TMI Tax Updates - e-Newsletter
March 16, 2020

Case Laws in this Newsletter:

GST Income Tax Customs Corporate Laws Central Excise CST, VAT & Sales Tax Indian Laws

Articles

1. RECENT DEVELOPMENTS IN GST

   By: Dr. Sanjiv Agarwal

2. DETAILED EXPLANATION ON FAQ,S WITH EXAMPLES AND ISSUES THAT ARE NOT DEALT IN FAQ,S ON VIVAD SE VISHWASH, 2020.

   By: ROHIT KAPOOR

3. ALCO BEVERAGES: MAY NOT COME UNDER GST

   By: Dr. Sanjiv Agarwal

News

1. Recommendations of GST council related to changes in GST rates on supply of goods and services

2. Recommendations of GST Council related on IT Roadmap

3. Recommendations of GST council related to law & procedure

4. Excise duty on petrol, diesel hiked by ₹ 3/lt; no change in prices; govt to get ₹ 39,000 cr

5. Invitation for Public Comments on the Companies (Corporate Social Responsibility Policy) Amendment Rules, 2020.

6. THE INSOLVENCY AND BANKRUPTCY CODE (AMENDMENT) ACT, 2020

7. Meeting held with EPCs, Industry Representatives and Stakeholders in Department of Commerce to discuss recent disruptions in Global Supply Chain; Industry representatives assured of all the support from Government

Notifications

Central Excise

1. 04/2020 - dated 13-3-2020 - CE

Seeks to amend notification No. 04/2019-Central Excise dated 6th July, 2019 so as to increase effective rate of Road and Infrastructure Cess (RIC) collected as additional duty of excise on petrol and diesel by ₹ 1 per litre.

2. 03/2020 - dated 13-3-2020 - CE

Seeks to amend notification No. 05/2019-Central Excise dated 6th July, 2019 so as to increase effective rate of Special Additional Excise Duty (SAED) on petrol and diesel by ₹ 2 per litre.

Customs

3. 15/2020 - dated 13-3-2020 - Cus

Seeks to amend notification No. 18/2019-Customs dated 6th July, 2019 so as to increase effective rate of Road and Infrastructure Cess (RIC) collected as additional duty of customs on petrol and diesel by ₹ 1 per litre

Circulars / Instructions / Orders

SEBI

1. SEBI/HO/DDHS/DDHS/CIR/P/2020/35 - dated 13-3-2020

Amendments to guidelines for rights issue, preferential issue and institutional placement of units by a listed REIT

2. SEBI/HO/DDHS/DDHS/CIR/P/2020/36 - dated 13-3-2020

Amendments to guidelines for rights issue, preferential issue and institutional placement of units by a listed InvIT

Highlights / Catch Notes

GST

• GST Council Revises Rates, Exemptions, and Procedures to Enhance Compliance and Efficiency in Tax Framework.

  News : GST Council Decisions - GST on goods and services - Rates, Exemptions, Reverse Charge, Procedural aspects etc. - News
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• High Court Rules No Valid Grounds for Detention of Consignment and Vehicle in Inter-State Sale Case.

  Case-Laws - HC : Detention of consignment alongwith vehicle - inter-state sale - There is no material placed on record by the 1st respondent to show that any attempt was made by the petitioner to deliver the goods at a different place and sell in the local market evading CGST and SGST, because it was found at Jeedimetla. It is not as if the detention was affected by the 1st respondent after noticing any such attempt to sell the goods in the local market by the petitioner. - There were no good and sufficient reasons for detention - HC
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• High Court Declares IGST on Ocean Freight Unconstitutional; No Further Adjudication Needed on GST Refunds.

  Case-Laws - HC : Levy of IGST on Ocean Freight - Reverse Charge (RCM) - Refund of GST already paid - Both the Notifications have already been declared to be unconstitutional - In view of the case, no further adjudication is required in this matter - HC
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Income Tax

• Section 154: Assessing Officer Must Fully Investigate Deduction Errors; Not a "Mistake Apparent from the Record.

  Case-Laws - HC : Rectification of mistake u/s 154 - unless and until a complete investigation is done by the assessing officer, the quantum of deduction for interest payments cannot be ascertained. Hence, the omission claimed by the Appellant/Assessee will not fall under the category of a “mistake apparent from the record”. - HC
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• High Court Grants Immunity from Prosecution Under Income Tax Act Section 245H (1A) Amidst Family Litigation and Health Issues.

  Case-Laws - HC : Immunity from prosecution u/s 245H (1A) - petitioner was going through mental and personal stress and had been engaged in litigation with family members, also contributing to health issues. That apart, the entire amount of tax and interest has been remitted even during the pendency of the writ petition before this Court, which places this petitioner on a better pedestal than the petitioner before the Supreme Court, who remitted the amounts only at the stage when the matter had travelled to, and was pending before the Supreme Court. - Immunity granted - HC
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• Court Directs Consideration of Delay in Form 3CK Submission Due to Portal Issues, Possible Approval for FY 2017-18 u/s 35(2AB).

  Case-Laws - HC : Denial of grant of the approval u/s 35(2AB) - Submission of form 3CK - portal was not functioning from 08.03.2018 - On the petitioner satisfying the respondent of the reasons for non-submission of Form 3CK in physical form with the respondent on or before 31.03.2018, the respondent shall consider the request of the petitioner to condone the delay and grant approval to the petitioner under Section 35(2AB) for the financial year 2017-18. - HC
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• Shareholder Directors and Employees Receive Genuine Commission Payments as Additional Salary, Totaling 0.5% of Turnover.

  Case-Laws - AT : Genuineness of payment of commission to shareholders employees - As per the agreement, six directors, who were also share holders, were paid additional salary termed as ‘commission’ and there are four employees who are also share holders who also have been paid salary with additional salary termed as ‘commission’. The total commission comes to 0.5% of the total turnover - such payment of commission cannot be doubted - AT
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• Assessing Officer's Addition u/s 68 Overturned Due to Lack of Evidence After SEBI Interim Order Revoked.

  Case-Laws - AT : Addition u/s 68 - LTCG - penny stock companies - A.O. merely relied upon interim order of the SEBI to make addition against the assessee, otherwise, there were no evidence or material on record to disprove the claim of assessee. Since the interim order of the SEBI have been revoked against the assessee and M/s EBFL, therefore, nothing survives in favour of the A.O. - AT
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• Assessee Qualifies for Section 11(1A) Income Tax Exemption by Investing Property Sale Proceeds in Fixed Deposits.

  Case-Laws - AT : Exemption of income u/s 11 - sale proceeds of property - acquisition of new property - Since the assessee has made the investment in fixed deposits for more than 6 months in the same financial year, we hold that the assessee is entitled for exemption of sale consideration u/s 11(1A) of the Act and the same required to be considered as for acquiring another capital asset. - AT
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• Transfer Pricing Adjustment Reference Invalid: No Prior Adjustments Over Rs. 10 Crore or Judicial Authority Support, Violating 2016 Guidelines.

  Case-Laws - AT : TP Adjustment - Reference to TPO - none of the two conditions enshrined in the Instruction of 2016 were satisfied in as much as neither transfer pricing adjustment of more than ₹ 10 crore was made for an earlier year nor, as a sequitur there was any question of such transfer pricing adjustment having been either upheld by a judicial authority or pending in appeal - reference is invalid - AT
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• Assessing Officer Oversteps by Using Section 154 for Rectification Instead of Section 263 Revision; Deduction Errors Need Investigation.

  Case-Laws - AT : Rectification of mistake u/s 154 - AO has travelled beyond the jurisdiction and scope of Section 154 - Instead of sending a proposal for revision of the order u/s 263 of the Act, the AO has assumed the powers and jurisdiction u/s 154 of the Act to review the earlier order in the garb of rectification of mistake. Even otherwise, if there is an error in the earlier order for allowing deduction u/s 54 of the Act, this is a mistake of question of law and facts. The ascertainment of facts requires a proper investigation and verification of the record as well as reality on the ground. - AT
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• Ex-directors missed participation in tax proceedings u/s 271(1)(c); current directors face financial troubles and labor unrest.

  Case-Laws - AT : Penalty u/s 271(1)(c) - Being unaware, the ex- Directors did not represent the matters either in quantum proceedings or in penalty proceedings. - The present Directors of the assessee-company has faced financial difficulties and labour unrest, and the same is evident from the documents produced before the Tribunal - CIT(A) directed adjudicate the matter - AT
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Customs

• High Court Rules Right to Appeal u/s 129A of Customs Act Available to Both Customs Brokers and Revenue Authorities.

  Case-Laws - HC : Right to prefer an appeal - Penultimate Order - Whether the CESTAT is right in law in holding that the right to prefer an appeal under Section 129A of the Customs Act, 1962 against an order passed under the CHALR, 2004 is available only to a Customs Broker and not to the Revenue? - the view taken by the CESTAT, of course following the earlier view of the CESTAT, is erroneous. - HC
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• Court Rules on Procedural Lapse in SEZ Supplies Without Bills of Exports Under Advance Authorization Scheme.

  Case-Laws - HC : Condonation of procedural lapse of supplying goods to SEZ only under ARE-1 without Bills of Exports - advance authorization scheme - deemed exports - The onus cannot be shifted to the Authorities in such cases to retrospectively determine if the petitioner had otherwise complied with all conditions of Advance Authorization. - HC
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• High Court Affirms Jurisdiction u/s 130 of Customs Act on Duty Rate Effective Date Dispute.

  Case-Laws - HC : Jurisdiction of HC u/s 130 of the Customs Act, 1962 - We are of the opinion that the question raised in this appeal does not have any connection with the rate of duty. Whether the notification was applied from the date of its publication by the DGFT or from the date of its publication by the customs under Section 25[4] of the said Act the rate of duty remained the same. The only controversy is the date from which that rate of duty was applicable. If that is the question, this court has the jurisdiction to hear this appeal. - HC
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• Chief Commissioner to Revise Procedures After Gross Mis-Declaration of MPOS Devices by Appellant and Director.

  Case-Laws - AT : Mis-declaration of imported goods - Mobile Point of Sale (MPOS) Devices - appellant and its director have been found grossly mis-declared on the counts of description, classification and value of the consignments. - Chief Commissioner directed to revisit the standard operating procedure in this regard to ensure that the system is enabled to take care of the instances where a blatant mis-declaration is avoided by the importers to bye-pass the Risk Management Module. - AT
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• Anti-dumping duty on Propylene Glycol imports from the USA invalidated due to expired notification extension.

  Case-Laws - AT : Levy of Anti-Dumping Duty - extension of expired notification - import of consignments of Propylene Glycol from USA - the Notification No. 105/2004-Cus., admittedly expired on 8-10-2009. Thereafter, the said notification was extended vide Notification No. 117/2009-Cus., dated 13-10-2009. Since the Notification No. 105/2004-Cus. was expired on 8-10-2009, on 13-10-2009 the Notification No. 105/2004-Cus. was not in existence. Accordingly, on 13-10-2009, it could not have been extended. - Demand set aside. - AT
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Indian Laws

• High Court Rules ICAI Must Disclose Reasons for Closing Inquiries Against Members in Misconduct Cases.

  Case-Laws - HC : Guilty of Professional Misconduct against Chartered Accountant (CA) - recording of reason of the complaint and disclosure of the same - whether the ICAI is required to communicate reasons for closing the inquiry against its member that has been initiated on a Complaint filed visa-a-vis on an Information received? - Held Yes - HC
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• Section 138 Offence: Dishonor of Cheque Defenses and Burden of Proof Explained Under Indian Law.

  Case-Laws - HC : Dishonor of Cheque - An offence under Section 138 of the NI Act is technical in nature and defences, which an accused can take, are inbuilt; for instance, the cheque was given without consideration, the accused was not a Director at that time, accused was a sleeping partner or a sleeping Director, cheque was given as a security etc. etc., the onus of proving these defences is on the accused alone, in view of Section 106 of the Indian Evidence Act, 1872. - evidence already given by the complainant by way of affidavit is sufficient proof of the offence - HC
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• Complainant Absence in Cheque Case Leads to Acquittal; Magistrate Must Justify Non-Acquittal Decision per Section 256.

  Case-Laws - HC : Dishonor of Cheque - acquittal - Section 256 mandates that if the complainant does not remain present on the appointed day after summons has been issued on complaint and unless attendance of complainant has been dispensed with, the Magistrate shall acquit the accused. If the Magistrate feels that the order of acquittal should not be passed on that date, the Magistrate has to give reasons - HC
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SEBI

• SEBI Revises Guidelines for Rights, Preferential Issues, and Institutional Placements by InvITs to Boost Transparency and Efficiency.

  Circulars : Amendments to guidelines for rights issue, preferential issue and institutional placement of units by a listed InvIT - Circular
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• SEBI Updates Guidelines for REITs: Streamlined Processes for Rights Issues, Preferential Issues, and Institutional Placement of Units.

  Circulars : Amendments to guidelines for rights issue, preferential issue and institutional placement of units by a listed REIT - Circular
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Central Excise

• Rule 6(3A)(c)(iii) Clarification: Include Only Common Input Services in Cenvat Credit Calculations, Exclude Exclusive Inputs.

  Case-Laws - AT : Reversal of credit - Rule 6(3A)(c)(iii) of Cenvat Credit Rules, 2004 - total Cenvat credit for the purpose of formula under Rule 6(3A) is only total credit of common input services and will not include the Cenvat credit on inputs/input services exclusively used for the manufacture or procurement of goods. - AT
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• Appeal Timely Filed; Delay Condonation Application Deemed Unnecessary u/s 35B; Respondent's Objection Misplaced.

  Case-Laws - AT : Jurisdiction - proper authority to sign the application - In the instant case, the appeal was filed within time and there was only delay in rectification of defect pointed out by the Registry. Even otherwise, the primary objection of the Ld. Counsel for the respondent regarding the condonation of delay application being signed by an officer not authorized by Committee of Commissioners is misplaced as the requirement of filing of appeal under Section 35B is only for filing the appeals and not for other miscellaneous applications - Since there is no delay in filing the appeal, the applications for condonation of delay are dismissed as infructuous. - AT
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VAT

• High Court Quashes Recovery Order; Provisional Attachment Order Expired Under VAT Act Section 45(2.

  Case-Laws - HC : Recovery of dues from the petitioner's bank - The learned Assistant Government Pleader stated that after expiry of the provisional attachment order on completion of one year, it was extended only for a period of one year and thereafter, the same was not extended. Therefore, as on today, provisional attachment order is not in existence, as per Sub-section (2) of Section 45 of the VAT Act. - Recovery order quashed - HC
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Case Laws:

• GST

• 2020 (3) TMI 566
  Levy of IGST or CGST and SGST - grievance of the petitioner in the instant case is that while transporting the goods for the purpose of weighing was intercepted by the officials of the State Goods and Service Tax, for the reason that in Ext.P2 Delivery Chelan, instead of IGST inadvertently CGST and SGST was levied - HELD THAT:- The writ petition disposed off with a direction to the petitioner to seek the release of the goods and carriage on furnishing of the bank guarantee and other charges as enshrined under Section 129 subject to condition that the adjudicating authority would afford an opportunity of hearing to the petitioner for imposition of the penalty, strictly in accordance with law and till such time, the bank guarantee furnished by the petitioner shall not be encashed. On furnishing the bank guarantee, the goods carriage along with goods may be released forthwith.

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• 2020 (3) TMI 565
  Detention of consignment alongwith vehicle - inter-state sale - Section 129(1) of the CGST Act, 2017 - principles of natural justice - HELD THAT:- Admittedly, it was mentioned in the order of detention of the vehicle and the consignment carried thereon from Karnataka to Hyderabad issued under Section 129(1) of the CGST Act, 2017 that the reason for such detention is wrong destination . Under the Act, this is not a ground to detain the vehicle carrying the goods or levy tax or penalty - Though it is stated that tax and penalty were levied and collected because it was presumed that at Jeedimetla, there was possibility of a local sale, a mere possibility cannot clothe the 1st respondent to take the impugned action. There is no material placed on record by the 1st respondent to show that any attempt was made by the petitioner to deliver the goods at a different place and sell in the local market evading CGST and SGST, because it was found at Jeedimetla. It is not as if the detention was affected by the 1st respondent after noticing any such attempt to sell the goods in the local market by the petitioner. There was no warrant to detain the vehicle along with goods, demand payment of Rs. 4,16,447/- as tax and penalty under the CGST and SGST Act, 2017 - Since petitioner could not contest it owing to the wedding ceremony in his family at that point of time in order to be able to secure the release of the vehicle carrying the goods at the instance of the driver of the vehicle, such payment has to be presumed as one made due to economic duress and the petitioner cannot be blamed for paying the same without protest, when he had no choice but to pay it. There were no good and sufficient reasons for detention by the 1st respondent of the vehicle and the goods which it was carrying when the transaction causing movement of the goods was inter-State in nature and the provisions of the SGST were not shown to have been violated. Also, there is no warrant to levy any penalty since it cannot be said that there is any willfulness in the conduct of the dealer - the impugned action of the respondents in collecting the amount of Rs. 4,16,447/- from the petitioner towards tax and penalty under the CGST and SGST Act, 2017 under threat of detention of the vehicle carrying the said goods for an absurd reason ( wrong destination ) when the vehicle in question carried all the proper documents evidencing that it was an inter-State sale transaction is clearly arbitrary, violative of Articles 14, 265 and 300-A of the Constitution of India. Petition allowed.

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• 2020 (3) TMI 564
  Confiscation of goods and levy of penalty - details goods alongwith the vehicle have already been released - Section 130 of the Central Goods and Services Act, 2017 - HELD THAT:- The writ applicant availed the benefit of the interim-order passed by this Court and got the vehicle, along with the goods released on payment of the tax amount. The proceedings, as on date, are at the stage of show cause notice, under Section 130 of the Central Goods and Services Act, 2017. The proceedings shall go ahead in accordance with law. It shall be open for the writ applicant to point out the recent pronouncement of this Court in the case of SYNERGY FERTICHEM PVT. LTD VERSUS STATE OF GUJARAT [ 2020 (2) TMI 1159 - GUJARAT HIGH COURT] . It is now for the applicant to make good his case that the show cause notice, issued in GST MOV- 10, deserves to be discharged - Application disposed off.

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• 2020 (3) TMI 563
  Confiscation of goods and levy of penalty - detained goods and vehicle have already been released - section 130 of the Central GST Act, 2017 - HELD THAT:- The writ-applicant makes his case good before the authority concerned and point out the principle explained by this Court in the aforesaid decision. It shall also open for the writ-applicant to file a detail reply and take all legal grounds available to him for the purpose of getting notice discharged. This writ-application disposed off with a direction to the authority concerned to hear the writ-applicant or any of his representative and take into consideration the submissions.

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• 2020 (3) TMI 562
  Filing of FORM GST TRAN 1 - transitional credit - Circular No.39/13/2018GST dated 03.04.2018 - HELD THAT:- The writ application disposed off with the direction to the respondent no.5 herein i.e. the Nodal Officer to undertake this exercise at the earliest. The GSTN upon receipt of the proposal from the Nodal Officer shall look into the same and take an appropriate decision in accordance with law, more particularly, keeping in mind the writ-applicant should not suffer on account of any technical glitches.

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• 2020 (3) TMI 561
  Levy of IGST on Ocean Freight - Reverse Charge (RCM) - Refund of GST already paid - Constitutional Validity of N/N. 8/2017-Integrated Tax (rate) dated 28.06.2017 and Entry 10 of the notification no.10/2017-Integrated Tax (Rate) dated 28.06.2017 - HELD THAT:- The issue is decided in the case of MOHIT MINERALS PVT LTD VERSUS UNION OF INDIA 1 OTHER [ 2020 (1) TMI 974 - GUJARAT HIGH COURT] where it was held that No tax is leviable under the Integrated Goods and Services Tax Act, 2007, on the ocean freight for the services provided by a person located in a non-taxable territory by way of transportation of goods by a vessel from a place outside India upto the customs station of clearance in India and the levy and collection of tax of such ocean freight under the impugned Notifications is not permissible in law. It was also held that The impugned Notification No.8/2017 Integrated Tax (Rate) dated 28th June 2017 and the Entry 10 of the N/N.10/2017 Integrated Tax (Rate) dated 28th June 2017 are declared as ultra vires the Integrated Goods and Services Tax Act, 2017, as they lack legislative competency. Both the Notifications are hereby declared to be unconstitutional. In view of the case, no further adjudication is required in this matter - petition disposed off.

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• 2020 (3) TMI 560
  Detention of goods - absence of validity of the E-way Bill - HELD THAT:- The writ petition is disposed of with a direction that in case the petitioner furnishes the bank guarantee, in terms of the provisions of Section 129 of the CGST Act for release of the vehicle and goods seized, if it is found to be in order and in accordance with law be ordered to be released.

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• 2020 (3) TMI 559
  Release of detained goods alongwith the vehicle - section 129(1) of the Central Goods and Services Tax Act, 2017 - HELD THAT:- While the goods where in transit, the GST authorities detained and seized the goods as well as the vehicle on the ground that the goods were being transported in contravention of the provisions of the Act and the Rules. The position as on date is that the goods as well as the vehicle is in custody of the GST Authorities. A show cause notice in form GST MOV-10 has been issued. The writ-applicants are permitted to prefer an appropriate application addressed to the authority concerned under Section 67(6) of the Act for provisional release of the goods and the conveyance. If such application is filed, the authority concerned shall immediately look into the same and pass an appropriate order within one week from the date of receipt of such application. Application disposed off.

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• 2020 (3) TMI 558
  Profiteering - supply of Deodorant Wild Stone Deo Chrome BX 120 ml - allegation that the Respondent had not pass on the benefit of reduction in the GST rate - contravention of section 171 of CGST Act - Penalty - HELD THAT:- The profiteered amount is determined as Rs. 21,84,79,790/- in terms of Rule 133(1) of CGST rules, 2017, during the period from 15-11-2017 to 31-03-2019 as has been computed by DGAP - This authority u/r 133(3)(a) of CGST Rules, 2017 orders that the respondent shall reduce his prices commensurately in terms of the rule. Penalty - HELD THAT:- It is evident that the respondent has denied the benefit of tax deduction to the customers in contravention of provisions of section 171(1) of CGST Act, 2017 and thus has profiteered as per the explanation attached to section 171 of the Act. Therefore, the respondent id apparently liable for imposition of penalty u/s 171(3A) of CGST Act - therefore a SCN should be issued to him to explain why the penalty should not be imposed. Further, this Authority as per Rule 136 of the CGST Rules 2017 directs the Commissioners of CGST/SGST to monitor this order under the supervision of the DGAP by ensuring that the amount profiteered by the Respondent as ordered by this Authority is deposited in the CWFs of the Central and the State Governments as per the details given above. A Report in compliance of this order shall be submitted to this Authority by the concerned Commissioner within a period of 4 months from the date of receipt of this order.

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• 2020 (3) TMI 557
  Profiteering - supply of Bajaj Majesty MX 20 Steam Iron - allegation that the benefit of reduction in the GST rate not passed on - contravention of Section 171 of the CGST Act - HELD THAT:- The allegation of Applicant No. 1 is that the Respondent had increased the MRP of the said product from Rs. 1099/- to Rs. 1405/- or Rs. 1520/- in respect of supplies of the said product and after coming into force of Notification No. 18/2018-Central Tax (Rate) dated 27.07.2018 and he had not passed on the benefit of reduction in the GST rate to the recipients. In this context, we have perused the invoices of the product dated 06.07.2018 and 03.08.2018, and we observe that the base price of the product was kept unchanged same by the Respondent despite the reduction in the rate of tax and that he did not increase the base price after coming into force of Notification No. 18/2018-Central Tax (Rate) dated 27.07.2018. The MRP of Rs. 1099/- shown on the screenshot, pertained to the stock of the goods carrying an MRP of Rs. 1099/-, which was lying with the Respondent and that the Respondent has himself stated that once the old stock was liquidated, the MRP of Rs. 1520/- was updated on the website. But since the new stock carrying the MPR of Rs. 1520/- had already circulated in the market, the website of the Respondent showed MRP of Rs. 1099/- till July, 2018 - the Applicant No. 1, vide his email dated 30.09.2019, has also agreed with the DGAP s conclusion recorded in his Report dated 06.09.2019. The present case is not a fit case of profiteering as had been alleged by the Applicant No. 1 - the allegation of the Applicant No. 1 is not tenable and therefore the application alleging violation of provisions of Section 171 of the CGST Act, 2017 is hereby dismissed.

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• Income Tax

• 2020 (3) TMI 556
  Rectification of mistake u/s 154 - Assessee did not claim deduction under Section 43B for interest payments to IDBI in the original returns filed by them - HELD THAT:- In the case on hand, the claim for interest deductions under section 43B of the Income Tax Act, which was omitted by the Appellant/assessee company while filing the original returns can be adjudicated by the assessing officer only through a process of investigation. Even as seen from the computation of income filed along with the rectification applications filed u/s 154 the Assessee has produced a self serving statement of account disclosing interest payments which does not exactly tally with the computation of income filed along with the section 154 applications. Therefore, unless and until a complete investigation is done by the assessing officer, the quantum of deduction for interest payments cannot be ascertained. Hence, the omission claimed by the Appellant/Assessee will not fall under the category of a mistake apparent from the record . The judgment relied upon by the learned counsel for the Appellant/Assessee in the case of Commissioner of Income Tax vs. Pruthvi Brokers and Shareholders Pvt. Ltd. [ 2012 (7) TMI 158 - BOMBAY HIGH COURT] will not apply to the case on hand as it was not a decision rendered under Section 154 as its scope falls on a narrow compass involving mistakes apparent from the record . Circular No.14 (XL-35 1955 dated 11.04.1955) has no bearing to the facts of the present case as the payment of interest to IDBI was never disclosed by the Appellant/Assessee in the income tax returns. Unless and until, the tax returns disclosed interest payments, it is impossible for the assessing officer to assist the Appellant/Assessee to rectify the alleged mistake of omission to claim deduction for interest payments under section 43B of the Income Tax Act. - Decided against the Appellant/Assessee

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• 2020 (3) TMI 555
  Deduction u/s 80P - HELD THAT:- We had occasion to consider an identical issue in a batch of writ petitions filed by several Primary Agricultural Cooperative Societies, and in the case of K.2058, Saravanmpatti Primary Agricultural Co-operative Credit Society Ltd., Vs. The Income Tax Officer [ 2020 (2) TMI 214 - MADRAS HIGH COURT] while dealing with a claim of deduction under Section 80P of the Income Tax Act by the Co-operative Societies. Aforesaid order is equally applicable to the present case as well, vis-a-vis, this issue. The petitioner is thus permitted to file a statutory appeal challenging the order of assessment before the Commissioner of Income Tax (Appeals) within a period of three (3) weeks from today. No recovery of the demand in relation to issue (ii), that is, in relation to deduction claimed under Section 80P be enforced till such time the appeal is disposed by the first appellate authority.

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• 2020 (3) TMI 554
  Addition based on statement recorded u/s 133A - tribunal held that on the basis of the statement of the director Shri Saurabh N. Garg alone, the AO cannot come to the conclusion that the assessee has issued accommodation bills and reject the books of account of the assessee - HELD THAT:- Madras High Court in S. Khader Khan Son [ 2007 (7) TMI 182 - MADRAS HIGH COURT ] concluded that statement recorded under Section 133A of the Act is not given any evidentiary value and that materials or information found in the course of survey proceedings could not be a basis for making any addition; besides materials collected and statement obtained under Section 133A would not automatically bind upon the assessee. The above decision of the Madras High Court has been affirmed by the Supreme Court by dismissing the civil appeal of the Revenue in CIT Vs.S. Khader Khan Son [2013 (6) TMI 305 - SC ORDER] - Decided against revenue

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• 2020 (3) TMI 553
  Disallowance of payments made to Shri Faraz G. Joshi in the form of salary / perquisites - allowable revenue expense u/s 37(1) - HELD THAT:- Supreme Court in the case of Sassoon J. David Co. Pvt. Ltd. Vs. CIT [1979 (5) TMI 3 - SUPREME COURT ] examined the expression wholly and exclusively appearing in Section 10(2)(xv) of the Income Tax Act, 1922 which corresponds to Section 37 of the Act. Sub-section (1) of Section 37 says that any expenditure not being expenditure of the nature described in Sections 30 to 36 and not being in the nature of capital expenditure or personal expenses of the assessee, laid out or expended wholly and exclusively for the purposes of the business or profession shall be allowed in computing the income chargeable under the head Profits and gains of business or profession . It was observed that the expression wholly and exclusively appearing in the said section does not mean necessarily . Ordinarily, it is for the assessee to decide whether any expenditure should be incurred in the course of his or its business. Such expenditure may be incurred voluntarily and without any necessity. If it is incurred for promoting the business and to earn profits, the assessee can claim deduction under Section 10(2)(xv) even though there was no compelling necessity to incur such expenditure. The fact that somebody other than the assessee is also benefited by the expenditure should not come in the way of an expenditure being allowed by way of deduction under Section 10(2)(xv) of the Act. We do not find that question Nos.1 to 4 as proposed by the Revenue raise any substantial question for consideration of the Court. Addition made in pursuant to the report of the DRI after recording that the report has been quashed by Customs, Excise Service Tax Appellate Tribunal (CESTAT) - Whether Tribunal is justified in deleting the addition made in pursuant to the findings provided by DRI, a Government Agency on the ground that assessing officer did not conduct any independent enquiry and only relied upon the finding of DRI, ignoring that DRI is a Government Agency and the information provided by it can be fully relied upon? - HELD THAT:- We find that Tribunal relied upon the order of the Customs, Excise Service Tax Appellate Tribunal (CESTAT) in the assessee s own case and deleted the additions made by the assessing officer. We have been informed that Commissioner of Customs has assailed the finding returned by the CESTAT before the High Court of Gujarat and by order dated 16.02.2017, the High Court of Gujarat has admitted the said tax appeal on the substantial questions of law framed thereunder - consequently, we admit this appeal on question Nos.5 and 6 above.

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• 2020 (3) TMI 552
  Disallowance u/s 14A - HELD THAT:- As perused the decision of this Court in Reliance Utilities and Power Limited [ 2009 (1) TMI 4 - BOMBAY HIGH COURT] wherein it has been held that if there are funds available with the assessee, both, interest-free and overdraft and / or loans taken then a presumption would arise that investments would be out of the interest-free funds generated or available with the assessee if the interest-free funds were sufficient to meet the investments. In the facts of that case, it was noted that the said presumption was established considering the finding of fact returned by the first appellate authority as affirmed by the Tribunal which is identical in the present case. We also note that the said decision of this Court has been affirmed by the Supreme Court in CIT Vs. Reliance Industries Limited [ 2019 (1) TMI 757 - SUPREME COURT] . We do not find any good ground to entertain this question for consideration. Loss arising on account of valuation of outstanding liabilities / receivables - HELD THAT:- Tribunal followed the decision of the Supreme Court in CIT Vs. Woodward Governor India Pvt. Ltd. [ 2009 (4) TMI 4 - SUPREME COURT] declaring that it is now settled proposition of law that the loss arising on account of valuation of outstanding liabilities / receivables cannot be considered as a notional loss. Therefore, Tribunal held that the first appellate authority had rightly set aside the addition made by the assessing officer. Adjustments made in the book profit u/s 115JB following disallowance made u/s 14A on account of foreign exchange fluctuations - tribunal held that since it had upheld the order of the first appellate authority deleting the additions made under Section 14A contention of the Revenue needed to be turned down - HELD THAT:- In the present decision, we have also affirmed the finding of the Tribunal affirming the deletion of disallowance made under Section 14A of the Act. Since disallowance under the substantive provision have been interfered with, question of consequential adjustments in book profit under Section 115JB of the Act does not arise. Bogus purchases u/s 69C - HELD THAT:- We find that according to the Tribunal the assessing officer had merely relied upon information received from the Sales Tax Department, Government of Maharashtra without carrying out any independent enquiry. Tribunal had recorded a finding that assessing officer had failed to show that the purchased materials were bogus and held that there was no justification to doubt genuineness of the purchases made by the respondent - assessee. We are in agreement with the views expressed by the Tribunal. Merely on suspicion based on information received from another authority, the assessing officer ought not to have made the additions without carrying out independent enquiry and without affording due opportunity to the respondent - assessee to controvert the statements made by the sellers before the other authority. Accordingly, we do not find any good ground to entertain this question for consideration as well.

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• 2020 (3) TMI 551
  Immunity from prosecution u/s 245H (1A) - petitioner had approached the ITSC for settlement of his case - petitioner had requested time to remit the tax and interest as computed by the Settlement Commission in six monthly installments - HELD THAT:- In the present case, the facts available on record indicate that the petitioner was going through mental and personal stress and had been engaged in litigation with family members, also contributing to health issues. That apart, the entire amount of tax and interest has been remitted even during the pendency of the writ petition before this Court, which places this petitioner on a better pedestal than the petitioner before the Supreme Court, who remitted the amounts only at the stage when the matter had travelled to, and was pending before the Supreme Court. Thus, in the light of the discussion as aforesaid and taking a cue from the judgment of SANDEEP SINGH VERSUS UNION OF INDIA AND OTHERS [ 2017 (1) TMI 1147 - SUPREME COURT] the impugned order is set aside.

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• 2020 (3) TMI 550
  Denial of grant of the approval u/s 35(2AB) - Non submission of application that is Form 3CK needs to be submitted online - Form 3CK submitted with the respondent in the physical form only on 27.04.2018 - HELD THAT:- Clause 6 of the Guidelines prescribes that the application that is Form 3CK needs to be submitted online. It seems that only because the portal of the respondent was not working, the respondents decided to accept the application even in physical form, however, for reasons mentioned hereinabove, the petitioner could not submit the application in physical form in time. At the same time, the petitioner cannot be denied the grant of the approval under Section 35(2AB) of the Income Tax Act on such hyper technical ground. On the petitioner satisfying the respondent of the reasons for non-submission of Form 3CK in physical form with the respondent on or before 31.03.2018, the respondent shall consider the request of the petitioner to condone the delay and grant approval to the petitioner under Section 35(2AB) for the financial year 2017-18. The petitioner in this regard shall be entitled to make a representation to the respondent, which shall be considered by the respondent within four weeks of receipt of such representation. Mere absence of a provision for condoning such delay, shall not be a ground for rejecting the representation of the petitioner inasmuch as it is not denied that the portal of the respondent was not functioning from 08.03.2018.

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• 2020 (3) TMI 549
  Order passed u/s 269UD(1) - Empowerment appropriate authority to invest the consideration amount deposited with it in Government or other securities - HELD THAT:- Once an order is passed u/s 269UD(1) the immovable property in question covered by the said order shall vest in the Central Government. As per sub-section (1) of Section 269UG, the amount of consideration payable on account of such purchase shall be tendered to the person or persons entitled to receive such payment within a period of one month from the end of the month in which the immovable property concerned becomes vested in the Central Government. In the instant case, orders under Section 269UD(1) were passed on 30.08.1994. Therefore, in terms of Section 269UG(1), the consideration amount was required to be paid within one month from the end of month of August, 1994 i.e. within 30th September, 1994. As per the affidavit of respondent No.1, cheques covering the two principal amounts were offered to the petitioners on 21.07.1995 much after the statutory period as discussed above. The amounts which were required to be paid by 30th September, 1994 were offered to the petitioners on 21.07.1995. Because of pendency of the two writ petitions whereby petitioners had assailed the legality and validity of the two orders passed under Section 269UD(1), naturally petitioners declined to accept the two cheques. The two cheque amounts were thereafter deposited by respondent No.1 in Fixed Deposit Account. The two writ petitions filed by the petitioners assailing the orders under Section 269UD(1) were finally closed on withdrawal on 28.04.1999 whereafter cheques covering the two principal amounts of Rs. 65,93,334.00 and Rs. 32,96,667 were handed over to the petitioners on 12.05.1999. As per own statement of respondent No.1, these two amounts which were kept in Fixed Deposit Account had earned interest of Rs. 8,66,417.00 and Rs. 4,33,208.00 upto 12.05.1999. Petitioners initial refusal to accept the aforesaid amount on 21.07.1995 in view of pendency of the two writ petitions assailing the two orders passed u/s 269UD is understandable. Respondent No.1 did not inform the Court regarding payment and refusal of the cheque amounts. Respondent No.1 had deposited the cheque amounts in Fixed Deposit Account on which interest accrued. Had the two amounts been paid promptly to the petitioners in terms of Section 269UG(1), it is the petitioners who would have got the benefit of the interest on the said amounts, in fact more, considering the delay in making the payments from 30.09.1994 to 21.07.1995. Sub-section (4) of Section 269UG empowers the appropriate authority to invest the consideration amount deposited with it in Government or other securities and may thereafter direct the interest or other proceeds that may accrue on such investment to be paid to the interested party. This is to be paid as a benefit which the interested party might have had from the immovable property in respect of which such amount was deposited. It was not justified on the part of the appropriate authority to refuse payment of interest to the petitioners when it had actually earned interest on the two principal amounts by taking the plea that there was no direction from the Court for payment of interest. In fact the interest was earned on the money that belonged to the petitioners. It would be wholly unfair and unjust if the appropriate authority is allowed to appropriate the interest amount accrued on the money legitimately belonging to the petitioners.

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• 2020 (3) TMI 548
  TP Adjustment - comparable selection - functional dissimilarity - HELD THAT:- Persistent systems Ltd. comparable is functionally dissimilar and in the absence of segmental details of revenue generated from its services of product development and product design services has been rightly excluded by the ITAT. Wipro Technology Services comparable excluded has a turnover which is 24 times that of the assessee and has also the benefit of the brand name of Wipro and the assured revenue from its agreement with Citi Technology Services.Thus, the comparable has been rightly excluded. Zylog System Ltd. exclusion of the comparable on the ground that the intangible assets owned by it are significant as compared to the assessee and it has also restructured its business is completely justified both in facts and in law. Accentia Technologies Ltd. comparable amalgamation has resulted in a higher OP by TC is an aberration and thus, the tribunal has rightly excluded the said comparable. Fortune Infotech has unique web based software and provided niche services to its customers and thus, was dissimilar to the assessee and has been right excluded as a comparable. Infosys brand definitely results in higher profits and hence the ITAT has rightly excluded the same from the list of comparables. TCS E Serve International Ltd. dissimilarity to the assessee and thus, the exclusion of the above comparable cannot be faulted in any manner. TCS E Serve Ltd. comparable is functionally dissimilar and thus, has to be excluded. Benchmarking analysis by aggregating the IT and ITES segment of the Appellant - ITAT setting aside the matter for carrying out the benchmarking analysis by selecting the comparable companies involved in provision of both ITES and IT services - HELD THAT:- Keeping in view the fact that the Transfer Pricing Officer had in the preceding years accepted that the assessee was engaged in IT Services (i.e. including software development and ITES) as is evident from the assessment order and considering the fact that due to paucity of time, the assessee could not produce evidence before the ITAT. ITAT is directed to examine the issue whether the assessee is engaged in the activity of software development after considering the additional evidence placed before this Court namely Annexures A-6 to A-13 and any other evidence which may be produced after hearing both the parties and allowing sufficient opportunity to the revenue to verify the same.

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• 2020 (3) TMI 547
  Revision u/s 263 - unexplained investment - reopening of assessment u/s 147 initiated - HELD THAT:- We find that the case of the assessee was reopened and one of the reasons recorded by the AO was source of investment of Rs. 2.71 crores as per copy of agreement entered into with M/s Sterling Build Estate Private limited which remain unexplained and to that extent, the income of the assessee has escaped assessment. During the course of assessment proceedings, the matter was examined by the Assessing officer wherein the assessee submitted that no such agreement was entered into and even a complaint has been lodged with the Stamp authorities regarding evasion of stamp duty and on investigation, an order dated 22.06.2016 has been passed by Collector (Stamps) wherein the said agreement was found to be fake. A copy of said order dated 22.06.2016 was filed before the Assessing officer and in turn, the Assessing officer also enquired from DIG stamps about the veracity of such assertion made by the assessee and passing of such an order which was duly confirmed by the DIG Stamps. AO has duly examined the matter and has carried out requisite enquiry and investigation which was reasonably expected from him and was satisfied that there was no basis to make any addition and accordingly, no addition was finally made towards undisclosed source of such investment as alleged initially while recording the reasons u/s 148 of the Act. Further, we find that on similar grounds, the matter in the hands of M/s Sterling Build Estate Pvt limited was reopened and after verification of all the relevant documents/facts of the case, the AO has accepted that no extra sale consideration was received in cash of Rs. 2.21 crores as mentioned in the alleged agreement to sale from the assessee and sale consideration of Rs. 55 lacs as per registered sale deed during offered to tax in return of income was accepted. We therefore find that there is concurring findings by two Assessing officers of respective assessees wherein they have held that no such investment was made and money has not changed hands and so called agreement to sale cannot be relied upon as the same was held to be a fake agreement by the stamp authorities. Therefore, the findings of ld CIT that the Assessing officer should have done a protective assessment pending adjudication by the Higher authorities cannot be accepted as there is nothing on record that the order of the collector stamps has not been accepted and any further appeal has been filed against the same. At the time of passing of the assessment order, the order of collector stamps was on record and even at the time of passing of the order by the ld CIT, there is nothing on record which establishes that the order of the collector stamps has been appealed against and the matter has been admitted for adjudication by the Higher authorities. Taking an affidavit from the assessee stating that if any adverse decision is passed against him by the Courts, the assessee shall be binded to pay taxes is more a precautionary approach adopted by the Assessing officer and the order so passed by the Assessing officer cannot be held to be erroneous and prejudicial to the interest of the Revenue where he has carried out the necessary and thorough examination of the matter. Addition u/s 68 - un-explained deposits in the bank account - We find that this was again one of the reasons to reopen the case of the assessee u/s 147 and thereafter, during the course of assessment proceedings, the matter was examined by the Assessing officer wherein the assessee was asked to explain the source of such deposits, further statement of the person whom the assessee claim to have received the amount were also recorded and these persons also filed affidavits before the Assessing officer. Taking all these explanation and documentation into consideration, the Assessing officer has recorded his findings in the assessment order We find that on the issue of deposits in the assessee s bank account, the AO has duly examined the matter and has taken a considered view and the ld Pr CIT was not correct in exercising jurisdiction under section 263 of the Act in remanding the matter for fresh adjudication. Pr CIT was not correct in exercising jurisdiction under section 263 of the Act and the order passed by the ld Pr. CIT passed u/s 263 is accordingly set-aside and the order passed by the AO u/s 143(3) r/w 147 is sustained. - Decided in favour of assessee.

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• 2020 (3) TMI 546
  Rejection of books of accounts - additions on account of alleged low GP - HELD THAT:- Even when the books of accounts have been rejected by the Assessing Officer, estimation of profit should be as per the material available on record. It would not be out of place to mention here that in all the earlier Assessment Years, assessments have been framed u/s 143(3) of the Act. The g.p of the assessee ranges from 2.97% to 3.08%. We do not find any reason for adoption of g.p. rate of 10.50%. Considering the facts of the case in hand as discussed hereinabove, we do not find any error or infirmity in the findings of the ld. CIT(A). Ground No. 1 is, accordingly, dismissed. Disallowance on account of payment of commission to shareholders employees u/s 36(1)(ii) - HELD THAT:- The undisputed fact is that there is no allegation that these persons are not working for the company. In our considered opinion, it is the prerogative of the assessee to decide the remuneration etc to be paid to the persons who work for his company. As per the agreement, six directors, who were also share holders, were paid additional salary termed as commission and there are four employees who are also share holders who also have been paid salary with additional salary termed as commission . The total commission comes to 0.5% of the total turnover. In our humble opinion, considering the nature of the business of the assessee vis-a-vis the turnover, such payment of commission cannot be doubted. We, therefore, do not find any reason to interfere with the findings of the ld. CIT(A). Thus, Ground No. 2 also stands dismissed.

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• 2020 (3) TMI 545
  Addition u/s 68 - allegation of booking of bogus long term capital gains through penny stock companies - addition on account of commission under section 69C - HELD THAT:- In the present case, the assessee submitted sufficient documentary evidences before A.O. to prove genuineness of the transaction. The assessee purchased the shares through banking channel and actually got the shares transferred in his name. The purchases are supported by bank statements. The transaction of the sale have been made through Demat Account which is corroborated by contract note and other details and transaction is carried out through banking channel through stock exchange through Demat Account on which Security Transaction Tax have also been paid. A.O. merely relied upon interim order of the SEBI to make addition against the assessee, otherwise, there were no evidence or material on record to disprove the claim of assessee. Since the interim order of the SEBI have been revoked against the assessee and M/s EBFL, therefore, nothing survives in favour of the A.O. The A.O. did not make any further investigation or enquiry into the matter and merely relied upon the interim order of the SEBI and investigation carried out by the Kolkata Wing. It is not clear from the assessment order whether Investigation Wing report have been confronted to the assessee or any right of cross-examination have been allowed to any statement recorded at the back of the assessee. The assessee asked for the cross-examination of any statement which is used against the assessee for making the addition. But, the assessment order is silent on this aspect. Therefore, the above facts clearly show that assessee entered into the genuine transaction and as such the profit on sale of scrip was exempt from tax. D.R. relied upon decisions of the ITAT, Delhi Benches, Delhi in the cases of Suman Poddar vs., ITO [ 2019 (9) TMI 1089 - DELHI HIGH COURT] and Udit Kalra vs., ITO [ 2019 (4) TMI 834 - DELHI HIGH COURT] in which the findings of the Tribunal had been that these are cases of penny stock companies which fact is not there in the present case. Therefore, these decisions would not support the case of the Revenue as having distinguishable on facts. The authorities below have not rebutted the explanation of assessee that he has indulged in dealing in scrips in earlier year as well as in subsequent years. It would, therefore, show that assessee is regularly dealing in scrips. The A.O. has not brought any adverse material against the assessee so as to make the above additions. Considering the totality of the facts and circumstances of the case and financials of M/s EBFL we set aside the Orders of the authorities below and delete both the additions.

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• 2020 (3) TMI 544
  Assessment u/s 153A - assessment already completed can be tinkered with or disturbed where any incriminating material is found and seized during the course of search - disallowance of education expenses u/s 37(1) - HELD THAT:- It is a settled legal preposition that in case of completed assessment, the scope and jurisdiction of the AO to reassess the total income of the assessee u/s 153A is limited only to the extent of the income disclosed by the incriminating material found and seized during the search and seizure action. However, in respect of the pending assessments which shall be abated as per proviso to U/s 153A(1) of the Act, the AO is free to assess the income of the assessee as part of regular assessment and there is no requirement that the same shall be based on incriminating material found and seized during the search and seizure action. In the instant case, where the assessment proceedings were pending at the time of search, we therefore donot find any legal infirmity in action of the Assessing Officer in assessing the income of the assessee by making the disallowance of education expenses u/s 37(1) based on enquires conduced during the course of assessment proceedings. Therefore, ground no. 1 of the assessee s appeal is dismissed. Addition of education expenditure - education of daughter of managing director - Held that:- What is relevant is not just the ultimate benefit or utilization of such expenditure for business purposes but what is equally relevant is that the point in time when the expenditure was incurred, the business of the assessee should have been set up which however, is not the case in the instant case. The claim of education expenditure has been rightly disallowed by the Assessing officer and confirmed by the ld CIT(A) and we donot see any infirmity in the said orders and no interference is called for. The matter is accordingly decided against the assessee and in favour of the Revenue. In the result, ground no. 2 of assessee s appeal is dismissed.

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• 2020 (3) TMI 543
  Exemption of income u/s 11 and 12 - assessee is a Hindu religious charitable institution and carrying on the charitable activities - HELD THAT:- In the instant case, the trust is very old trust and as observed from the trust deed, it is carrying on the same objects prior to the date of trust deed also. The AO did not make out a case that the assessee is not carrying on the same objects prior to trust deed dt.28.04.2016. Therefore, we are of the view that the assessee s case is squarely covered by the decision of Ganta Sriram Educational Society [ 2017 (11) TMI 365 - ITAT VISAKHAPATNAM] accordingly we hold that income of the assessee is entitled for exemption u/s 11 and 12 of the Act. Hence, we set aside the order of the Ld.CIT(A) and allow the appeal of the assessee on this ground. Rejection of assessee s claim u/s 11(1A) - assessee has made the investment in fixed deposits for more than 6 months in the same financial year - HELD THAT:- In the instant case, the assessee sold the property for a consideration of Rs. 40,99,200/- and invested in fixed deposits of Rs. 41,04,400/- as per the copies of evidences placed before us. The deposits were made in the same financial year, but not in the subsequent assessment year as stated by the Ld.AO. Deposit of Rs. 25,00,000/- was made in Andhra Bank on 03.03.2010 and Rs. 16,04,400/- on 09.03.2010. The Board has clarified in Instruction No.883 dt.24.09.1975 that investment of the net consideration of fixed deposit with a bank for a period of six months and above would be regarded as utilized for acquiring another capital asset within the meaning of section 11(1A) - Since the assessee has made the investment in fixed deposits for more than 6 months in the same financial year, we hold that the assessee is entitled for exemption of sale consideration u/s 11(1A) of the Act and the same required to be considered as for acquiring another capital asset. Accordingly, the orders of the lower authorities are set aside and the appeal of the assessee on this issue is allowed. Application of 50C for sale consideration of the immovable property - HELD THAT:- In the instant case, the assessee has sold the property consisting of 3 plots for sale consideration of Rs. 40,99,200/- and the market value of which was Rs. 67,41,740/-. In the earlier paragraphs, we have decided that the assessee s income is entitled for exemption u/s 11 and 12 of the Act. Having decided that the assessee s income is exempt u/s 11 and 12 of the Act, the assessee s income required to be computed as provided in section 11 to 13 of the Act, but not under other provisions of the Act. Therefore, we agree with the contention of the Ld.AR that when the income has to be computed u/s 11 to 13, application of section 50C has no relevance. Since the assessee has invested the entire sale consideration of Rs. 40.99 lakhs in fixed deposits, the assessee is entitled to claim exemption u/s 11 of the Act, thus, we set aside the order of the Ld.CIT(A) and delete the addition made by the AO u/s 50C. Corpus donation received by the assessee is exempt u/s 11(1)(d) Addition u/s 69C - Unexplained expenditure - - HELD THAT:- The proviso to section 69C is invoked in a situation where the assessee incurs expenditure and offers no explanation about the source of such expenditure. In the instant case, the AO has not doubted the source of expenditure and he simply made the addition, for not offering the cross verification of the genuineness of the transaction. From the order of the AO, it is clear that the amount was paid by cheque to Mr.P.N.Roy and the expenditure was incurred by Sri Sidheswarananda Bharathi Swamy which was reimbursed by the mutt. The source and the genuineness of expenditure was explained by the assessee. Therefore, we find no reason to make addition and hence, we set aside the order of the Ld.CIT(A) and allow the appeal of the assessee.

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• 2020 (3) TMI 542
  TP Adjustment - jurisdiction of AO in making a reference to the Transfer Pricing Officer (TPO) for determining the arm s length price (ALP) of the international transactions reported by the assessee - Whether Instruction 2016 cannot override section 92C(3) of the Act ? - HELD THAT:- We find that though the amount of the `proposed transfer pricing adjustment was more than Rs. 10.00 crore in an earlier assessment year but the same fell short of the `transfer pricing adjustment as it was still pending with the DRP at the time of the AO making a reference to the TPO for the year under consideration. Till then, the Assessing Officer had simply forward a draft of the proposed order of assessment to the eligible assessee proposing to make variation in the income returned. To sum up, we find that none of the two conditions enshrined in the Instruction of 2016 were satisfied in as much as neither transfer pricing adjustment of more than Rs. 10 crore was made for an earlier year nor, as a sequitur there was any question of such transfer pricing adjustment having been either upheld by a judicial authority or pending in appeal. That being the position, we hold that the AO made a reference to the TPO in contravention of Instruction No.3/2016. Since the Instruction is binding on the AO, such reference is declared as invalid and the consequential transfer pricing adjustment of Rs. 10.14 crore is directed to be deleted.- Decided in favour of assessee.

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• 2020 (3) TMI 541
  Eligible units claiming deduction u/s 10A/10AA - allowed without set off of business loss or not is not a res-integra - HELD THAT:- Hon ble Supreme Court, in the case of CIT vs Yokogawa India Limited [ 2016 (12) TMI 881 - SUPREME COURT] has clearly held that the deduction u/s 10A would be prior to the commencement of the exercise to be undertaken under Chapter VI of the Act, for arriving at the total income of the assessee from the gross total income. The Hon ble Supreme court, further held that though, section 10A, as amended is a provision for deduction, a stage of deduction would be, while computing the gross total income of the eligible undertaking under Chapter IV of the Act, and not at the stage of computation of the total income under Chapter VI of the Act. The Hon ble Bombay High court in the case of Black and Veatch Consulting Pvt.Ltd.vs CIT [ 2012 (4) TMI 450 - BOMBAY HIGH COURT] has upheld similar position of law. The ITAT, Mumbai benches in asseesee own case for earlier years has held that the deduction u/s 10A of the Act, has to be given at the stage, when the profits and gains of the business is computed in the first instance. The sum and substance of ratio laid down by the Hon ble Supreme Court and Hon ble Bombay High Court, is that the profit of eligible units claiming deduction u/s 10A/10AA of the Act, shall be allowed without setting off of losses of other units. Therefore, we are of the considered view that the AO, as well as the Ld.CIT(A) were erred in set off of loss of business from the profit of eligible units claiming deduction u/s 10AA before allowing deduction provided u/s 10AA of the Act, 1961. Hence, we direct the AO to allow deductions towards profit of eligible units u/s 10AA of the Act, without set off of loss of non eligible/other units. Appeal filed by the assessee is allowed.

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• 2020 (3) TMI 540
  Exemption claimed u/s 35 (2AB) - claim not made by the assessee company in its return of income for the A.Y. 201-12 - approval of expenditure for the impugned year in prescribed form has not been received from the competent authority - HELD THAT:- We find that an identical issue has been considered by the Tribunal in assessee own case for AY 2010-11 [ 2020 (2) TMI 508 - ITAT MUMBAI] where it has been held that once, R D facility has been recognized by the competent authority, then deductions provided u/s 35(2AB) cannot be denied, merely for the reason that approval of expenditure for the impugned year in prescribed form has not been received from the competent authority. In view of the matter and consistent with view taken by the co-ordinate bench in assessee own case for earlier years, we are of the considered view that the Ld. AO, as well as the Ld.CIT(A) were erred in denying the benefit of weighted deductions claimed u/s 35(2AB) in respect of expenditure incurred for research and development activities in in-house R D centers, even though the R D facility has been recognized by the competent authority. Hence, we direct the Ld. AO to allow weighted deductions claimed by the assessee towards R D expenditure u/s 35(2AB) - Decided in favour of assessee.

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• 2020 (3) TMI 539
  Unexplained cash Deposits - certain time gap between withdrawal and deposit - HELD THAT:- Assessee has explained that withdrawal of Rs. 15.2 lacs was made out of maturity of fixed deposit receipt of Rs. 14.67 lacs which was credited in his bank account on 16.04.2009 and opening balance of Rs. 91,667 in his bank account. The assessee has further explained that fixed deposit was made out of compensation amount of Rs. 16,14,382/- received from RIICO, Bhiwadi (Alwar) being 5/8 share in the ancestral agricultural land which was acquired by RIICO in the preceding financial year i.e. 2008-09. These are undisputed facts which are emerging from records and we therefore, find that the assessee has reasonably explained the source of cash deposit in his bank account which is the amount of compensation received on sale of his agricultural land. Where the compensation on sale of agriculture land is not disputed, the amount deposited out of such compensation cannot be disputed. The assessee has further explained that it has deposited the amount finally with RHB. Therefore, where the source and even subsequent deposit is clearly established in the instant case, merely on account of fact that there was certain time gap between withdrawal and deposit cannot be held against the assessee and thus, we do not see any justifiable basis for holding that the amount so deposited remain unexplained. - Decided in favour of assessee.

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• 2020 (3) TMI 538
  Rectification of mistake u/s 154 - withdrawal of claim of deduction u/s 54 - CIT(A) did not accept the objection of the assessee and upheld the order of the AO passed u/s 154 - HELD THAT:- In the case in hand, it can be a matter of lack of enquiry or lack of proper enquiry on the part of the AO while passing scrutiny assessment order u/s 143(3) of the Act but the decision taken by the AO after considering the facts and evidences produced by the assessee cannot be held as a mistake apparent and patent on the face of the record. AO while passing the order u/s 154 has stated that on perusal of the record of the assessee and specifically on perusal of the sale deed dated 24-11-2010 whereby the assessee sold the immovable property bearing No. B-277, Vigyan Nagar, Jaipur, there was nowhere mentioned about the construction of the said property. Therefore, the AO in proceedings u/s 154 of the Act has re-appreciated the evidences which was already available on record and considered by the AO while passing the scrutiny assessment order u/s 143(3) - AO has no jurisdiction u/s 154 of the Act to re-appreciate the evidences already considered by the AO during the scrutiny assessment as it would amount to review of its own order. AO has travelled beyond the jurisdiction and scope of Section 154 - Instead of sending a proposal for revision of the order u/s 263 of the Act, the AO has assumed the powers and jurisdiction u/s 154 of the Act to review the earlier order in the garb of rectification of mistake. Even otherwise, if there is an error in the earlier order for allowing deduction u/s 54 of the Act, this is a mistake of question of law and facts. The ascertainment of facts requires a proper investigation and verification of the record as well as reality on the ground. Therefore, such an exercise of investigation and examination cannot be undertaken u/s 154 - Decided in favour of assessee.

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• 2020 (3) TMI 537
  Penalty u/s 271(1)(c) - Directors could not represent before the first appellate authority as regards the penalty imposed u/s 271(1)(c) - information received from the Excise Authorities, AO issued notice u/s 148 and completed the assessments u/s 143 r.w.s. 147 - On quantum assessments, the appeals were preferred by the assessee before the first appellate authority, who partly allowed the appeals of the assessee - HELD THAT:- The earlier Directors of the assessee-company had resigned on 09.04.2003. After the resignation of the earlier Directors, the Central Excise Department had conducted a search at the premises of the assessee-company on 08.07.2003. The earlier Directors were not associated with the assessee-company s matters subsequent to their retirement and were not aware of the assessments completed and consequent penalty levied. Being unaware, the ex- Directors did not represent the matters either in quantum proceedings or in penalty proceedings. The present Directors of the assessee-company has faced financial difficulties and labour unrest, and the same is evident from the documents produced before the Tribunal. Consequent to labour unrest and the financial difficulties faced by the present Directors, they also could not represent before the first appellate authority as regards the penalty imposed u/s 271(1)(c) of the I.T.Act. The penalty proceedings initiated are separate from the quantum assessments and if the assessee can prove in penalty proceedings that the additions in the quantum assessments are not warranted, necessarily, the penalty imposed has to be deleted. Since the assessee has not been represented before the first appellate authority with regard to the penalty proceedings, in the interest of justice and equity, we are of the view that as a last chance, the assessee should be granted one more opportunity of being heard. The assessee shall cooperate with the Department and furnish necessary documents and evidences to prove its case. For the above said purpose the issue is restored to the CIT(A) - Appeal allowed for statistical purposes.

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• 2020 (3) TMI 536
  Assessment u/s 153A - Whether no assessment was pending from the date of the search? - HELD THAT:- The assessee in the statement of facts before Ld. CIT(A) has mentioned that original return was filed on 25.09.2010 showing total income of Rs. 83,685/- and the same was processed u/s 143(1) of the Act. It would show that the return was completed and no assessment was pending from the date of the search. The Hon ble Delhi High Court in the case of CIT vs. Kabul Chawla [ 2015 (9) TMI 80 - DELHI HIGH COURT] held that Completed assessments can be interfered with by the AO while making assessment u/s 153A only on the basis of some incriminating material unearthed during the course of search which were not produced or not already disclosed or made known in the course of original assessment . The Hon ble Delhi High Court following the aforesaid decision took the same view in the case of Meeta Gutgutia [ 2018 (7) TMI 569 - SC ORDER] . In view of the above, we do not find any infirmity in the order of the Ld. CIT(A) in allowing the appeal of the assessee.

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• 2020 (3) TMI 535
  Deduction u/s 10AA - profit generated from the alleged activity of the processing/blending of oil - assessee has its processing unit in SEZ and thus it claimed the deduction from the operations carried out therein (SEZ Unit) - HELD THAT:- Definition of the manufacturing under section 10AA of the Act has already been provided for the assessee s claiming the benefit therein. Thus there was no need to import the definition provided under section 2(29B) of the Act while evaluating the fact whether the assessee is carrying out any manufacturing activity. In our considered view, the assessee in the present facts and circumstances is carrying out blending activity which is manufacture within the meaning as provided under SEZ Act. Accordingly, we hold that the assessee is engaged in the manufacturing activity. Deduction under section 10AA is also available to the assessee engaged in providing any services. As such we are inclined to elaborate the services eligible for deduction under section 10AA Trading activity carried out by the assessee is also eligible for exemption under section 10AA of the Act within the meaning of the provisions provided under section 2(z) of the SEZ Act read with the rule 76 of Special Economic Zone Rules 2006 as discussed above. Whether the assessee is eligible for deduction with respect to the income generated by it on account of currency fluctuation, interest income - these incomes are arising in the course of the business (import and export) carried on by the assessee in its SEZ Unit. As such these incomes are intrinsically linked with the operation of the assessee. Accordingly we hold that such income is eligible for deduction/exemption under section 10AA of the Act. Assessee has correctly calculated the amount of deduction in proportion to the export sales viz a viz domestic sales of the SEZ unit as provided under subsection 7 of section 10AA of the Act. Thus the AO erroneously has reduced the amount of domestic turnover from the total turnover of the assessee SEZ unit which resulted loss to the assessee. No reason to interfere in the order of the learned CIT (A). Accordingly, we uphold the same. Hence the ground of appeal of the Revenue is dismissed. Disallowance of the hedging loss - Absence of the documentary evidence - HELD THAT:- Assessee has also not produced any documentary evidence at the time of hearing before us suggesting that the impugned losses were not speculative in nature. Thus in the absence of any information/documentary evidence we hold that such losses are speculative in nature and therefore the same cannot be setoff against the non-speculative income - income of the assessee from the SEZ unit shall stand increased on account of the disallowance of the impugned loss and the assessee shall be eligible for deduction on such enhanced income. Thus the ground of appeal of the Revenue is dismissed and the ground of appeal of the assessee is also dismissed. Addition u/s 36(1)(iii) - HELD THAT:- Own fund of the assessee as on 31st 2010 was in excess of the amount of investment in the mutual fund. Thus, in such a situation an inference can be drawn that the own fund available with the assessee was utilized in the investment of such mutual funds as discussed above. Therefore, there cannot be any disallowance of interest expenses as the amount of borrowed fund was not diverted in such investment. See HDFC BANK LTD. [ 2014 (8) TMI 119 - BOMBAY HIGH COURT] - No disallowance of interest expense claimed by the assessee can be made on account of investment in the mutual funds. Hence, we do not find any reason to interfere in the order of the ld. CIT-A. Hence, the ground of appeal of the Revenue is dismissed. Time limit for passing the order under section 143(3) r.w.s. 144C - HELD THAT:- Admittedly, the time limit for passing the order under section 143(3) r.w.s. 144C of the Act was available only upo 31-3- 2015. But the AO made the assessment order dated 27-4-2015 despite the fact the TPO has passed the order dated 31 July 2014. In holding so we find support and guidance from the judgement of Honourable Delhi High Court in the case of Honda cars India Ltd [ 2016 (2) TMI 527 - DELHI HIGH COURT] - assessment order framed by the AO is not sustainable. Accordingly we hold that, the assessment framed under section 143 3 read with section 144C of the Act is about by limitation and the same is not sustainable in the eyes of law. Accordingly we quash the same. Hence, the ground of appeal of the assessee is allowed.

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• Customs

• 2020 (3) TMI 534
  Right to prefer an appeal - Penultimate Order - Whether the CESTAT is right in law in holding that the right to prefer an appeal under Section 129A of the Customs Act, 1962 against an order passed under the CHALR, 2004 is available only to a Customs Broker and not to the Revenue? HELD THAT:- In the case in hand, though initially the licence was suspended, subsequently the suspension itself was revoked and thereafter show cause notice was issued for adjudication process. After adjudication, the licensing authority who passed the final order, i.e., the Order-in-Original, has given the findings against the respondent/licensee. Even for a normal renewal of licence, after expiry of the term, the licensee must satisfy the licensing authority that, there is no complaints of misconduct including non-compliance of any of the obligation specified in Regulation 13. Therefore if any violation of Regulation 13 is noticed, then the licensee is not entitled to get the renewal of licence, even though such licensee has not been punished for such violation of Regulation 13. The Board while making regulation, under Section 146(2) of the Customs Act, has made it clear that, certain obligations has to be scrupulously followed or to be fulfilled by the licensee as enumerated under Regulation 13 and if any violation is noticed, even though the licence is not revoked in between, at the time of renewal, that will have a bearing and such licensee would not be or may not be eligible to get renewal - Therefore the paramount intention of the Regulation makers was that, the licensee must fulfill all obligations and no adverse notice should have been there against such licensee and on satisfaction of these aspects only even renewal can be given in normal circumstances. Here in the case in hand, the order passed under Regulation 22(7) is only based on adjudication and a detailed procedure has been contemplated under Regulation 22 as to how such adjudication has to be conducted and final order to be passed. Therefore whatever order passed under Regulation 22(7) can only be construed as an adjudicative order and not as an administrative order - If such kind of adjudicative orders are passed, certainly those orders can be very well fit in the situation mentioned under Section 129A of the Customs Act, where 129A(1) (a) to (d) made it clear that, some specific orders as well as order passed by adjudicating authority are appealable to the CESTAT. Therefore the present order passed under Regulation 22(7), since being an order passed by the adjudicating authority, can be categorised under Section 129A(1)(a) of the Act, thereby the said order, can very well be appealed by an aggrieved party. No party in an adjudicating proceedings can be rendered remediless by way of appeal and if any such contrary view is taken by Courts of law, that will be detrimental to the basic structure as enshrined in our Constitution, i.e., Judicial review. Though the words any Customs House Agent aggrieved by any decision or order is employed in Regulation 22(8), we should not fail to note that, there is no prohibition specifically or expressly made prohibiting the Revenue from preferring any appeal against any order passed under subregulation 7 of Regulation 22. Therefore, there is no bar or prohibition given in express terms in the said sub-regulation 8 of Regulation 22. Therefore the view taken by the CESTAT, of course following the earlier view of the CESTAT, is erroneous. The matter is remitted back to the CESTAT for deciding the issue on merits as raised by the parties by affording reasonable opportunity for both sides in accordance with law - Appeal allowed by way of remand.

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• 2020 (3) TMI 533
  Condonation of procedural lapse of supplying goods to SEZ only under ARE-1 without Bills of Exports - advance authorization scheme - deemed exports - petitioner claims that due to an inadvertent error, the Bills of Exports were not filed - HELD THAT:- the Bill of Export is an essential document to be submitted for claiming discharge of export obligation under the Advance Authorization. Besides, petitioner s statement of having worked and manufactured boxes for the past 39 years further weakens his claim in the petition. There is no explanation as to why the petitioner supplied goods only under cover of ARE-1 and not with Bill of Export except for it being an inadvertent mistake. A market player in business for this long would be expected to comply with formalities and file all relevant documents timely. As is evident from the reading of the Paragraph 2.5 of the FTP, exemption from following policy/procedure can be granted only in cases of genuine hardship or adverse impact on trade or in public interest. It is not applicable for cases where the exporters, even bonafide, are not vigilant or are lax in compliance with the mandatory conditions. The onus cannot be shifted to the Authorities in such cases to retrospectively determine if the petitioner had otherwise complied with all conditions of Advance Authorization. Petition dismissed.

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• 2020 (3) TMI 532
  Maintainability of appeal - benefit of exemption - effective date of notification by the customs authority - Jurisdiction of HC u/s 130 of the Customs Act, 1962 - HELD THAT:- We are of the opinion that the question raised in this appeal does not have any connection with the rate of duty. Whether the notification was applied from the date of its publication by the DGFT or from the date of its publication by the customs under Section 25[4] of the said Act the rate of duty remained the same. The only controversy is the date from which that rate of duty was applicable. If that is the question, this court has the jurisdiction to hear this appeal. This appeal is admitted on the following question:- Whether the order of the learned tribunal has not correctly interpreted sub-section 4 of Section 25 of the Customs Act, 1962 and the effective date of the subject exemption notification? List the appeal for hearing on 29th April, 2020.

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• 2020 (3) TMI 531
  Mis-declaration of imported goods - Mobile Point of Sale (MPOS) Devices - POS (Point of Sale) devices - suppression of actual value of goods - undervaluation - non-inclusion of transfer/licence fee - non-submission of BIS and ETA/WPC licence - Confiscation - penalty - HELD THAT:- The importer/appellant and its Executive Director Ms. Latha Priyadarshini were mis-classifying MPOS/POS consignments in utter disregard to the provisions of Customs Tariff Act and at their own free will and thus they have certainly resorted to mis-declaration and mis-classification of the import consignments with an intent to evade duty and to avoid compliance of other allied Acts as mentioned in preceding paras and thereby making all the import consignments liable for confiscation on this count under Section 111 of the Customs Act, 1962. Valuation of the import consignments of MPOS/POS - HELD THAT:- The per unit price declared under various Bills of Entry have varied between U.S. $ 97 per unit to as low as U.S. $ 1.45 per unit for D-180 Model of MPOS. It has been established by the investigations that a Master Distribution Agreement has been signed by the appellant importer and its Executive Director Ms. Latha Priyadarshini with Pax Technology Ltd. Hongkong on 1 November 2014. On perusal of Appendix A of the master distributor agreement it reflects that the price of hardware of various models of the MPOS and POS have been provided by the Hongkong based company and it has very specially been provided that apart from the hardware price the licence fee for software for D series equipments of MPOS will be U.S. $ 45 per unit, for S series the licence fee was fixed at U.S. $ 60 per unit and for R series it was fixed at U.S. $ 40 per unit. This very fact indicates that the importing firm and its Executive Director were fully aware about the import value of the imported equipments - The arguments advanced by Ms. Latha Priyadarshini and the company are not acceptable in the facts and circumstances as well as legally as per the provision of Section 46 of the Customs Act, 1962 of sub-Section (iv) the importer presenting the Bill of Entry is required to subscribe to a declaration as to the truth and contents of Bills of Entry. Since the declarations made by the importer appellant and its director have been found grossly mis-declared on the counts of description, classification and value of the consignments. Ms. Latha Priyadarshini in her statement dated 19/01/2016 and other statement has admitted the facts of mis-declaration. There are no illegality in the conclusions reached in the impugned order-in-original regarding confiscation of the import consignments, confiscation of customs duty and with regard to imposition of penalty under various Sections of the Customs Act on the appellant importer and its Director Mrs. Latha Priyadarshini. We advice the Chief Commissioner to revisit the standard operating procedure in this regard to ensure that the system is enabled to take care of the instances where a blatant mis-declaration is avoided by the importers to bye-pass the Risk Management Module. We also direct the Chief Commissioner of Customs to consider whether it should be necessary to cause a vigilance enquiry to determine how the consignments were cleared when there were so many mis-declaration in description as well as classification of the imported Mobile Point of Sale equipments. Appeal dismissed.

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• 2020 (3) TMI 530
  Classification of imported goods - Hot Rolled Steel Plates - whether classified under CTH No. 7208 or under CTH No. 7225? - benefit of N/N. 21/2002 dated 01.03.2002 - HELD THAT:- In the case of M/s V.K. Industrial Corporation Ltd. [Final Order No. A/91475/2017 dated 11.12.2017] has set aside imposition of penalty on the ground that the duty amount along with interest was paid before issuance of the show cause notice. Since, the issue involved in the present case is identical to the case decided by the Tribunal, we find that the ratio of the said order should be applicable to these cases for setting aside the penalties imposed in the adjudication orders dated 27.06.2012 and upheld in the impugned order dated 27.05.2013. The appeals are allowed to the extent of setting aside the penalties confirmed therein - Appeal allowed in part.

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• 2020 (3) TMI 529
  Levy of Anti-Dumping Duty - import of consignments of Propylene Glycol from USA - N/N. 117/2009-Cus., dated 13-10-2009 extending the Notification No. 105/2004-Cus., dated 8-10-2004 - Rescinded notification - extension of rescinded notification. The appellant submits that the original Notification No. 105/2004-Cus., dated 8-10-2004 imposed an anti-dumping duty. This notification was valid for 5 years and it had expired on 8-10-2009 as provided in Section 9A(5) of the Customs Tariff Act, 1975. Only after expiry of the Notification on 13-10-2009 by Notification No. 117/2009-Cus., the Notification No. 105/2004-Cus. was extended up to 7-7-2010. She submits that once the original Notification No. 105/2004-Cus. has come to an end on expiry of 5 years the said notification cannot be extended. HELD THAT:- In the identical facts and on the legal issue, the Hon ble Supreme Court in the case of UNION OF INDIA AND ANOTHER VERSUS M/S. KUMHO PETROCHEMICALS COMPANY LIMITED AND ANOTHER [2017 (6) TMI 526 - SUPREME COURT] where the Hon ble Supreme Court observes that once a notification enforcing anti-dumping duty is expired and non-existent, such non-existent notification cannot be extended. In the facts of the present case, the Notification No. 105/2004-Cus., admittedly expired on 8-10-2009. Thereafter, the said notification was extended vide Notification No. 117/2009-Cus., dated 13-10-2009. Since the Notification No. 105/2004-Cus. was expired on 8-10-2009, on 13-10-2009 the Notification No. 105/2004-Cus. was not in existence. Accordingly, on 13-10-2009, it could not have been extended. Therefore, the result is that no anti-dumping duty can be levied in view of Notification No. 105/2004-Cus. which was extended vide Notification No. 117/2009-Cus. during the period after 8-9-2009. Demand not sustainable - appeal allowed - decided in favor of appellant.

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• Corporate Laws

• 2020 (3) TMI 528
  Winding up process - disbursement of amounts in discharge of debt - priority of charge of secured creditors - HELD THAT:- In present case, it is undisputed that some amount, out of sale proceeds of assets of the Company, already stands released in favour of Secured Creditors without taking into consideration the provisions of Sections 529 and 529A of the Companies Act, wherein statutory charge has been created in favour of workmen in respect of their dues from the Company over the security of every Secured Creditor and also workmen s dues have been categorized as overriding preferential payments . It is evident that under Section 529A(1)(b), the Secured Creditors shall be entitled for overriding preferential payments of debts to the extent these are governed under clause (c) of proviso to Section 529(1), pari passu with workmen s dues, if the Secured Creditor, instead of relinquishing his security and proving his debts, opts to realize his security without participating in the winding-up proceedings, and in case he participates effectively in the winding-up proceedings then Section 529A(1)(b) will not be available to the Secured Creditor for want of applicability of clause (c) of proviso to Section 529(1) of the Companies Act. Payment under Sections 529A(1)(a) and 529A(1)(b) shall be made in priority to all other dues. Amount of debt payable under Section 529A(1)(b) is to be determined, in terms of clause (c) of the proviso to Section 529(1). As held by the Apex Court, for such debt ranking pari passu with the workmen s dues for the purpose of Section 529A, two limbs of proviso to Section 529(1) are to be satisfied - In absence of security and exercise of option by Secured Creditor to realize the same, there will not be any debt equivalent to workmen s portion, realization whereof could not be made by the Secured Creditor and in such eventuality there will be no right of overriding preferential payments under Section 529A(1)(b) in favour of Secured Creditor. In the present case, there is no debt due to the Secured Creditors, falling in the category of debts defined under clause (b) of Section 529A(1) of the Companies Act, to be paid as overriding preferential payments under Section 529A(1)(b) to them. So far as workmen s dues under Section 529A(1)(a) are concerned, the Official Liquidator has submitted report of Chartered Accountant dated October 10, 2014, wherein except three claims of workmen, all claims have been verified as workmen s dues and the claims of the remaining three applicants have been got verified by the Official Liquidator lateron, after passing of order, of condonation of delay in filing of those claims, in Company Application No.36 of 2014. Therefore, workmen s dues of workmen, who had filed the claims before the Official Liquidator, stand duly verified. Fee of Chartered Accountant, in present case, is to be governed by the order dated 9.10.2007, passed by this High Court, wherein it is ordered that remuneration of the Chartered Accountant will be on case-to-case basis, depending upon the nature and quantum of work to be performed/assigned. Application disposed off.

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• 2020 (3) TMI 527
  Conversion of company from an Unlimited Liability Company to a Limited Liability Company - Section 18 of the Companies Act, 2013 - Non-speaking order - HELD THAT:- The reasons supplied in the counter affidavit are of no help to the respondents and the non-speaking order dated 05.10.2016 remains a non-speaking order, even if, the reasons have been given in the counter affidavit filed by the respondent in this writ petition - Thus, the impugned order dated 05.10.2016 deserves to be quashed and set aside. The impugned order is quashed on the ground that it is not a speaking order as no reasons have been given by the concerned respondent authority - petition allowed.

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• 2020 (3) TMI 526
  Oppression and Mismanagement - purchase of mortgaged property at a higher rate - HELD THAT:- It is not necessary for the NCLT to give a finding whether as per agreement of mortgaged, the Respondent No.5- J.M. Financial Services can sell the mortgaged property or not. Such finding can be given only after examining the allegations and counter allegations of the oppression and mismanagement levelled against the Respondent Nos. 2 to 4. The impugned order is not in any manner detrimental to the Respondent No.1 Company as well as the Appellants interest. Sub-section (4) of Section 242 of the Companies Act, 2013 provides that the Tribunal may, on the application of any party to the proceeding, make any interim order which it thinks fit for regulating the conduct of the company s affairs upon such terms and conditions as appear to it to be just and equitable - the NCLT has a vast power to pass interim order for regulating the conduct of the company s affairs and it should be just and equitable. Appeal dismissed - decided against appellant.

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• 2020 (3) TMI 525
  Conversion of Public Limited Company to a Private Limited Company - time limitation - petition was delayed as filed after three months from the date of passing of special resolution - Rule 68(1) of NCLT Rules 2016 - HELD THAT:- Rule 68(1) of NCLT Rules 2016 provides that a petition under section 14(1) of Companies Act, 2013 for conversion of a public company into private company shall, not less than three months from the date of the passing of special resolution, be filed to the Tribunal in Form No.NCLT-1. It means such petition shall be filed after three months from the date of passing of special resolution. The appellant company has passed the resolution on 14.8.2017. 1st petition was filed on 30.10.2017 which was pre-matured. Therefore, and it was withdrawn on 6.12.2017 and Second petition was filed on 19.12.2017 i.e. after three months from the date of passing of special resolution. Thus the petition is well within limitation. The appellant company is wholly owned subsidiary and unlisted public company. Therefore, in view of sub-rule (2) of Rule 4 of the Companies (Appointment Qualification of Directors) Rule 2014 appointment of at least two independent directors is not necessary. Hence non-disclosures of resignation of two independent directors will not affect the merit of the petition in any manner. The dispute between Ernest and Young and appellant company is pending before the Arbitral Tribunal hence the conversion of appellant company shall not affect the responsibility and liabilities of the appellant company - the appellant company has fulfilled the conditions for conversion and shortcomings pointed out by the NCLT are inconsequential. The special resolution dated 14.08.2017 for conversion of appellant company from public company to private company is approved.

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• Central Excise

• 2020 (3) TMI 524
  Refund granted under N/N. 39/2001-CE dated 31.07.2001 - recovery of refund sought on the ground that the production of these products were not started on declared dated 14.01.2005 - also alleged in SCN that the plant and machinery certified by the committee does not include the plant machineries subsequently installed and used for the manufacture of subject goods. HELD THAT:- The Ld. Commissioner in the adjudication order regarding the factual aspect that whether the plant and machinery were installed as on 31.12.2005 only relied upon the Assistant Commissioner s order in an identical case, however, he has not verified the facts on the basis of documents that whether the machineries were installed as on 31.12.2005. The finding of the Commissioner with reference to the Board Circular dated 10.07.2008 to the extent that even if the production is started after the date i.e. 14.01.2005, but if the Plant and Machinery were installed as on 31.12.2005, the benefit of the notification 39/2001-CE is prima facie available appears to be prima facie correct. The learned adjudicating authority decided the entire matter relying on the Tribunal s remand order dated 27.10.2015. The period of that case was different from the period of this case therefore facts of each case must be verified independently - The adjudicating authority has not verified the facts in the context of this case. The vital fact which needs to be verified is that whether the goods on which exemption was claimed were manufactured from the plant machinery installed prior to the commencement of production thereof i.e. 14.01.2005 or they were installed after 14.01.2005. The matter needs re-examination - appeal allowed by way of remand.

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• 2020 (3) TMI 523
  Interpretation of statute - Rule 6(3A)(c)(iii) of Cenvat Credit Rules, 2004 - whether in the formula prescribed under Rule 6(3A)(c)(iii) of Cenvat Credit Rules, 2004, the total Cenvat credit mentioned therein relates to only total common credit availed on inputs/input services or whether total Cenvat credit? - HELD THAT:- The said issue stands decided by the Tribunal in the case of CCE ST, Rajkot Vs M/s. Reliance Industries Ltd., [2019 (3) TMI 784 - CESTAT AHMEDABAD] - It was held therein that total Cenvat credit for the purpose of formula under Rule 6(3A) is only total credit of common input services and will not include the Cenvat credit on inputs/input services exclusively used for the manufacture or procurement of goods. The demand cannot sustain - Appeal allowed - decided in favor of appellant.

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• 2020 (3) TMI 522
  Jurisdiction - proper authority to sign the application - verification of application - case of Revenue is that the application for condonation of delay has been signed by Commissioner, Central Goods and Services Tax, Bhavnagar, who was not authorized by the Committee of Commissioners that had originally authorized to file the appeal - HELD THAT:- The perusal of Rule 8 of the CESTAT (Procedure) Rules, shows that it clearly permits the appellant to verify the application. The Rule clearly permits appeal/application/cross-objection shall be signed and verified by the appellant/applicant/respondent of the Principal Officer duly authorised to sign Memorandum of Appeal/application/Cross-objection. The appellant and respondent can verify the application. In the instant case, the Commissioner is appellant and he has filed the appeal. Consequently, the words duly authorized appearing in Rule 8 do not refer to authorization under Section 35B(2) for the reason that there is no mention of the said Section in the said Rule. The authorization referred to in Rule 8 is a normal authorization done by appellant or respondent as the said Rule applies not only to Revenue also but to the assessees. Thus, the words duly authorized appearing in Rule 8 are not with reference to Section 35B(2). In the instant case, the appeal was filed within time and there was only delay in rectification of defect pointed out by the Registry. Even otherwise, the primary objection of the Ld. Counsel for the respondent regarding the condonation of delay application being signed by an officer not authorized by Committee of Commissioners is misplaced as the requirement of filing of appeal under Section 35B is only for filing the appeals and not for other miscellaneous applications - Since there is no delay in filing the appeal, the applications for condonation of delay are dismissed as infructuous. Appeals admitted.

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• CST, VAT & Sales Tax

• 2020 (3) TMI 521
  Validity of clarification issued by the learned Commissioner of Commercial Taxes under Section 28A of the Tamil Nadu General Sales Tax Act, 1959 - Imported Pile Fabrics - whether taxable at 16% as per entry No.22A Part E of the First Schedule to the TNGST Act, 1959 for the Assessment year 2000-01? - HELD THAT:- The learned Commissioner, while exercising the powers under Section 28A of the Act, which empowers him to pass a quasi judicial order on any point concerning the rate of tax under the Act and which is a wide and significant quasi-judicial power of Advancing Ruling given to the higher authority of the Commercial Excise Department with a view to remove the difficulties and doubts about the rate of tax, has issued such orders prima facie without application of mind at all. The said order firstly has been issued in the form of a letter instead of an order and we quote below the one liner order of the learned Commissioner dated 28.03.2009. The non discussion of the facts and controversy, no reasons assigned in the order and simply holding the commodity in question viz., Imported Pile fabrics to the taxable at 16% under the Entry 22A, in our opinion, is no order in the eye of law at all under Section 28A of the Act. The Assessee not only challenged this order, but under the garb of this order even laid a frivolous challenge to the entry 22A itself without disclosing how the said entry was in any way in conflict with Section 14(vii) of the CST Act - Section 14(vii) of the CST Act gives the list of Declared Goods and it includes in clause (vii) thereof description of various types of man made fabrics covered under heading 60.01 of the Central Excise Tariff Act, 1985. Unless one establishes that the commodity in question falls under the particular category of Declared Goods, there is no question of disbelieving the applicability of the Entry 22A of the TNGST Act which on its own force applied a rate of 16% on the entry relating to 22A Textiles Imported into India from foreign country under the First Schedule to the Act. This Entry 22A is wide enough to cover even the goods in question but we are not expressing any opinion on the same. We would like also to observe that some such other non speaking orders passed by the Commissioner in exercise of Section 28A of the Old TNGST Act, 1959 and Section 48A of the TNVAT Act, 2006 have come on our notice quite often and some kind of non-speaking orders are passed by the learned Commissioners without appreciating the responsibility which lies upon them to pass well reasoned quasi judicial orders - Since we have directed above for the fresh assessment order to be passed, at this stage, the impugned order passed in the present case on 27.05.2009 for Assessment Year 2000-01 is set aside. The Writ Petitions is disposed off by relegating the Petitioner/Assessee before the learned Commissioner so that fresh orders are passed under Section 28A of the Act and then consequential appropriate assessment orders be passed in the case of the Assessee for Assessment Year 2000-01 involved in the present case.

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• 2020 (3) TMI 520
  Recovery of dues from the petitioner s bank - provisional attachment of the goods which was secured with the petitioner-Bank - Section 44 of the VAT Act - HELD THAT:- It is not in dispute that the petitioner had advanced a loan of Rs. 40,00,000/- on hypothecation of 200 cotton bales to the respondent No.3. It also emerges from the record that the respondent No.1 passed an order of provisional attachment, under Section 45 of the VAT Act after the petitioner advanced a loan to the respondent No.3. On perusal of the aforesaid provisions of the VAT Act, it is clear that the petitioner is not holding any money of the respondent No.3, who is a borrower of the petitioner and therefore, the respondent No.1 could not have issued the notice by invoking the provisions of Section 44(1)(b) of the VAT Act - the provision of Section 48 of the VAT Act would not come into play and therefore, the respondent No.1 could not have issued provisional attachment order under Section 45 of the VAT Act, nor notice could have been issued under Section 44 of the VAT Act to the petitioner. The learned Assistant Government Pleader stated that after expiry of the provisional attachment order on completion of one year, it was extended only for a period of one year and thereafter, the same was not extended. Therefore, as on today, provisional attachment order is not in existence, as per Sub-section (2) of Section 45 of the VAT Act. The impugned notices dated 07.05.2012 and 11.05.2012, issued under Section 44 of the VAT Act, are hereby quashed and set aside - Petition allowed.

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• Indian Laws

• 2020 (3) TMI 519
  Dishonor of Cheque - insufficiency of funds - section 138 of NI Act - legally enforceable debt or not - HELD THAT:- By virtue of Sections 118 and 139 of Negotiable Instruments Act, there is a presumption that the cheque was issued towards the a legally enforceable debt. The contention that a blank cheque was issued to the complainant is not tenable. Merely because a blank cheque was issued, it could not be assumed that the presumption under Section 118 and 139 of Negotiable Instruments Act, is not applicable. Even if a blank cheque was issued as contended by the accused, it is settled principle of law that presumption could be pressed into service. The Court below has rightly applied the presumption under Sections 138 and 139 of the Negotiable Instruments Act and convicted and sentenced the accused. However, considering the amount involved, it is not necessary to incarcerate the accused in prison for the offence under Section 138 of the Negotiable Instruments Act. Instead of sentencing the accused for a jail term, it is just and proper to sentence the accused to pay a fine of Rs. 10,000/- and in default to undergo simple imprisonment for a period of two months more. In case the fine amount is remitted the same shall be paid to the complainant as compensation. Revision allowed in part.

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• 2020 (3) TMI 518
  Guilty of Professional Misconduct against Chartered Accountant (CA) - recording of reason of the complaint and disclosure of the same - whether the respondent is required to communicate reasons for closing the inquiry against its member that has been initiated on a Complaint filed visa-a-vis on an Information received? HELD THAT:- Rules 7(2)(c) of the Rules provides that where the inquiry is initiated only on an Information, the Institute will be under no obligation to inform the sender of the progress made in respect of the Information received, including the final orders. In terms of Rule 5(7)(a), the order of closure of the complaint is passed by the Board of Discipline where the Complainant fails to rectify the defect in the complaint within the time allowed and an order for closure is also mandatory under Rule 9(3)(a) where Board of Discipline agrees with the prima facie opinion of the Director (Discipline) that the member is not guilty of any misconduct. Thus, where the inquiry is initiated on a complaint filed under Rule 3 of the Rules, the Complainant is entitled to receive a copy of the order closing such inquiry against the member. Order would necessarily include the reasons for the same. The Rules having themselves created this right in favour of the Complainant, it cannot be accepted that the Complainant would only be supplied with the Information of the closure of the complaint. Various judgments emphasize the requirement of recording reasons to obviate arbitrary and non-considered decisions even by the administrative authorities. Communication of such reasons to the concerned party is, therefore, essential to achieve this objective of the rule of natural justice. In absence of such communication of reasons, the objective of prescribing a condition for recording reasons may itself fail. It must be held that unless the legislature specifically or by necessary implication exempts the Authority from communicating reasons for its decision, such reasons must be communicated to the affected parties - In the present case, no such exemption is prescribed or can be inferred in the Act. Thus, it is held that the respondent no. 1 is under an obligation to provide reasons to the complainant for its prima facie conclusion of the member being not guilty of any misconduct on the complaint made by a Complainant. At the same time, it is clarified that such reasons need not be elaborate and would not widen the scope of interference of the Courts while exercising powers of judicial review - present petition is accordingly allowed directing the respondent no. 1 to communicate the reasons for its decision that was communicated to the petitioner vide the Impugned Communication dated 09.04.2018, within a period of two weeks of receipt of this order.

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• 2020 (3) TMI 517
  Dishonor of Cheque - section 138 of NI Act - argued by petitioner that the cheque in question was a post dated cheque which was issued as a security cheque without any liability and privity of contract between the petitioner and respondent No. 2 - HELD THAT:- The Negotiable Instruments Act, provides sufficient opportunity to a person who issues the cheque. Once a cheque is issued by a person, it must be honoured and if it is not honoured, the person is given an opportunity to pay the cheque amount by issuance of a notice and if he still does not pay, he is bound to face the criminal trial and consequences. It is seen in many cases that the petitioners with malafide intention and to prolong the litigation raise false and frivolous pleas and in some cases, the petitioners do have genuine defence, but instead of following due procedure of law, as provided under the NI Act and the Cr.PC, and further, by misreading of the provisions, such parties consider that the only option available to them is to approach the High Court and on this, the High Court is made to step into the shoes of the Metropolitan Magistrate and examine their defence first and exonerate them. The High Court cannot usurp the powers of the Metropolitan Magistrate and entertain a plea of accused, as to why he should not be tried under Section 138 of the NI Act. An offence under Section 138 of the NI Act is technical in nature and defences, which an accused can take, are inbuilt; for instance, the cheque was given without consideration, the accused was not a Director at that time, accused was a sleeping partner or a sleeping Director, cheque was given as a security etc. etc., the onus of proving these defences is on the accused alone, in view of Section 106 of the Indian Evidence Act, 1872. Since the mandate of the legislature is the trial of such cases in a summary manner, the evidence already given by the complainant by way of affidavit is sufficient proof of the offence and this evidence is not required to be given again in terms of section 145(1) of the NI Act and has to be read during the trial. Upon analyzing the provisions of the NI Act, it is clear that Section 138 of the Act spells out the ingredients of the offence as well as the conditions required to be fulfilled before initiating the prosecution - These ingredients and conditions are to be satisfied mainly on the basis of documentary evidence, keeping in mind the presumptions under Sections 118 and 139 of the NI Act and Section 27 of the General Clauses Act, 1897 as well as the provisions of Section 146 of the Act. The parameters of the jurisdiction of the High Court, in exercising jurisdiction under Section 482 Cr.PC, are now almost well-settled. Although it has wide amplitude, but a great deal of caution is also required in its exercise. The requirement is, the application of well known legal principles involved in each and every matter - Adverting back to the facts of the present case, this Court does not find any material on record which can be stated to be of sterling and impeccable quality warranting invocation of the jurisdiction of this Court under Section 482 Cr.PC at this stage. More so, the defence as raised by the petitioners in the petition requires evidence, which cannot be appreciated, evaluated or adjudged in the proceedings under Section 482 of Cr.PC and the same can only be proved in the Court of law. There are no flaw or infirmity in the proceedings pending before the Trial Court. However, the Trial Court shall certainly consider and deal with the contentions and the defence of the petitioner in accordance with law - petition dismissed.

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• 2020 (3) TMI 516
  Smuggling - Psychotropic Substance - poppy straw - it has been mainly contended by learned counsel for the appellants that no public witness has been joined at the time of recovery; the mandatory provisions of Section 42 of the Act have not been complied with; there are discrepancies and infirmities in the case of prosecution and the appellants have been falsely implicated on account of party faction. HELD THAT:- In the case in hand, the recovery has been effected by Inspector Nand Lal (PW4) in the presence of ASI Jaswant Singh (PW3). Both the witnesses to the recovery have deposed in a fairly satisfactory manner on all the material aspect of the case. They have given a satisfactory count with regard to the sequence of events leading to the recovery of incriminating articles from the possession of the appellants. No ill will, animosity or bias is made out against the appellants by the police officials and no reason is made out for their false implication. The deposition of the witnesses inspire confidence and are fairly reliable to base the conviction of the appellants. The deposition of the witnesses sufficiently proves and establishes the material fact of recovery of the incriminating articles from the conscious joint possession of all the three appellants beyond the shadow of reasonable doubt. Once the material fact of recovery of incriminating articles from the conscious possession of the appellants is proved and established by satisfactory and reliable evidence, the inconsequential infirmities and unimportant flaws in the case of prosecution tend to pale into insignificance - The learned trial Court has recorded the findings of conviction on the basis of satisfactory and reliable evidence establishing the guilt of the appellants beyond the shadow of reasonable doubt and the same does not call for any interference by this Court. Appeal dismissed.

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• 2020 (3) TMI 515
  Dishonor of Cheque - insufficiency of funds - legally enforceable debt/liability or not - rebuttal of presumption - Section 139 of Negotiable Instruments Act - HELD THAT:- Though the Trial Court has acquitted accused on the basis that complainant did not prove that there was legally enforceable debt or liability, the appeal is dismissed on the basis that complainant was economical with truth and came with tainted hands and any party coming to Court should come with clean hands and speak the truth. This Court have, on many occasions, stated that if a party comes to the Court with unclean hands, which in this case plaintiffs have, the party should be dealt with very strongly and substantial costs also should be imposed on the party. The conduct of complainant intends to impede and prejudice the administration of justice. Judiciary is the bedrock and handmaid of orderly life and civilized society. There is an acquittal and therefore, there is double presumption in favour of accused. Firstly, the presumption of innocence available to accused under the fundamental principle of criminal jurisprudence that every person shall be presumed to be innocent unless he is proved guilty by a competent court of law. Secondly, accused having secured acquittal, the presumption of his innocence is further reinforced, reaffirmed and strengthened by the Trial Court. For acquitting accused, the Trial Court observed that the prosecution had failed to prove its case. Thus, the opinion of the Trial Court cannot be held to be illegal or improper or contrary to law - The order of acquittal cannot be interfered with - appeal dismissed.

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• 2020 (3) TMI 514
  Dishonor of Cheque - acquittal of offence punishable U/s. 138 of N.I. Act in view of provisions of Sec. 256 of Cr. P. C. - issuance of summons - HELD THAT:- Admittedly in this case, process, i.e., summons, has been issued and even plea has been recorded. Therefore, the judgment of this Court in BALIRAM S/O. RAMCHANDRA PATIL VERSUS ASHOK S/O. PUNDALIK PATIL [ 2017 (6) TMI 1322 - BOMBAY HIGH COURT] relied upon by the counsel for appellant is not applicable to the facts and circumstances of this case. It is because in that case even process had not been issued. In this case, the conduct of the complainant has to be noted. On 18th February 1997, the plea of the accused has been recorded. On the date the impugned order was passed also the accused was present. The complainant remained absent on the date of hearing. The matter was adjourned and on 26th May 1997, when the accused was acquitted, the complainant and its advocate were again absent although repeatedly called till 4.00 p.m. The Magistrate also has noted that there is no application on record to adjourn the matter further. Further the impugned order is dated 26th May 1997. The appeal has been lodged on 10th November 1998, almost 1 years after the order of acquittal. Moreover, there is no explanation even in the appeal as to why the complainant or its pleader did not remain present on 26th May 1997 or the earlier date of hearing as recorded in the impugned order. If the summons has been issued on complaint and on the date appointed for the appearance of accused or any day subsequent thereto to which the hearing may be adjourned, the complainant does not appear, the Magistrate shall, acquit the accused, unless for some reason the Magistrate thinks it proper to adjourn the hearing of the case to some other day. Therefore, Section 256 mandates that if the complainant does not remain present on the appointed day after summons has been issued on complaint and unless attendance of complainant has been dispensed with, the Magistrate shall acquit the accused. If the Magistrate feels that the order of acquittal should not be passed on that date, the Magistrate has to give reasons - Although an order of acquittal is of immense significance, there cannot be any doubt or dispute whatsoever that the discretion in this case had been properly exercised by the Magistrate. There are no illegality in the order that requires this Court s interference - appeal dismissed.

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