideration is 2017-18 and therefore, section 11(6) is squarely applicable to the facts of the case and the Revenue is justified in denying the depreciation to the assessee on the assets purchased prior to the previous year relevant to the assessment year under consideration. Appeal of the assessee is dismissed.

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• 2023 (2) TMI 1058
  Penalty u/s 271(1)(c) - GP estimation - Bogus Purchases - HELD THAT:- As decided in decision of M/s. Fancy Diamonds India Pvt. Ltd.[ 2022 (6) TMI 1359 - ITAT MUMBAI] which has held that in case where the addition is made on estimated basis, the penalty u/s. 271(1)(c) of the Act is not leviable. In the present case in hand, it is observed that the A.O. has made addition @ 2.58% + 3% on VAT which was restricted by the ld. CIT(A) to 2.58% of gross profit on the bogus purchases made by the assessee with the hawala parties. This clearly indicates that the addition in assessee s case was made on estimated basis. The penalty u/s. 271(1)(c) of the Act cannot be levied where the addition is made on estimated basis. From the above observation we hereby delete the penalty levied by the A.O. and find no justification in the order of the ld. CIT(A). - Decided in favour of assessee.

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• 2023 (2) TMI 1057
  Reopening of assessment u/s 147 - reasons to believe - own satisfaction or borrowed satisfaction - client code modification has been done for shifting of profit and loss by the assessee - HELD THAT:- Honourable Bombay High Court in case of Pr. CIT vs. Shodiman Investments (P.) Ltd. [ 2018 (4) TMI 1287 - BOMBAY HIGH COURT] by deciding the identical issue held that reopening notice has to be issued by the AO on his own satisfaction and not on borrowed satisfaction . Here in this case it is proved on record that the AO was having no material whatsoever before him except the information sent by DIT(Inv.) by recording the fact that certain brokers, one such broker is M/s. BP Equities Pvt. Ltd., were carrying out non genuine profits and losses by misusing the client code modification in F O segment. Merely on the basis of this information the AO hurriedly proceeded to reopen the assessment which is not sustainable in the eyes of law. Assessment cannot be re-opened on the basis of reasons recorded that client code modification has been done for shifting of profit and loss by the assessee particularly when there is no material on record that such client code modification was done with malafide purpose of shifting of profit to evade the tax nor any such material was there before the AO. Initiation of reopening proceedings u/s 147/148 are bad in law and the subsequent assessment order framed by the AO is not sustainable in the eyes of law, hence ordered to be quashed without entering into the merits of the case and consequently impugned order passed by the CIT(A) is set aside. Decided in favour of asseessee.

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• 2023 (2) TMI 1056
  Vivad-se-Viswas Scheme - Additions on account of amount received towards share in sale of land in different Assessment Years settled under Vivad-se-Viswas Scheme - HELD THAT:- The dispute between the department and M/s Roots Developer Pvt. Ltd. still subsists as it has not been settled under the Vivad-se-Viswas Scheme. The decision taken in the present appeals will have no impact on the pending appeals of M/s Roots Developer Pvt. Ltd. which have to be decided on their own merits. Therefore, the apprehension of learned Departmental Representative, in our view, is unfounded. Thus, considering the fact that the dispute between the present appellants and the department qua the issue of taxability of amount received on sale of land has been settled under the Vivad-se-Viswas Scheme, in our view, the present appeals filed both by the assessee and the revenue are of mere academic importance, hence infructuous. Therefore, we dismiss all these appeals.

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• 2023 (2) TMI 1055
  Interest Income Other Income vs. Pre-Operative Expenses - Disallowance of expenses - assessee has not earned any business income relating to the project which is yet to commence - AO treated the expenditure claimed by the assessee as part of the capital work-in-progress and the interest income earned by the assessee, he has treated the same as income from other sources which assessee has earned by depositing the funds in fixed deposit - HELD THAT:- Assessee has entered into escrow agreement with original lenders (Axis Bank Limited) and Escrow Bank by Standard Chartered Bank, as per the terms of the agreement assessee has to maintain reserve amounts as per clause (ii) of the construction of the Escrow Agreement as per which assessee has to maintain statutory Dues Account, Project Construction Account, Operation And Maintenance Account and the NHAI Account, Debt Payment Account and other similar accounts. Assessee was allowed to withdraw only through Escrow Account for withdrawal during construction period and also assessee was allowed to make investment only in permitted investments. By respectfully following the terms of agreement assessee has made the investment through permitted investments and earned the interest income. The relevant data are submitted by the assessee as part of the Paper Book. It clearly shows that the operation of funds are relating to the same project as well as the interest earned through permitted investments are also part of the same project. As held in the above said case the interest earned by the assessee through Due Account and permitted investment are part of the same project and accordingly, we direct the AO to allow the interest earned by the assessee as capital income and should be reduced from the capital work-in-progress of the project. Accordingly, Ground raised by the assessee are allowed.

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• 2023 (2) TMI 1054
  Unexplained cash credit - onus to prove - entire assessment on the assessee is due to a financial fraud by using the assessee's name where the assessee is totally unaware and uninvolved - HELD THAT:- The onus is on the the assessee to substantiate the transactions which were undertaken by the assessee during previous year relevant to the impugned assessment year, and any failure on the part of the assessee will have its own consequences as provided under the 1961 Act. The assessee has filed a copy of online FIR as well legal notice , but this is not sufficient because if serious prejudice is caused to the assesee as claimed by her because of alleged fraudulent opening of bank account in her name by M/s Oven Commerce Private Limited , then she should have taken further steps to ensure that the Chargesheet are filed in the Court of law against culprits/accused and they are brought to justice, but merely filing FIR, legal notice or filing an affidavit at a very belated stage suffering from delay and latches will not be sufficient to discharge her onus, as the amount stood credited in her bank account , and she has to explain satisfactorily sources of credit in the said account. Thus, in our considered view, the assessee has failed to discharge her onus and the additions were rightly made by the AO and confirmed by ld. CIT(A), and we hold that the assessee fails to satisfactorily explain the sources of credit in her bank account maintained with ICICI Bank, Sigra , Varanasi as is required under the 1961 Act, and thus , we dismiss the appeal filed by the assesse on the merits of the addition . We order accordingly. Best judgment Assessment u/s 144 read with section 147 - non issuance of notice u/s 143(2) - AO duly complied with the mandate of provisions of Section 144 which deals with a different class of assessment viz. best judgment assessment. Had the assessee filed return of income in pursuance to notice dated 29.03.2016 issued by AO u/s 148, or even in compliance of terms of issue of notice u/s 142(1)dated 02.12.2016 , then Section 143(2) would have got triggered and then the AO would have been obligated to frame assessment u/s 143(3) read with Section 147, and not best judgment assessment u/s 144 read with Section 147 If the assessee did not file return of income in response to notice u/s 148 , then the AO will be competent to frame best judgment assessment and no notice u/s 143(2) would have been required. The second situation is clause (b) to Section 144(1), where there was failure on the part of the assessee to comply with the terms of notice issued by the AO u/s 142(1), and hence the AO shall be competent to frame best judgment assessment u/s 144 and no notice u/s 143(2) shall be required. We are seized presently to the situation which falls under clause (a) and (b) of Section 144(1). The third situation envisaged u/s 144(1) clause (c) is the situation where the assessee having filed return of income, fails to comply with all the terms of a notice issued by AO u/s 143(2), then again Section 144 would get triggered and the AO shall be competent to frame best judgment assessment and no further notice u/s 143(2) shall be required to be issued . Had the assessee filed return of income complying with the terms of notice u/s 142(1) or filed return of income in pursuance to notice issued by the AO u/s 148 , then AO would have been under an obligation to issue notice u/s 143(2) and assessments would have to be completed u/s 143(3) read with Section 147, but since there was failure of the assessee to comply with the terms of notice dated 02.12.2016 issued u/s 142(1) nor return of income was filed in pursuance to notice issued by the AO u/s 148 , as the return of income was never filed during reassessment proceedings, then in that case, we hold that there was no requirement of issuing any notice u/s 143(2) by the AO , and assessment was rightly framed by AO u/s 144 read with Section 147, which was done after complying with the conditions as are stipulated u/s 142(1) r.w.s. 144 r.w.s. 147, and hence we uphold the reassessment order dated 29.12.2016 passed by AO for assessment year 2009-10 , as valid and legal. Section 144 engrains principle of natural justice , before making best judgment assessment, which stood duly complied with by the AO in the instant case before us. Once the language of the statute is plain, simple, clear and unambiguous, full effect is to be given, and no part could be held to be surplus, as Parliament was fully aware while enacting law. Thus, we reject this contention of the assessee that reassessment is bad in law owing to non issuance of notice u/s 143(2). Decided against assessee.

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• 2023 (2) TMI 1053
  Assessment u/s 144C - Validity of the draft assessment order passed in the name of the non-existing company - HELD THAT:- As in light of the decision of the Hon ble Supreme Court in Maruti Suzuki India Ltd [ 2019 (7) TMI 1449 - SUPREME COURT ] the draft assessment order passed in the name of the non-existing company cannot be said to be a valid draft assessment order and therefore is set aside. Further, respectfully following the decision of FedEx Express Transportation and Supply Chain Services (India) (P.) Ltd. [ 2019 (7) TMI 1554 - ITAT MUMBAI ] all subsequent proceedings resulting from the invalid draft assessment order are also bad in law, void ab initio, and thus are ordered to be set aside. As a result, additional grounds raised by the assessee, are allowed.

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• 2023 (2) TMI 1052
  Transfer pricing adjustment - outstanding receivables of the assessee by charging interest thereon - As per assessee account of unbilled revenues having not accrued to the assessee itself, there was no question of charging notional interest on the outstanding amount on account of unbilled revenue - HELD THAT:- Until bill is raised the assessee has no right to recover any amount from the other party, because it is the bill which notifies the other party of fixing liability on it to pay certain amounts. Until then, the assessee has no right to recover any amount. Therefore, with no right of recovery with the assessee, the amounts outstanding on account of unbilled amounts cannot be said to be outstanding debtors since no debt has accrued on the other party on account of these amounts. The other party having neither received the bill and as a consequence not accepted the same also, therefore, there is no debt which is accrued on the other party. These outstanding amounts on account of unbilled revenues cannot be termed as outstanding debtors and there is no question of charging any interest for the delayed recovery of the same. The unbilled revenue is therefore, we hold not to be treated as accounts receivable for the purposes of making any adjustment on account of notional interest earned thereon. No adjustment on account of notional interest was warranted since it had been demonstrated that even vis- -vis non-AE the assessee was not charging any interest - As far as outstanding receivables are concerned, in the case of the amount outstanding with respect to AE it is only an amount which is to be considered, being the amount actually billed to the AE and outstanding as at the end of the year. It is a fact on record that with respect to non-AE also the assessee has not charged any interest on the outstanding balance, and again it is a fact that on record that the amount invoiced to non-AE is to the tune of Rs.4.12 crores. Therefore, even going by volume, the billed revenue with non-AE is much more than the AE and the outstanding receivable from AE and non-AE can be reasonably compared, even as per the reasoning of the ld.DRP. In the present case, no interest having been charged by the assessee to the non-AE outstandings, its transaction of outstanding receivables with AE without charging any interest on the same is therefore held to be justified to be at arm s length. No adjustment, we hold therefore ,is to be made on account of non charging of interest on outstanding receivables of AE. And the adjustment made on account of the same is therefore directed to be deleted. Denial of grant of credit of TDS - HELD THAT:- Since the assessee has raised this issue for the first time before us after noting the fact of short credit of TDS given in the demand notice issued to the assessee after passing of the assessment order, We consider it fit to restore the issue back to the AO to consider the contentions of the assessee, verify all the documents placed by the assessee in support of its contention and thereafter allow the credit of TDS to the assessee in accordance with law.

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• 2023 (2) TMI 1051
  TP Adjustment - MAM - use of segmental profitability on the basis that the trading turnover constitutes less than 10% of total sales of the assessee - HELD THAT:- We would like to refer to the decision of Sony Ericsson Mobile Communications India Pvt Ltd [ 2015 (3) TMI 580 - DELHI HIGH COURT] wherein held that in cases where the assessee is engaged in the manufacturing/sales trading activities it would be inappropriate to apply TNMM on entity wide basis. Keeping in mind the aforesaid decision of the Hon'ble Jurisdictional High Court of Delhi, all that we have to consider is as to whether the segmental results are to be taken into consideration or profit margin at entity level is to be considered. In light of the provisions of section 92 to 94 of the Act, international transactions are to be taken into consideration. Therefore, in our considered opinion, segmental results are to be considered and not the profit at entity level. Considering the factual matrix of the case in hand, nature of transactions are functionally different and even the risks assumed are different. We are, therefore, inclined to accept the stand of the ld. counsel for the assessee to bench mark the manufacturing segment and the trading segment separately. Rejection by ld. CIT(A) is solely on the ground that turnover of the trading segment is around 10% of the total turnover. This appears to be logical if considered as it If the same is considered in light of total sales made by the assessee for the year ended 31.03.2005, the picture is totally different. The assessee has recorded turnover of Rs. 1062 crores and 10% of which would be around 106 crores, claim of the ld. DR that it would be difficult to find comparables does not hold any water as several comparables can be found in Rs. 100 crores club. Thus we direct the AO/TPO to bench mark the international transactions separately segment wise with suitable comparables and decide the issue afresh after affording reasonable and adequate opportunity of being heard to the assessee. TP adjustment shall be made only with reference to international transactions undertaken by the assessee and not with reference to the overall turnover - In TP Regulations, price of only international transaction is to be determined for which adjustment of ALP is to be done in respect of international transactions only. TPO/Assessing Officer grossly erred in considering the total turnover and did not restrict the ALP adjustment to the international transactions. Therefore, we do not find any reason to interfere with the findings of the ld. CIT(A).

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• 2023 (2) TMI 1027
  Nature of receipt - receipts from the sale of Carbon Emission Reductions (CER) Certificates / Carbon Credits - revenue or capital receipt - HELD THAT:- As the order of ld. CIT(A) for A.Y. 2006-07 has been set aside by Co-ordinate Bench [ 2017 (4) TMI 1577 - ITAT DELHI] hold that the income from sale of carbon credits is capital in nature. Book Profits u/s 115JB - CIT(A) and Ld. AO while calculating Book Profit at Nil u/s 115JB not excluded the amount of receipt from transfer of CERs from the book profit - HELD THAT:- As decided in assessee s own case [ 2022 (2) TMI 758 - ITAT DELHI] Carbon credits being the capital receipts cannot be brought to tax as book profits and are, thus, liable to be excluded from the computation of book profits u/s 115JB. The additional ground of appeal no.4 of the assessee is thus allowed.

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• Customs

• 2023 (2) TMI 1050
  Renewal of Customs Broker License - Tribunal had fallen in serious error for not having noticed the legal implication of the statutory regulation 11(d), 11(m), 11(n) of the CBLR, 2013 or not - Whether the Tribunal was right in directing the appellant to examine the application of the respondent for renewal of license? - misclassification/misdeclaration of goods - violation of principles of natural justice. HELD THAT:- In the OIO it has recorded that on September 5, 2014, an opportunity of personal hearing was given to the respondent. Therefore, the view taken by the CESTAT that there has been violation of principles of natural justice and that no opportunity of hearing was given to the respondent is perverse. It is not in dispute that the license was valid up to October 16, 2014 and it had expired when OIO was passed. The Commissioner has recorded that no application for renewal of the license was received from the Customs Broker. If this were to be the factual matrix, the direction issued by the CESTAT to consider the application is also perverse. Appeal allowed.

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• 2023 (2) TMI 1049
  Interest on the refund of differential duty deposited for the purpose of clearance, being successful in appeal - price escalation clause - consent given by the appellant to the enhancement made by the department in the value of the declared goods at the time of processing of the Bill of Entry or not - Revenue urges that deposit of differential duty without making a prior protest, amounts to acceptance or consent on the part of the appellant. HELD THAT:- It is an accepted fact that appellant had deposited the differential duty as ordered by revenue, but have immediately filed the appeal and thus, the payment of differential duty was under protest, ipso facto. It is further found that such claim of the appellant of payment under protest was accepted by the Commissioner (Appeals) who remanded the matter for re-adjudication under Section 17(5) of the Act, by order dated 26.11.2013. In this view of the matter, the appellant is entitled to grant of interest on the refund amount under Section 129EE of the Act. Hon ble Supreme Court in the case of SANDVIK ASIA LIMITED VERSUS COMMISSIONER OF INCOME-TAX AND OTHERS [ 2006 (1) TMI 55 - SUPREME COURT] , which have been followed by Division Bench of this Tribunal in M/S. PARLE AGRO PVT. LTD. VERSUS COMMISSIONER, CENTRAL GOODS SERVICE TAX, NOIDA (VICE-VERSA) [ 2021 (5) TMI 870 - CESTAT ALLAHABAD] , grant of interest @ 12% P.A. has been upheld by Hon ble Punjab Haryana High Court in the case of COMMISSIONER OF CENTRAL EXCISE, PANCHKULA VERSUS M/S RIBA TEXTILES LIMITED [ 2022 (3) TMI 693 - PUNJAB HARYANA HIGH COURT] , wherein interest was granted @ 12% P.A. Accordingly, I allow the appeal and set aside the impugned order. Thus interest is granted from the date of deposit till the date of refund @ 12% P.A. under Section 129EE of the Act, within 45 days of receipt of this order by the Adjudicating Authority - appeal allowed.

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• 2023 (2) TMI 1039
  Clandestine removal of the goods from trading unit at KASEZ - Revenue proceeded on the premise that Appellant was engaged in diversion of goods in DTA clandestinely and fabricated the records to show that said goods were exported - diversion of goods to DTA - existence of concrete evidences or not - HELD THAT:- The allegation of clandestine removal of the goods from trading unit at KASEZ, which was under the physical control of the department, to the Domestic market no cogent evidence was produced by the revenue. Not a single customer is brought on records who has received the clandestine removed goods. No documentary evidence is produced in the form of transport receipts, delivery challans or any other documents relating to removal of disputed goods. No evidences produced regarding the receipts of payment against the clearances of disputed goods in domestic market. No transporter or any person are brought on records who has transported the disputed goods in domestic market. It is well settled that the charge of clandestine removal of goods, cannot be established on assumptions and presumptions. Such a charge has to be based on concrete and tangible evidence. Reference may be made to OUDH SUGAR MILLS LTD. VERSUS UNION OF INDIA [ 1962 (3) TMI 75 - SUPREME COURT] , wherein the Apex Court has observed that demand of duty cannot be raised on the strength of assumptions and presumptions. There should be sufficient evidence of the removal of the goods alleged to have been manufactured and cleared without payment of duty. The charge of clandestine removal must be based on tangible evidence and not on inferences involving unwarranted assumptions. Further, in RADHA MADHAV CORPORATION LTD. VERSUS COMMISSIONER OF C. EX., DAMAN [ 2013 (6) TMI 395 - CESTAT, AHMEDABAD] , the issue was raised in a case where the allegation was that there was clearance of plastic film in the guise of Lay Flat Tubing (LFT). After examining the facts of the case at length, it was held that a link between the documents recovered in the search and the activities of the appellant in their factory is required to be proved. Thus, the present demand which has been confirmed against Appellant by the impugned order, is not based on evidence. Unless there is conclusive evidence that Appellant has clandestinely cleared the disputed goods without payment of duty, liability cannot be placed on Appellant on the basis of conjectures and surmises. Therefore, the demand based on assumption and presumption is not sustainable. In the present case, it is not proved that the original goods were loaded in the container and the same was cleared from SEZ. If the contention of the revenue is presumably accepted that the appellant have cleared the original goods from their SEZ then, as per the allegation of investigation that the appellant have attempted to export the inferior quality of goods, the investigation could not bring on record particularly from the SEZ records that the disposal of the original goods and procurement of low quality goods in the guise of original goods. The entire case was based on the document but no physical movement or diversion could be established. In this fact, the demand of customs duty is not sustainable and consequently, the confiscation of goods is also incorrect and illegal. Appeal allowed.

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• 2023 (2) TMI 1038
  Valuation of import goods - Alloy Wheels of motorcycles - rejection of declared value - redetermination of assessable value - market survey was actually conducted in the presence of the proprietor and as per the opinion given by the shopkeepers, the retail sale price was ascertained - HELD THAT:- It is no doubt true that the value of the imported goods shall be the transaction value of such goods when the buyer and the seller of goods are not related and the price is the sole consideration, but this is subject to such conditions as may be specified in the rules to be made in this behalf. The Valuation Rules have been framed. A perusal of rule 12(1) indicates that when the proper officer has reason to doubt the truth or accuracy of the value of the imported goods, he may ask the importer to furnish further information. Rule 12(2) stipulates that it is only if an importer makes a request that the proper officer shall, before taking a final decision, intimate the importer in writing the grounds for doubting the truth or accuracy of the value declared and provide a reasonable opportunity of being heard - Explanation 1(iii)(a) provides that the proper officer can have doubts regarding the truth or accuracy of the declared value if the goods of a comparable nature were assessed at a significantly higher value at about the same time. The very fact that the importer had agreed for enhancement of the declared value in the statements made under by section 108 of the Customs Act, itself implies that the importer had not accepted the value declared in the Bills of Entry. The value declared in the Bills of Entry, therefore, automatically stood rejected. Further, once the importer had accepted the enhanced value, it was really not necessary for the assessing authority to undertake the exercise of determining the value of the declared goods under the provisions of rules 4 to 9 of the Valuation Rules. This is for the reason that it is only when the value of the imported goods cannot be determined under sub-rule (1) of rule 3 for the reason that the declared value has been rejected under sub rule (2), that the value of the imported goods is required to be determined by proceeding sequentially through rules 4 to 9. However, in the present case, not only did the proprietor make a statement on April 27, 2017 that a market survey should be conducted, since the value and the retail price of the goods imported were not in consonance with the market price of such goods sold in the Indian market, but a market survey was actually conducted in the presence of the proprietor and as per the opinion given by the shopkeepers, the retail sale price was ascertained, which price was accepted to be correct by the proprietor in the statement made on April 27, 2017. When he was shown details of how the value was calculated, the proprietor admitted that it was based on the value ascertained during the market survey and agreed to pay the differential duty with interest. When the proprietor had admitted the re-determined value and also paid the differential duty with interest and penalty imposed by the competent authority, it is not open to the appellant to now contend, after goods have been cleared, that the market value could not have been re-determined - the value has been re-determined on the basis of the opinion given by the shopkeepers during the market survey, which value was accepted by the appellant. It is, therefore, not a case where only the statement of the proprietor has been relied upon. The provisions of section 111(m) of the Customs Act have been correctly invoked as the value of the goods imported by the appellant do not correspond with the value given by the appellant in the Bills of Entry. Appeal dismissed.

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• 2023 (2) TMI 1037
  Quantum of levy of penalty and redemption fine - low amount of redemption fine and penalty imposed - use of Dummy IEC - Attempt to export helicopters without obtaining an IEC from the DGFT as required under the Foreign Trade Policy - whether the alleged violation, which resulted in confiscation of the goods, is a technical violation or substantial violation calling for enhancement of fine and penalty? - HELD THAT:- On confiscation, the property of the goods will vest in the Central Government and the individual or entity is deprived of its property which is a very serious punishment. The Adjudicating Authority has to, in the first place, decide if the goods attempted to be exported fell under one of the clauses of section 113. If they do not, this section does not apply at all. If the goods fall under one of the clauses under section 113, the goods will be liable to confiscation but the adjudicating authority must use his discretion to decide whether or not to confiscate them. Even if the adjudicating authority finds that the goods fall under one of the clauses of section 113, he does not find the offence serious enough to warrant the punishment of confiscation, he does not have to confiscate them. Considering the nature of the contraventions and the aggravating and extenuating factors, the adjudicating authority can decide to confiscate or not confiscate the goods. The Madras High Court examined the scope of the expression liable to confiscation which was used in the predecessor law, Sea Customs Act, 1878 in SHA RIKABDOSS BHAVARLAL VERSUS COLLECTOR OF CUSTOMS, MYSORE [ 1961 (5) TMI 2 - MADRAS HIGH COURT ] and held that the expression does not mean that the goods should be confiscated. Thus, the settled legal position is that liable to confiscation does not mean shall be confiscated and the adjudicating authority or the assessing officer has to exercise his/her discretion and decide (a) if the goods fall under section 113 (or section 112 in case of imported goods); and (b) if they fall under section 113 (or 112, as the case may be), decide whether or not to confiscate them. It is NOT NECESSARY for the adjudicating authority to confiscate all the export goods which fall under section 113 or all imported goods which fall under section 112. In this case, the Commissioner found that there was only a technical violation which rendered the goods liable to confiscation under section 113. If that be so, he had the complete discretion to have not even confiscated the goods. However, he decided to confiscate the goods and this confiscation is not under challenge - If the adjudicating authority confiscates the goods and if the goods are not prohibited goods, he has to allow them to be redeemed on payment of fine under section 125. Even if they are prohibited goods, he may still allow the goods to be redeemed on payment of redemption fine. There is no formula to determine the quantum of redemption fine nor is there a minimum fine but the fine cannot exceed the market value of the goods. The quantum of fine must be determined based on the facts and circumstances of the case. Similarly, any person will be liable to penalty under section 114 for actions and omissions which rendered the goods liable to confiscation under section 113. Again the law is the person is liable to penalty and not that a penalty shall be imposed on the person. So, it is open for the adjudicating authority to impose penalty under section 114 or not. If he decides to impose the penalty, he cannot exceed the maximum prescribed - In this case, considering the facts of the case, the Commissioner imposed a penalty of Rs. 50,000/- only. Revenue s case is that the penalty is too low and hence needs to be increased. The penalty imposed is only on account of the perceived technical offence and the Commissioner did not have to impose any penalty at all. However, he imposed a penalty of Rs. 50,000/- only, calls for no enhancement. Appeal of Revenue dismissed.

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• Corporate Laws

• 2023 (2) TMI 1047
  Oppression and Mismanagement - allegation of dilution of his equity, illegal appointment of Appellant herein as the Director on the Board of the Company, illegal sale of the Company's properties and other acts detrimental to the interest of the Company - HELD THAT:- The Section 286 of the Act provides that notices for Board meetings should be given to every director in writing. The requirements of Section 286 of the Act, being mandatory, notice to all the directors of meeting is essential for the validity of resolution passed at the Board meeting. Any Board meeting or general meeting held without quorum is illegal. We are fully in agreement with the reasons returned by the NCLT whereby the appointment of Respondent No. 3, the Appellant herein was set aside in the absence of any documentary proof of his valid appointment. Further, the NCLT held that the Respondent Nos. 1 and 3 only be two directors of the Respondent company. The increase in the Authorised and Paid-up share capital was reduced to its original state. Additional shares issued in favour of Appellant herein / Respondent No. 3 before NCLT was directed to be cancelled and Fresh Annual Returns was directed to be filed with the RoC, Jaipur. The equity of Respondent No. 1 herein / Petitioner and Respondent No. 3 herein / Respondent No. 2 before NCLT was also directed to be restored to that of 50% each. With respect to alleged illegal sale and transaction of the immovable assets of the company was concerned, the same was outside the jurisdiction of the Tribunal. The parties have already invoked the jurisdiction of the civil courts for necessary action. There are no merit in the Appeal to interfere with the order impugned passed by the NCLT. The impugned order dated 20.12.2019 passed by the National Company Law Tribunal (New Delhi Bench) in CP-118(ND)/2013 is hereby affirmed - appeal dismissed.

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• 2023 (2) TMI 1028
  Seeking grant of Regular Bail - Conspiracy involving huge loss of public funds - siphoning of huge funds through various paper companies/entities from CUIS through a myriad of companies - HELD THAT:- After the arrest of the applicant on 14.10.2022, the SFIO has already filed their compliant on 12.12.2022. It is pertinent to note that the provisions of Section 167(2) have been made applicable in relation to arrests made under the Companies Act - In terms thereof, if the chargesheet (complaint) is not presented before the expiry of 60 days from the date of arrest, the accused is entitled for the grant of default bail. It is not in dispute that economic offences have deep rooted conspiracies involving huge loss of public funds and need to be viewed seriously. They have a tendency of affecting the economy of the country as a whole and cause serious consequences to the community at large - It is apparent that no person accused of an offence under Section 447 shall be released on bail unless the Court is satisfied that there are reasonable grounds for believing that he is not guilty of such offence and that he is not likely to commit any offence while on bail. From the perusal of the complaint, it is apparent that even in relation to the charges which are alleged against the present applicant, there are various other accused persons who have been named as co-accused. The role assigned to them at this stage is no different than the Applicant. However, surprisingly the SFIO did not feel any need or ground to arrest those co-accused persons and proceeded to file the complaint praying the learned Special Court to take cognizance of the offences - the investigation, even though is stated to have started in the year 2018, the applicant was called on few occasions in the year 2020, then in February 2021 and thereafter information was sought from the applicant in July and September, 2022 and she was ultimately arrested on 14.10.2022. From the very nature of investigation and the complaint filed by the SFIO, the evidence appears to be documentary in nature which is already in custody of SFIO - the SFIO also has not been able to point out the need for continuing the custody of the applicant. Even though they have stated in cursory manner in the Status Report that the applicant is a flight risk, the same, however, can be taken care of by putting appropriate conditions. The very fact that the SFIO did not feel the need to keep 53 out of 55 accused persons in custody and did not feel that their custody would be relevant in order to complete investigation, shows that it does not apprehend any tampering with the evidence or influencing of the witnesses. From the perusal of the complaint the role of Applicant does not appear to be graver than other co-accused persons. In fact the same has not even been contended by SFIO during the course of arguments. As reiterated by the Hon'ble Apex Court from time to time, the object of bail is neither punitive nor preventive and deprivation of liberty must be considered as a punishment. The applicant is, therefore, directed to be released on bail on furnishing a personal bond for a sum of ₹ 5 lakh with one surety of the like amount to the satisfaction of the Special Judge/Duty Magistrate on the conditions imposed - application allowed.

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• Insolvency & Bankruptcy

• 2023 (2) TMI 1048
  CIRP - applicability of provisions of PMLA - Provisional attachment order - legality of assets acquired by petitioner (whether assets acquired from the proceeds of crime or not?) - seeking declaration that the right, title and interest of the Petitioners to the Specified Assets sold to the Petitioners will not be affected in any manner by any action taken/to be taken by Respondent No. 1 under the provisions of the Prevention of Money Laundering Act against the Corporate Debtor or the Corporate Debtor s promoters. HELD THAT:- From the chain of events narrated, what is evident is that ABG Shipyard Limited went into liquidation. Assets of the company corporate debtor were offered for sale pursuant to an auction held under the directions of the Apex Court. The petitioners were successful bidders and had after depositing the entire sale consideration received sale certificates. Certainly can it not be said that the assets which are specified assets which the petitioners have acquired are those assets which are acquired as a result of criminal activity and therefore can be said to be proceeds of crime . If the authorities were given a free hand to pass orders of attachment of properties which were acquired by a successful bidder in a liquidation process, on a presumption that such acquisition was as a result of a criminal activity, could be contrary to the interest of value maximization of the corporate debtor s assets by substantially reducing the chances of finding a willing resolution applicant or a bidder in liquidation. VIJAY MADANLAL CHOUDHARY ORS. VERSUS UNION OF INDIA ORS. [ 2022 (7) TMI 1316 - SUPREME COURT] was a case where the Apex Court was considering a batch of appeals concerning the validity and interpretation of certain provisions of the PMLA, where it was held that sub-section (1) delineates sufficient safeguards to be adhered to by the authorised officer before issuing provisional attachment order in respect of proceeds of crime. It is only upon recording satisfaction regarding the twin requirements referred to in sub-section (1), the authorised officer can proceed to issue order of provisional attachment of such proceeds of crime. Before issuing a formal order, the authorised officer has to form his opinion and delineate the reasons for such belief to be recorded in writing, which indeed is not on the basis of assumption, but on the basis of material in his possession. The order of provisional attachment is, thus, the outcome of such satisfaction already recorded by the authorised officer. Therefore, what is clear is that it is only such property which is derived or obtained directly or indirectly as a result of a criminal activity can be regarded as proceeds of crime. In the facts of the case, obviously apparent it is that the only allegation and the gist that had been discussed is that the corporate debtor used the credit raised from the bank for purposes other than intended purposes to carry out circular transactions with various group companies and making overseas investments. There is no explanation as to how the properties standing in the name of corporate debtor and which form part of the assets sold to the petitioners are proceeds of crime especially since these assets are neither overseas assets or that of the group companies. Sine qua non to arrive at a determination that the assets are proceeds of crime, the foremost requirement is that the author has to have reason to believe on the basis of material in his possession. Reason to believe cannot arise from mere suspicion, gossip or rumour. Merely because the impugned order records alleged fraudulent transactions and diversion of funds, it cannot automatically lead to a conclusion that the properties acquired by the petitioners are proceeds of crime. In order to arrive at a conclusion that reason to believe exists, there must be some material to suggest such formation of opinion. Alternative remedy - HELD THAT:- When the assumption of jurisdiction by the authorities itself is non-existent and the respondent proceeds on facts which have no nexus to the objects sought to be achieved, and the opinion is not based on any tangible material, reason to believe is a jurisdictional fact and in absence of such reason to believe arrived at by the authorities, the bar of alternative remedy cannot oust the jurisdiction of this court. Section 8 of the PMLA - HELD THAT:- What is evident on reading the provision is that the onus shifts on the petitioners once the adjudicating authority decides to take action and therefore section 8 cannot be a ground on which the petitioner can be ousted from securing a relief in exercise of powers under Article 226 of the Constitution of India. The order dated 21.09.2022 insofar as it attaches the specified assets of the petitioners as shown in the impugned order in the schedule of properties at Sr. Nos. 13, 14, 15, 17, 18, 19 and 20 shall be treated as assets not falling within the purview of and having acquired from proceeds of crime . The order holding so is without jurisdiction and the assets are directed to be released from such attachment - Petition allowed.

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• 2023 (2) TMI 1046
  Seeking intervention of petition - Adjudicating Authority by way of the impugned order, without even issuing notice or considering the issue of fraud, erroneously dismissed the application for intervention filed by the Appellants - HELD THAT:- The application under Section 7 by a Financial Creditor against the Corporate Debtor was pending for consideration and for admission and in the meanwhile, the Appellants are seeking intervention, not on the ground that the Corporate Debtor defaulted in payment of amounts to them, but, on the ground that the Company Petition filed by the Central Bank of India, the Respondent No. 2 herein was not for legitimate reasons but it is a malicious prosecution that falls under Section 65 of the IBC. The Appellants have been ostensibly setup by the Respondent No. 1 Company for the purpose of derailing the lawful action of the Respondent Bank under Section 7 of the IBC - there are no merit in the Appeal to interfere with the order impugned passed by the Adjudicating Authority - appeal dismissed.

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• 2023 (2) TMI 1036
  Principles of natural justice - respondent has filed reply and served it on the petitioner s counsel but the copy of the same has not been filed before the NCLT - opportunity to reply to section 7 petition also not allowed - HELD THAT:- As noted in the Order dated 6th January, 2023 passed by the NCLT clearly the reply had been filed by the Petitioner and it continued to remain under scrutiny in terms of the Data Management System (DMS), which is maintained by the NCLT itself. Thus, it is not clear as to why the reply was not on record. Be that as it may, a perusal of the order sheets as extracted above does not give any impression to the Court that the Petitioner in any manner was delaying deliberately or otherwise. On the first date when the time for reply was granted to the Petitioner, the Petitioner had filed the reply before the next date of hearing i.e. on 30th November, 2022. Consequences of any order passed under section 7 of the IBC can be quite far reaching for any company. Accordingly, in the opinion of this Court, the Petitioner deserves an opportunity to defend its position - The Petitioner s reply, which has been filed on 29th November, 2022, shall be placed on record before the NCLT which shall take up the matter for hearing on 15th March, 2023 - The Petitioner shall be given opportunity to make its submissions in respect of the petition under Section 7 of the IBC. Petition disposed off.

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• 2023 (2) TMI 1035
  Challenging the order for Liquidation of Corporate Debtor - HELD THAT:- This Tribunal is of the earnest view that the Appellant has failed to meet the basic requirements for consolidation of CIRP Viz. that the Assets of a Corporate Debtor, cannot be sold as a standalone unit. The Committee of Creditors, in its 8th CoC Meeting, had resolved to recommend the Liquidation of the Corporate Debtor by 100% Voting Shares. Having regard to the fact that, the CIRP, was invoked under Section 10 of the Code way back in the year 2021, the Application for Consolidation, was filed belatedly after one year and also the fact that the Corporate Debtor, has failed to satisfy the requirements necessary for Consolidation, this Tribunal, does not see any illegality or infirmity in the Impugned Order of the Adjudicating Authority, (National Company Law Tribunal, Division Bench-I, Chennai), allowing Liquidation. Appeal dismissed.

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• 2023 (2) TMI 1034
  Seeking directions against the Resolution Professional and the CoC to consider the Resolution Plan - main case of the Appellant herein is that the Adjudicating Authority ought not to have dismissed IA446/2021 on the ground that the CIRP period of 330 days is over and ought to have exercised its discretion and extended the period giving time to the CoC to consider its revised Resolution Plan. HELD THAT:- It is seen from the record that the CoC has discussed in detail the Plan of the Resolution Applicant in their various Meetings and suggested for modifications in the Resolution Plan. It is pertinent to mention that a total time of 281 days i.e., from 14.07.2020 to 20.04.2021 was given for submission of the revised Resolution Plan and a final call was given by the RP stating that if no signed Plan is received on or before on 20.04.2021, the CoC may consider the matter as if there is no Plan - The Adjudicating Authority in the Impugned Order dated 22.09.2021, before passing the Order for liquidation of the Corporate Debtor, observed that all possible steps as required under the Code were taken during the period of CIRP and the CoC did not receive any viable Plan/Proposals for revival of the Company. This Tribunal is of the considered view that the issue whether 330 days is to be extended or not has to be seen comprehensively with the decision of the CoC whether any further time is to be granted and if the proposal of the Resolution Applicant was actually under serious consideration. In the instant case, the documentary evidence establishes that the CoC had rejected the Plan submitted by the Appellant herein and the Appellant itself vide email dated 21.04.2021 refused to make the changes as required by the CoC. It is significant to mention that IA259/2021 filed by the RP seeking liquidation was taken up by the Adjudicating Authority on 11.08.2021 and the matter was reserved for Orders, and the Appellant herein submitted their revised Resolution Plan on 16.08.2021 subsequent to the filing of the IA259/2021 and sought that the Liquidation Orders may not be passed. The Counsel appearing for IDBI, a Secured Financial Creditor comprising 33% of Voting Shares submitted before this Bench that no more opportunities need to be given to the Appellant herein as the Committee of Creditors, had rejected the revised Resolution Plan, given by the Appellant herein. Finally, this Tribunal, addresses to the contention of the Learned Senior Counsel for the Appellant that without adhering to the five days time, which ended on 16.09.2021, based on the Reply filed by the Resolution Professional on 15.09.2021, the Adjudicating Authority, had passed the Orders. It is relevant to note that admittedly, several opportunities were given to the Appellant to make the necessary revised changes, the Appellant itself had refused to make the changes as evident from the email dated 21.04.2021, and ultimately five days time was given - this Tribunal, is quite alive and conscious of the fact that more than a year has lapsed and the I B Code, 2016, is a time bound process, and all the more, Speed, is the essence enjoined, under the Code. Appeal dismissed.

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• 2023 (2) TMI 1033
  Right of the Resolution Professional - Non-cooperation by the Directors of Corporate Debtor - NCLT rejected the application of RP with cost of Rs. 25000/-- non-application of mind by the Adjudicating Authority - HELD THAT:- When we look into the order itself, it is clear that in 25.04.2022 order, liberty was reserved to RP to file an Application, if there is no continued cooperation from the suspended Board of Directors, for seeking prosecution under Section 236 of the Code. The prosecution under Section 236 is a different aspect from running a CIRP as per timeline prescribed in the IBC. The mere fact that in an earlier Application filed by RP, liberty was granted only to file prosecution, does not preclude the Adjudicating Authority to consider a subsequent Application filed by the RP due to continued non-cooperation by suspended Directors. The Application had substantial grounds as evidenced from the orders of the Adjudicating Authority itself that it had issued various directions including a direction of personal appearance of Respondent No.1, which was issued after the Adjudicating Authority was fully satisfied, hence, there is no occasion to dismiss Section 19, sub-section (2) Application as frivolous and infructuous. Coming to the submission of learned Counsel for Respondent that Resolution Plan had already been approved by the Adjudicating Authority, which is pending consideration before the Adjudicating Authority, it is for the Adjudicating Authority to consider as to what directions can be issued. Appeal allowed.

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• 2023 (2) TMI 1032
  Condonation of delay of 79 days in filing appeal - appeal could not be filed in time - whether the delay was properly explained or not - whether the delay was wilful or wanton? HELD THAT:- It cannot be gainsaid, that the delay in question, needs to be explained, from the date, the time was running out, till the date of filing of an Appeal or an Application, as per the decision of the Hon ble Supreme Court of India, in the matter of Ramlal v. Rewa Coal Fields Limited [ 1961 (5) TMI 54 - SUPREME COURT ]. The Rules of Limitation, prescribe that a Remedy, can be exercised, only upto a certain point of time and not subsequently / later, as the case may be. In reality, the Litigants / Parties / Stakeholders, are to be diligent, and they are not to be an indolent persons, and not to adopt a careless and a negligent attitude, keeping in mind of the fact that Speed is the gist of the I B Code. 2016. This Tribunal, taking note of the fact that in the present case, the delay, that has occasioned in preferring the instant Appeal, is 79 days, which is beyond the specified period, contemplated under Section 61 of the I B Code, 2016 - Appeal dismissed.

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• PMLA

• 2023 (2) TMI 1045
  Seeking grant of Anticipatory bail - Money Laundering - predicate offence/scheduled offence - systematic conspiracy has been planned and executed by a number of infrastructure companies based at Hyderabad in collusion with a few Government officials and IT management companies to illegally win etenders - large amounts of bribes running into crore(s) of rupees have exchanged hands using hawala channels - public funds meant for development activities have been diverted and siphoned off for personal illegal enrichment and for making illegal bribe payments - bogus and overbilling by the infra companies. HELD THAT:- By the impugned judgment and order, while granting anticipatory bail the High Court has observed that the provisions of Section 45 of the Act, 2002 shall not be applicable with respect to the anticipatory bail applications/proceedings under Section 438 Cr.PC. For which the High Court has relied upon the decision of this Court in the case of NIKESH TARACHAND SHAH VERSUS UNION OF INDIA AND ANR. [ 2017 (11) TMI 1336 - SUPREME COURT] In the case of THE ASST. DIRECTOR ENFORCEMENT DIRECTORATE VERSUS DR. V.C. MOHAN [ 2022 (1) TMI 511 - SUPREME COURT] , this Court has specifically observed and held that it is the wrong understanding that in the case of Nikesh Tarachand Shah this Court has held that the rigour of Section 45 of the Act, 2002 shall not be applicable to the application under Section 438 Cr. PC. In the case of Dr. V.C. Mohan in which the decision of this Court in the case of Nikesh Tarachand Shah was pressed into service, it is specifically observed by this Court that it is one thing to say that Section 45 of the Act, 2002 to offences under the ordinary law would not get attracted but once the prayer for anticipatory bail is made in connection with offence under the Act, 2002, the underlying principles and rigours of Section 45 of the Act, must get triggered although the application is under Section 438 Cr.PC. - the observations made by the High Court that the provisions of Section 45 of the Act, 2002 shall not be applicable in connection with an application under Section 438 Cr.PC is just contrary to the decision in the case of Dr. V.C. Mohan and the same is on misunderstanding of the observations made in the case of Nikesh Tarachand Shah. Once the rigour under Section 45 of the Act, 2002 shall be applicable the impugned judgment and order passed by the High Court granting anticipatory bail to respondent No. 1 is unsustainable. It can be seen that the High Court has not at all considered the nature of allegations and the seriousness of the offences alleged against respondent No. 1. As per the catena of decision of this Court, more particularly, observed in the case of P. CHIDAMBARAM VERSUS DIRECTORATE OF ENFORCEMENT [ 2019 (9) TMI 286 - SUPREME COURT] in case of economic offences, which are having an impact on the society, the Court must be very slow in exercising the discretion under Section 438 of Cr.PC. The rigour of Section 45 of the Act, 2002 shall be applicable even with respect to the application under Section 438 Cr.PC and therefore, the impugned judgment and order passed by the High Court granting anticipatory bail to respondent No. 1 herein is unsustainable - appeal allowed.

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• 2023 (2) TMI 1031
  Provisional Attachment Order - scheduled offences or not - the proceedings against the Petitioner, its directors, and shareholders in the scheduled offense as also the offense under the PMLA have been closed.- HELD THAT:- In Vijay Madanlal Choudhary [ 2022 (7) TMI 1316 - SUPREME COURT ], the Supreme Court has in categorical terms held that for the existence of proceeds of crime under Section 2(1)(u) of the PMLA, the existence of a criminal complaint pending enquiry and/or trial would be necessary. Further, if the person in question has been finally discharged or acquitted of the scheduled/predicate offence, there can be no offence of money laundering against the said person. In Parvathi Kollur v. Enforcement Directorate [ 2022 (8) TMI 1256 - SC ORDER ], the Supreme Court also specifically referred to the paragraph as mentioned above in Vijay Madanlal Choudhary and held that when the accused person has been acquitted in the scheduled offence under the PMLA, the closure of the proceedings under the PMLA against the accused person and persons said to connected to the accused person would be the natural consequence. The Supreme Court in Indrani Patnaik Anr. v. Enforcement Directorate and Ors. [ 2022 (11) TMI 1311 - SUPREME COURT ] has recently held that there cannot be any prosecution in relation to an offence for which the accused person has already been discharged. In view of the settled legal position in Vijay Madanlal Choudhary and the subsequent decisions and orders thereafter, the properties of M/s Omkar Realtors and Developers Pvt. Ltd., which were attached by the impugned PAO, shall be released. The PAO deserves to be quashed in view of the legal position as held in the above judgments - Petition disposed off.

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• Service Tax

• 2023 (2) TMI 1044
  Levy of service tax - various projects executed by the appellant under Construction of Residential Complex Service and Works Contract Service - miscellaneous income which was treated as receipts towards construction services - HELD THAT:- In the case of REYNOLDS PETRO CHEM LTD VERSUS C.C.E. S.T. -SURAT-I [ 2022 (7) TMI 656 - CESTAT AHMEDABAD] , the Learned Ahmedabad Bench has exhaustively dealt with the issue and has held that in the present matter for confirmation of service tax demand revenue also relied upon the TDS /26ASStatement. The said statement under provisions of Income Tax Act, 1961 is an Annual Consolidated tax statement. Income tax and service tax are two different/ separate and independent special Act and their provisions operate in two different fields. Therefore by relying the 26AS /TDS Statement under the Service Tax Act, demand of service tax cannot be made. The issue of Service Tax liability on the miscellaneous income is not justified - Appeal allowed.

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• 2023 (2) TMI 1043
  Refund of service tax paid on services relating to export of iron ore fines - allegation was that the condition set out in the Notification dated 07.07.2009 that requires, in a case where refund sought is more than 0.25% of the declared Free on Board value of export, a certificate of the Chartered Accountant who audits the annual accounts of the exporter for the purposes of the Companies Act, to be furnished had not been satisfied - non-submission of relevant invoices / bills raised by the various service providers in respect of services utilized for export of iron ore fines pertaining to the refund claim. HELD THAT:- The show cause notice does not allege that the respondent had actually exported lesser quantity of iron ore fines than shown in the shipping bills. Though it was not a charge in the show cause notice, but a finding has still been recorded by the Commissioner (Appeals) that the respondent had filed the refund claim on the basis of quantity of iron ore fines which were actually loaded / exported. The show cause notice is the foundation on the basis of which any order can be passed and in the absence of any allegation in the show cause notice, it is not permissible for the department to raise this ground in the appeal that has been filed. Appeal dismissed.

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• 2023 (2) TMI 1042
  Levy of Differential duty - Works Contract or not - case of the Department is that the appellant is carrying out services of Repair or Maintenance and Commercial or Industrial Construction Relating to Painting on Walls, Buildings, and Sheds etc. - only ground for denial of the payment of Service Tax under the works contract by the revenue is that the same is not covered under definition of works contract. HELD THAT:- The appellant admittedly carried out repairing/painting work in respect of plant, machinery, and building of their client. The service was provided along with the material used for painting work and the appellant also paid the VAT on the works contract. On reading of the definition of works contract, it is found that to cover the appellant s activity under works contract it is not necessary that the said activity should be carried out only in respect of new building. As per clause (b) in addition to construction of a new building there is another category Civil structure and part thereof primarily for the purpose of commerce or industry. This category is a very vast category, which covers the plants machinery building. The appellant has carried out the painting work on this plant, machinery, building - a civil construction or a part thereof covers the plant machinery, building on which the appellant has carried out the painting work, the same is specified under clause (b) therefore, the painting work carried out on a civil structure or part thereof and also of a pipe line or conduit and undisputedly it is for the purpose of commerce or industry. The activity of the appellant is squarely covered under the definition of works contract . The appellant have correctly discharged the Service Tax under the head of works contract - Appeal allowed.

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• Central Excise

• 2023 (2) TMI 1041
  Levy of penalty on the appellant firm and the other appellant, being the partner of the firm - passing on on inadmissible cenvat credit by issuing fake invoices without actual supply of goods - HELD THAT:- The order of the Court below is vitiated as it has not decided the preliminary question or ground, that is non-receipt of the show cause notice by these appellants. Accordingly, these appeals are allowed by way of remand. The impugned order is set aside. The Adjudicating Authority is directed to record the service of show cause notice and thereafter, proceed to re-adjudicate the matter in accordance with law, after giving adequate opportunity of hearing to the appellants. Appeal allowed by way of remand.

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• 2023 (2) TMI 1030
  CENVAT Credit - input services - clearing and forwarding services - reversal of the Cenvat Credit demanded on the ground that the services have been rendered are beyond the place of removal - HELD THAT:- Generally the manufacturer has to move the goods from his factory premises to the ICD/Port of Shipment and then only the physical exports of goods can take place after filing the Shipping Bill and necessary clearance is given by the Customs Department. Para 6 of the Board Circular No.999/6/2015-CX dated 28.2.2015 states that the ICD/Port of shipment is nothing but the extended location of the manufacturing unit only. ICD/Port will also fall within the definition of Place of Removal as held by the Hon ble High Court in the case of Inductotherm [ 2014 (3) TMI 921 - GUJARAT HIGH COURT ]. Therefore, all expenses incurred from the factory gate upto ICD/Port of Shipment would also be within the definition of Rule 2(l) of Cenvat Credit Rules 2004, which allows Cenvat Credit upto the place of Removal . The ratio laid down in the Ultra Tech Cement [ 2018 (2) TMI 117 - SUPREME COURT ] and Ispat Industry [ 2015 (10) TMI 613 - SUPREME COURT ] are fully met in the present case. Accordingly, the appellant would be eligible for the Cenvat Credit for the Service Tax paid on such services. In the Ultra Tech case cited by the Learned Authorized Representative, The Hon ble Supreme Court clearly held that after amendment of Rule 2(l) with effect from 01/03/2008, the Appellant would not be eligible for Cenvat Credit for the freight expenses incurred from the Place of Removal . In the present case, the services are rendered upto the place of Removal . Hence, the ratio Laid down by the Hon ble Supreme Court is fully met. The Aditya Birla Case [ 2021 (1) TMI 709 - CESTAT KOLKATA ] cited by the Learned Authorized Representative is on a different issue and is not applicable to the present facts of the case. Since the material facts are same in the present case, respectfully following the decision of Division Bench in the case of Electrosteel Castings Ltd. [ 2019 (2) TMI 1023 - CESTAT KOLKATA ] the present Appellant is eligible for the Cenvat Credit taken by them. Appeal allowed.

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• 2023 (2) TMI 1029
  CENVAT Credit of Sugar Cess and Education Cess paid on such Sugar Cess levied under Sugar Cess Act, 1982 - of Sugar Cess and Education Cess paid on such Sugar Cess levied under Sugar Cess Act, 1982 - HELD THAT:- There is no specific mention of Sugar Cess And Education Cess paid on such Sugar Cess under Rule 3 of Cenvat Credit Rules, 2004. However, the Hon ble Karnataka High Court in COMMISSIONER OF CENTRAL EXCISE VERSUS M/S SHREE RENUKA SUGARS LTD [ 2014 (1) TMI 1469 - KARNATAKA HIGH COURT] decided the matter in favour of the assesse. On perusal of the said judgment, it is observed that the Cenvat Credit was allowed on the ground that the sugar cess is nothing but duty of excise on the ground that levy of such cess is under levy and collection of sugar cess under Central Exicse Act, 1944. However, Hon ble Supreme Court in a recent judgment of M/S. UNICORN INDUSTRIES VERSUS UNION OF INDIA OTHERS [ 2019 (12) TMI 286 - SUPREME COURT] held that the education cess is not a duty of excise. As regard the Sugar Cess the same is not a levy of Central Excise duty, whereas cess is levied under the sugar cess Act, 1982 . Therefore, the issue is that whether such cess and education cess paid thereon is duty of Central Excise or otherwise needs to be re-considered in the light of the recent judgment of Hon ble Supreme Court in the case of Unicorn Industries Vs. Union of India. The impugned order is set aside - appeal disposed off by way of remand to the Adjudicating Authority for passing a fresh order.

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• CST, VAT & Sales Tax

• 2023 (2) TMI 1040
  Correctness of remanding the case - Entitlement to claim benefit of customs duty - denial on the ground that there were no records to show re-export of repaired units between 2005 and 2007 - HELD THAT:- No doubt the impugned order is a remand order but the matter is remitted to the file of the Assessing Officer for passing fresh re-assessment order under Section 39(2) of the KVAT Act. KAT has noticed assessee s contention in para 6.1 of the impugned order. The assessee has pleaded before the KAT that the KVAT authority was relying solely on the show cause notice issued by the DRI Authority in a different set of proceedings under different legislation - Unless an authority vested with a power to impose tax and the KVAT authorities in this case, have had sufficient material based on its own investigation, proposition and confirmation of such proposed tax would be untenable in law. It is not in dispute that reliance has been placed on the show cause notice issued by the DRI authorities and the said ground has been noticed by the KAT. In our view, the KAT was required to return a finding on the said ground. It is assessee s specific case that the UPS machines exported abroad were imported without any consideration for the purpose of repair and refurbishing. According to the assessee, after repair, machines have been exported. Therefore, there needs to be an appropriate adjudication not only with regard to the factual matrix, but also on the questions of law. In the circumstances, KAT was duty bound to return its findings on the main ground urged on behalf of the petitioner. Matter is remitted to the file of the KAT to re-examine the principal contention urged by the assessee and to pass fresh orders in accordance with law - Revision petition allowed.

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