TMI Tax Updates - e-Newsletter
March 20, 2021

Case Laws in this Newsletter:

GST Income Tax Customs Insolvency & Bankruptcy PMLA Service Tax Central Excise Indian Laws

Articles

1. THE UNLAWFUL ACTIVITIES (PREVENTION) ACT, 1967 – AN OVERVIEW – PART I

   By: DR.MARIAPPAN GOVINDARAJAN

News

1. Exports from the Manufacturing Sector

2. India’s Trade Performance during COVID-19 Period

3. 4th Review meeting held under Indo-Japan Memorandum of Cooperation on Industrial Property

4. Income Tax Department conducts searches in Tamil Nadu

5. Income Tax Department conducts searches in Haryana

Notifications

Companies Law

1. S.O. 1257 (E) - dated 18-3-2021 - Co. Law

Central Government establishes Central Scrutiny Centre (CSC) for carrying out scrutiny of Straight Through Processes (STP) e-forms

2. S.O. 1256 (E) - dated 18-3-2021 - Co. Law

Amendment to Schedule V of the Companies Act., 2013

3. S.O. 1255 (E) - dated 18-3-2021 - Co. Law

Seeks to bring in force section 32 and 40 of Companies (Amendment) Act, 2020

Customs

4. 14/2021 - dated 18-3-2021 - ADD

Seeks to impose definitive anti-dumping duty on imports of “Faced Glass Wool in Rolls” originating in or exported from People's Republic of China.

Highlights / Catch Notes

GST

• Court Denies Anticipatory Bail for Alleged ITC Fraud; Parity Principle Inapplicable Due to Different Circumstances.

  Case-Laws - DSC : Seeking grant of Anticipatory Bail - illegal availment of ITC on GST, on the basis of forged invoices - other co-accused whose case was on similar footing was granted bail after his arrest and here in this case accused is coming for anticipatory bail while apprehending arrest from the department. Therefore, the ground of parity cannot be said to be applicable to the applicant on this application. - DSC
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Income Tax

• Tribunal Grants Relief on CENVAT Scheme; Applies M/s. NCS Distilleries Precedent, Resolves Legal Questions Against Revenue.

  Case-Laws - HC : Allowable expenditure under Income Tax Act - opening balance in Service Tax Set Off Account (STA) made by the assessee - In fact, the Tribunal has taken into consideration as to how the CENVAT Scheme operates and granted relief to the assessee. The Tribunal has once again re-appreciated the factual position and found that the decision in M/s.NCS Distilleries P. Ltd., would fully apply to the case on hand - substantial questions of law are answered against the Revenue. - HC
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• High Court Remands Tribunal's Decision on Computerization Costs, Calls for Detailed Review of Revenue vs. Capital Expenditure.

  Case-Laws - HC : Allowable revenue expenditure - expenditure towards computerization - as per revenue assessee has spent the same on networking of 125 branches with a centralized processing solution and the activity has a long term benefit, warranting capitalization of the expenditure spent for the same - tribunal has recorded the conclusion that the expenditure incurred by the assessee for computerization of its branches is revenue in nature - The order passed by the tribunal is cryptic in nature and suffers from vice of non application of mind - Matter remanded back - HC
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• Setting Off Business Losses Against Capital Gains on Business Assets: Flexibility Under Income Tax Act Section 72(1) Explained.

  Case-Laws - HC : Set off of brought forward of business loss against capital gain arising on sale of business asset used for the purpose of business - Section 72(1) of the Act employs the expression computation 'under the head profits and gains or profession', whereas, Section 72(1)(i) does not use the expression under the head. Thus, the legislature has consciously left it open that any income from business though classified under any other head can still be entitled to the benefit of set off. - HC
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• Court Upholds Reopening of Assessment u/s 147; AO Had "Reasons to Believe" Income Escaped Assessment.

  Case-Laws - HC : Reopening of assessment u/s 147 - reasons to believe - Having regard to the material on record, we are of the view that the Assessing Officer has initiated the proceedings not only on the information received from the concerned department but based upon his independent satisfaction and other available material to form a belief with regard to the escape assessment of income - AO is justified in reopening the assessment of the assessee - HC
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• Tribunal's Decision on Land Payments Criticized for Ignoring Project Challenges and Solely Relying on Initial Agreement Clauses.

  Case-Laws - HC : Disallowance of payment paid to the landlord towards the land expenses - Tribunal has merely relied upon certain clauses of the Joint Development Agreement which was entered into at the initial stage of the project. During the course of the project, there occurred many obstacles and hurdles and they were faced by the appellant and therefore, merely relying on the Joint Development Agreement, the Tribunal erred in law and facts, especially when the Tribunal has not doubted the genuineness of the expenditure incurred by the appellant. - HC
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• Assessment Reopening Under Income Tax Act Section 147 Quashed Due to Flawed Approval by Additional Commissioner.

  Case-Laws - AT : Reopening of assessment u/s 147 - Addl. CIT who has given approval for such reopening has simply mentioned that “ yes, I am satisfied that this is a fit case for issue notice of u/s 148 of I.T. Act”. A perusal of the approval given by the Addl. CIT shows that he has not applied his mind properly and has in a mechanical manner given his approval - Reassessment proceedings initiated by the AO are not as per law and has to be quashed. - AT
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• Section 68 Amendment Questions High-Premium Share Investments in Defunct Company Without Business Activity Since 2007.

  Case-Laws - AT : Addition u/s.68 of the Act on account of share capital and share premium - In the absence of any business activity of a company, which was closed since 2007, we fail to appreciate as to how all the corporate investors coming exclusively from Mumbai and Kolkata would join and invest in the shares of such a company, and that too at a premium of 300% of the face value, which had no running business and further there were no returns on such investment. - AT
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• Court Orders Reassessment of Property Value Due to Lack of Fair Hearing and Ignored Local Differences in Rental Calculation.

  Case-Laws - AT : Income from house property - ALV determination - AO has though adopted the rate of rent as it was agreed upon between the parties in respect of property in the vicinity however, the assessee did not give the opportunity to the assessee to present its case against such adoption of the annual letting value. The Assessing Officer has also not taken the facts which might have influenced the fair market rental value of the property being the difference in the locality of the properties, the area let out advantage and disadvantage if any attached to the properties - Matter restored back - AT
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• Unexplained Bank Deposits Deemed Taxable u/s 44AE Due to Lack of Evidence in Transport Business Case.

  Case-Laws - AT : Unexplained deposits made in Bank Account - Whether the amount represents receipt from transport business and taxable u/s 44AE - Held No - This claim could have been merited acceptance if the assessee had shown the list of persons and their confirmations etc. for whom he did the transportation business and the resultant transportation receipts. No such evidence has been placed on record. - Additions confirmed - AT
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• Reopening Assessments for Under-Reported Capital Gains Valid u/s 147 if Relevant Facts Overlooked; Not a 'Change of Opinion'.

  Case-Laws - AT : Validity of reopening of assessment u/s 147 - under-reporting of capital gains - where the relevant facts have been overlooked and has not taken cognizance of, resulting in escapement of chargeable income, such omission would not constitute ‘change of opinion’. In the absence of any other contention, we do not see any merit in the plea of assessee towards wrongful usurpation of jurisdiction u/s 147 - AT
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• Dispute Over R&D Expense Deduction u/s 35(2AB); AO Denies Due to Missing Form 3CL, Legal Rights Questioned.

  Case-Laws - AT : Deduction u/s 35(2AB) - expenditure incurred on R&D centre - AO held that in the absence of Form 3CL, such deduction is not allowable - the assessee should not be shorned of the legal right bestowed upon by the provisions of the Income Tax Act. The revenue may disallow the claim of the asseseee if it can prove that the claim of the assessee is wrong after obtaining the report in Form 3CL from the concerned authority. - AT
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Customs

• High Court Orders Release of Seized Goods After Customs Misses Deadline u/s 110(2) of the Customs Act.

  Case-Laws - HC : Seeking release of seized consignment - Section 110 (2) read with the proviso thereto - SCN not issued within six month and further extension of six month sought - The intimation of extension should have been brought to the knowledge of the petitioner on or before 05.09.2020, accompanied by the reasons recorded for the extension. However, by virtue of the relaxation ordinance, such time stands extended to 30.09.2020. However, and admittedly, the intimation has been received by the petitioner only on 07.10.2020, beyond the date stipulated in the proviso to Section 110(2) and the reasons for extension have also not been supplied. - Goods directed to be released - HC
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• Court Decision on SAD Refunds Pre-GST Period Misguided by Rescinded Notification No. 34/1998-Cus.

  Case-Laws - AT : Refund of SAD - sales during pre-GST period - Sale of goods at NIL / Exempted rate of VAT - both the authorities have wrongly relied upon the decision of the Apex Court which was in respect of Notification No. 34/1998-Cus. dated 13.06.1998. Further I find that the said Notification 34/1998 has been subsequently rescinded by Notification 58/1998-Cus. dated 01.08.1998. Therefore, reliance by both the parties on a Notification which has been rescinded is not tenable in law. - AT
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Central Excise

• Supreme Court Upholds Valuation Method for Duty Payment u/s 4(1)(a), Dismisses Additional Demand.

  Case-Laws - AT : Method of Valuation - assessable value adopted for payment of duty is lower than the actual cost of manufacture of said products - there is no flow back of additional consideration - The Apex Court taking note of the fact that when there was no additional consideration and the goods were cleared to independent buyers, upheld the valuation adopted by the assessee under Section 4(1)(a). - Demand set aside - AT
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Case Laws:

• GST

• 2021 (3) TMI 750
  Alleged discrepancy in GSTR-2A and GSTR-3B - ITC availed - HELD THAT:- Matter be listed after five weeks. Learned counsel for the parties may submit their written notes, provisions of law and decisions on which they seek to rely upon, at least three days before the next date of hearing.

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• 2021 (3) TMI 749
  Seeking Refund of IGST - HELD THAT:- In case the respondents wish to resist the petition, they will file a counter-affidavit before the next date of hearing. In any event an affidavit, will be filed, before the next date of hearing, as regards the instructions received in the matter with regard to the IGST refund and the verification of the petitioner s suppliers. List the matter on 20.04.2021.

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• 2021 (3) TMI 745
  Calculation of amount of Interest - whether interest can be levied on the gross amount or net amount? - Section 50(1) of the Central Goods and Services Tax Act, 2017 - HELD THAT:- It is brought to our notice that in the recent budget of 2021-22, an amendment has proposed under Section 103 of the Finance Act to be made applicable with retrospective effect that the interest shall be payable only on the amount where the tax has to be paid in cash and the tax which has been paid through the electronic cash ledger - The assent of the President to this amendment is awaited. Nothing further requires to be adjudicated in the present writ application - Application disposed off.

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• 2021 (3) TMI 709
  Seeking grant of Anticipatory Bail - Application rejected on the ground that the applicant has no reason to believe that he may be arrested in a non bailable offence and that the reasons must be founded on reasonable grounds - illegal availment of ITC on GST, on the basis of forged invoices - Creation of fake firms - HELD THAT:- In this case accused has been shown as the person who has been avoiding the investigation since 2019 even not responding to the summons and notices of the department which has resulted into delay in the investigation. In order to seek such relief the accused should have come with clean hands and as per the averments of the defendant despite having registered the firm at the address of Faridabad, he has not responded to the communication of the department. Apart from this, other co-accused whose case was on similar footing was granted bail after his arrest and here in this case accused is coming for anticipatory bail while apprehending arrest from the department. Therefore, the ground of parity cannot be said to be applicable to the applicant on this application. There are no ground to grant protection by way of anticipatory bail - application dismissed.

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• Income Tax

• 2021 (3) TMI 747
  Revision u/s 263 - Tribunal relying upon section 43(2) of the Act to allow the deduction on account of expenditure towards acquisition of distribution rights without actual payment, overlooking Explanation to Rule 9B(1) of the Income Tax Rules - HELD THAT:- As per Explanation to Rule 9B, the cost of acquisition means the amount paid by the film distributor to film producer under an agreement. In the case on hand, admittedly, the assessee was following mercantile system of accounting. Therefore, as per section 43(2), the paid will include what is incurred as per the method of accounting followed by the assessee for computing the income from business. The revenue has not disputed that the assessee was following the mercantile system. Therefore, the assessee was well within his right to claim the whole of the sum mentioned in agreement as part of the cost of acquisition. AO had called for the relevant agreement during the course of original assessment proceedings and the assessee also submitted the same before the AO. AO during the course of original assessment proceedings, considered the issues and gave the allowances to the assessee. Revisionary powers were invoked by the Commissioner of Income Tax based on letter of the Assessing Officer and not based on an independent assimilation of facts. The Tribunal has rightly observed that the Commissioner of Income Tax was only trying to stamp his approval to a change of opinion of the Assessing Officer. The Tribunal has rightly came to the conclusion that the original order of the Assessing Officer did not suffer from any error which was prejudicial to the interests of revenue, warranting invocation of revisionary powers vested on the Commissioner of Income Tax under section 263 - Decided in favour of assessee.

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• 2021 (3) TMI 746
  Allowable expenditure under Income Tax Act - opening balance in Service Tax Set Off Account (STA) made by the assessee - Tribunal deleted the addition - HELD THAT:- CIT(A) took note of the decision in the case of Girdhar Fibres P. Ltd. Vs. ACIT [ 2012 (11) TMI 161 - ITAT, AHMEDABAD ] wherein, identical issue was decided in favour of the assessee. The Revenue seeks to distinguish the decision in the case of M/s.NCS Distilleries P. Ltd. [ 2014 (9) TMI 1160 - ITAT HYDERABAD ] by referring to certain factual aspects stating that in the said case, the unit had been closed down. However, the said contention sought to be given by the Revenue is not tenable, because the assessee could not have availed the set off on account of operation of law and from the assessment year 2007-08 onwards, Central Excise duty on edible oils were deleted. In the case of M/s. NCS Distilleries P. Ltd., it appears that the union was merged with other company and therefore, the credit remained unutilized. However, this is not a feature to distinguish the said decision. In fact, the Tribunal has taken into consideration as to how the CENVAT Scheme operates and granted relief to the assessee. The Tribunal has once again re-appreciated the factual position and found that the decision in M/s.NCS Distilleries P. Ltd., would fully apply to the case on hand - substantial questions of law are answered against the Revenue.

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• 2021 (3) TMI 744
  Disallowance u/s 36(1)(ii) - HELD THAT:- Issue involved in the present appeal is covered by the decision of this Court in M/s.True Value Homes (India) Pvt. Ltd [ 2021 (3) TMI 529 - MADRAS HIGH COURT ] - Decided in favour of assessee.

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• 2021 (3) TMI 743
  MAT Computation - Addition of prior period expenses in computing book profits - HELD THAT:- If this amount was not required to be part of Profit Loss Account prepared as per Schedule VI of the Companies Act, then undisputedly this amount not being part of any of the clauses of Explanation to Section 115JB cannot be excluded from net profit for the purposes of computing book profit u/s 115JB. Since, neither the revenue nor the assessee has furnished any record in support of their respective claims, whether this amount of prior period expenditure was required to be part of profit and loss account prepared as per provisions of Schedule VI of the Companies Act, therefore, in the facts and circumstances of the case, we set aside this issue to the record of the CIT(A) to re examine the issue light of the relevant provisions of Schedule VI of the Companies Act as well as the relevant accounting standard applicable on this item of expenditure and then give a finding whether this amount of prior period expenditure is required to be part of profit and loss account or not. It is evident that while passing the order, the tribunal has not adverted to the reasoning assigned by the Commissioner of Income Tax (Appeals). Therefore, we answer the second substantial question of law in favour of the assessee and against the revenue. In the result, the impugned order passed by the tribunal dated 29.12.2015 is quashed. We may clarify that decision of this court in CIT VS. GMR INDUSTRIES LTD [ 2020 (3) TMI 286 - KARNATAKA HIGH COURT ] was rendered in the peculiar facts of that case. Needless to state that it will be open for the parties to raise all contentions as are admissible to them in law.

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• 2021 (3) TMI 741
  Allowable revenue expenditure - expenditure towards computerization - as per revenue assessee has spent the same on networking of 125 branches with a centralized processing solution and the activity has a long term benefit, warranting capitalization of the expenditure spent for the same - tribunal has recorded the conclusion that the expenditure incurred by the assessee for computerization of its branches is revenue in nature - HELD THAT:- The order passed by the tribunal is cryptic in nature and suffers from vice of non application of mind. Even the contention by the revenue that the decision rendered in IBM India Ltd. [ 2013 (10) TMI 1225 - KARNATAKA HIGH COURT ] does not apply to the case of the assessee has not been considered. No reasons have been assigned for holding that decision rendered in the case of IBM India Ltd. Applies to the facts of the case of the assessee. Therefore, in view of contentions raised by both the parties before us, we deem it appropriate to quash the order passed by the tribunal so far as it pertains to findings of substantial question of law No.1 and remit the matter to the tribunal for decision afresh in accordance with law after considering the rival submissions made on both sides. Deduction u/s 36(1)(vii) - assessee did not receive any income during the year and is not eligible for the deduction - HELD THAT:- The second substantial question of law is covered by decision of this court in COMMISSIONER OF INCOME TAX VS. SYNDICATE BANK [ 2020 (2) TMI 1020 - KARNATAKA HIGH COURT ] - For the reasons assigned in the aforesaid judgment, the second substantial question of law is answered in favour of the revenue and against the assessee. Amortization of cost over face value of investment held to maturity - Whether such securities have characteristic of capital asset rather than stock in trade and the investment done as per RBI Guidelines is not an allowable revenue expenditure in terms of Section 37(1) of the Act? - Tribunal holding that the provisions of Section 115JB are not applicable to the assessee, it being a banking company, even though there is no such provision/exclusion under the IT Act - HELD THAT:- For the reasons assigned in the decisions in CIT VS. KARNATAKA VIKAS GRAMEEN BANK [ 2015 (12) TMI 1420 - KARNATAKA HIGH COURT ] and CIT VS. ING VYSYA BANK LTD. [ 2020 (1) TMI 1116 - KARNATAKA HIGH COURT ] the third and fourth substantial questions of law are answered against the revenue and in favour of the assessee.

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• 2021 (3) TMI 738
  Net profit estimation - turnover on account of main contract ad sub-contract works - While the AO had brought the entire amount to tax, CIT(Appeals) had held that the entire amount cannot be brought to tax and it is only the income portion of the Labour charges which is to be brought to tax and he then levied 9% to the additional income admitted and brought it to tax - Tribunal modified it as 9% of the turnover on the main contracts and 6% on the turnover on account of sub-contract works - HELD THAT:- Finding of Tribunal is based on the finding recorded by the Commissioner of Income Tax (Appeals) himself that the Net Profit of the assessee is to be estimated at 9% on main contract works and 6% on sub-contract works. Tribunal specifically observed that the Commissioner of Income Tax (Appeals) could not have adopted 9% net profit on this entire amount and he ignored the fact that the appellant was also working both as a main contractor and a sub-contractor. The finding of the Tribunal appears to be in consonance with the findings of the Commissioner of Income Tax (Appeals), and it did not commit any error in directing the Assessing Officer to recompute the Net Profit at 9% of the turnover on the main contracts and at 6% of the turnover on the sub-contract works. These are finding of facts and no substantial question of law arises for consideration in Appeal under Section 260-A of the Income Tax Act, 1961.

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• 2021 (3) TMI 737
  Set off of brought forward of business loss against capital gain arising on sale of business asset used for the purpose of business - Whether the Tribunal was justified in law in not holding that the income arising out of sale of business assets has the character of business income, and consequently the income though assessed as capital gain is entitled to set off against the carry forward business loss on the facts and circumstances of the case? - HELD THAT:- It is pertinent to note that proviso to Section 72(1)(i) was omitted by Finance Act, 1999 with effect from 01.04.2000. Therefore, for the Assessment Year in question i.e., 2003-04, the assessee was not required to have carried on the business for the purposes of set off of brought forward business. It is well settled rule of statutory interpretation that intention of statute has to be gathered from the language employed by the legislature which means attention has to be paid to what has been said and what has not been said. Section 72(1) of the Act employs the expression computation under the head profits and gains or profession , whereas, Section 72(1)(i) does not use the expression under the head. Thus, the legislature has consciously left it open that any income from business though classified under any other head can still be entitled to the benefit of set off. In COCANADA RADHASWAMI BANK LTD [ 1965 (4) TMI 11 - SUPREME COURT ] the Supreme Court dealt with Section 24(2) of the Act which is parimateria with Section 72 of the Act. Therefore, the aforesaid decision applies to the fact situation of the case. In view of aforesaid enunciation of law, it is evident that the assessee is entitled to set off brought forward loss against income which has the attributes of business income even though the same is assessable to tax under a head other than profits and gains from business. Therefore, the substantial questions of law 1 and 2 are answered in favour of the assessee and against the revenue. Notice issued under section 148 - HELD THAT:- No order has been passed under Section 254(1) of the Act and the order answering the reference cannot be termed as an order under Section 254(1) of the Act. Therefore, we are not inclined to examine the validity of the proceedings under Section 148 of the Act as on the issue of validity of the aforesaid finding, the tribunal has to record its findings. Therefore, in our opinion the matter requires to the remitted to the final fact finding authority under the Act for recording the findings on merits with regard to remaining two substantial questions of law. Therefore, we do not propose to answer the substantial questions of law Nos.3 and 4.

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• 2021 (3) TMI 736
  Reopening of assessment u/s 147 - reasons to believe - HELD THAT:- It is settled law that Section 147 of the Act authorizes and permit the Assessing Officer to assess or reassess income chargeable to tax, if he has reason to believe that the income for any assessment year has escaped assessment. The expression reason to believe has been explained by the Apex Court in the case of CIT Vs. Rajesh Jhaveri Stock Broker [ 2007 (5) TMI 197 - SUPREME COURT] - It was held that the expression reason to believe cannot be read to mean that Assessing Officer should have finally ascertained the fact by legal evidence or conclusion. It is an undisputed fact that the return of income of the assessee was processed under Section 143(1) of the Act and was accepted without any scrutiny and no assessment stipulated under Section 2(40) of the Act was made. The record indicates that notices under Section 143(2) and 142(1) dated 28.09.2018 and 22.11.2018 respectively had been served upon the assessee and the assessee did not have responded to the notices and failed to furnish necessary information called for by the revenue. As carefully examined the reasons for reopening we find that the information received by the concerned department was specific, clear and unambiguous, so far the involvement of the assessee is concerned. The Assessing officer has observed that the main business of Harshaben Gosai and Kundan Mudaliar was to provide accommodation entries through bogus billing without actual delivery of goods and the assessee company was one of the beneficiaries amongst the other companies whose names were given by the Kundal Mudaliar. Assessing Officer further observed that the name of assessee company was also found in the bank statement of Mahavir Enterprise. Assessing Officer has further observed that the assessee company has received payment from PM Co. and made the payment of Rs. 9628150/- to J.K. Enterprise and the name of these two entities were also found in the bank statement of Mahavir Enterprise. Assessing Officer after receiving the information had verified the details of the assessee and called for information under Section 133(6) of the Act and also obtained bank statement of all concerned and finally observed that the transactions made with two entities through bank channels having direct link with Mahavir Enterprise as money has routed through the bank account of Mahavir Enterprise and Harshaben Gosai being a Proprietor of the Firm managed to provide accommodation entries through bogus billing and the sales and purchase shown in the books of assessee are bogus and the assessee has received the benefit of bogus entry and the income earned from this accommodation entries has escaped assessment. Assessing Officer himself was satisfied with regard to the information received and other material available with him and came to conclusion that the transactions reflected in the bank statement as well as in the books of accounts were false and bogus and two entities as well as assessee having direct link with the Mahavir Enterprise and routed the money in tune of Rs. 3,12,77,640/-. Having regard to the material on record, we are of the view that the Assessing Officer has initiated the proceedings not only on the information received from the concerned department but based upon his independent satisfaction and other available material to form a belief with regard to the escape assessment of income. Assessing Officer is justified in reopening the assessment of the assessee and it could not be said to have that the impugned notice under Section 148 of the Act is without jurisdiction and contrary to Section 147 of the Act and/or bad in law - Decided against assessee.

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• 2021 (3) TMI 735
  Disallowance of payment paid to the landlord towards the land expenses - appellant-Company had to pay compensation on account of landlord to various tenants from time to time to get the possession of the property for development - HELD THAT:- The appellant decided to settle the dispute between Mr. D. Ramesh and his sister in order to continue with the construction of project on reliasation of the property that may arise from the sale of apartments and under those circumstances, the amount was paid to Mr.D.Ramesh. Tribunal has merely relied upon certain clauses of the Joint Development Agreement which was entered into at the initial stage of the project. During the course of the project, there occurred many obstacles and hurdles and they were faced by the appellant and therefore, merely relying on the Joint Development Agreement, the Tribunal erred in law and facts, especially when the Tribunal has not doubted the genuineness of the expenditure incurred by the appellant. The amount which was paid to Mr.D. Ramesh was rightly treated as cost of the project as evidenced by the accounts which was certainly within the knowledge of the Assessing Officer and the Appellate Authority. The cost of the project includes the sum paid to Mr. D. Ramesh and the entire project has been sold out as reflected in the profit and loss account. Therefore, the Tribunal has certainly on erroneous assessment of facts, not allowed the amount paid to Mr.D.Ramesh as deduction, as cost towards the project. The Tribunal was certainly having no power to re-write the agreement and if the parties have modified the understanding by an agreement, the same should not have been ignored specially when the amount paid to Mr.D. Ramesh was certainly an expenditure, it should have been allowed as a deduction. - Decided against revenue.

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• 2021 (3) TMI 732
  Validity of proceedings initiated u/s 153C - satisfaction recorded by the AO should mention that the incriminating material found during the course of search showed undisclosed income of another assessee - CIT-A cancelled the proceedings initiated against assessee - HELD THAT:- Admittedly, no specific observation has been made in the satisfaction recorded by the Assessing Officer that the incriminating material shows availability of any undisclosed income. Hence the decision rendered by Hon ble Karnataka High Court in the assessee s own case [ 2016 (5) TMI 372 - KARNATAKA HIGH COURT ] shall squarely apply to both the years under consideration. In view of the foregoing discussions and further, since the Ld CIT(A) has followed the binding decision rendered by Hon ble jurisdictional Karnataka High Court, we do not find any reason in interfering with the order passed by Ld CIT(A) cancelling the initiation of proceedings u/s 153C of the Act. Accordingly, we uphold the order passed by the learned CIT(A) in both the years under consideration. - Decided against revenue.

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• 2021 (3) TMI 731
  Interest under Section 244A - refund being the excess of tax liability on the assessed income over the taxes paid under section 143(1) - CIT(A) expressed the view that interest should be given to the assessee under Section 244A of I.T. Act for the full month even if tax is paid by the assessee on the last day of the month - Revenue is of the view that for constituting part of the month, at least one day should have been completed and a few hours of the day do not constitute part of the month - HELD THAT:- At the time of hearing before us, the representatives of both sides were in agreement that the issue in dispute is covered by the order of Co-ordinate Bench of Income Tax Appellate Tribunal, Delhi in assessee s own case [ 2020 (9) TMI 1045 - ITAT DELHI] wherein held having gone through the specific provisions of the Act, pertaining to computation of interest u/s 244A(1)(a) and Sec. 244A(1)(b) as well as Sec. 234A, Sec. 234B Sec. 234C, we hereby hold that the rule of collection of interest on the taxes due from the taxpayer would be applicable in the comparable way while paying interest to taxpayer on the refund. We direct the Assessing Officer to allow interest under Section 244A of I.T. Act to the assessee to the entire month even when payments / adjustments were made on the last day of the month. Accordingly all the three appeals filed by Revenue are dismissed.

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• 2021 (3) TMI 728
  Reopening of assessment u/s 147 - validity of approval given by Addl. CIT - validity of reasons to believe - bogus share capital / share application money received - HELD THAT:- A perusal of the reasons recorded shows that the name of the companies from whom the assessee company is alleged to have accepted share capital / share application money are different from the companies mentioned in the assessment order from whom the assessee company has actually taken the share capital / share application money. Even the Ld. DR in his written synopsis has also admitted the mistake stating that the same is a typographical error. This clearly shows that neither there was any independent application of mind by the AO while recording reasons nor application of mind by the Addl. CIT while giving approval. The reassessment proceeding was made on wrong and incorrect facts and, therefore ,makes the reopening null and void. In the case of PCIT vs. Meenakshi Overseas (P) Ltd. [ 2017 (5) TMI 1428 - DELHI HIGH COURT] has held that where reassessment was resorted to on the basis of information from DIT (Investigation) that assessee had received accommodation entry but there was no independent application of mind by Assessing Officer to tangible material and reasons failed to demonstrate link between tangible material and formation of reason to believe that income had escaped assessment, reassessment was not justified. Addl. CIT who has given approval for such reopening has simply mentioned that yes, I am satisfied that this is a fit case for issue notice of u/s 148 of I.T. Act . A perusal of the approval given by the Addl. CIT shows that he has not applied his mind properly and has in a mechanical manner given his approval - Reassessment proceedings initiated by the AO are not as per law and has to be quashed. Reassessment proceedings initiated by the AO by recording wrong and incorrect facts and the approval given by the Addl. CIT in a mechanical manner without application of mind makes the entire reassessment proceedings a nullity - Decided in favour of assessee.

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• 2021 (3) TMI 725
  Reopening of assessment u/s 147 - CIT(A) treating the notice under section 148 of the Act to be defective entirely on technical grounds - HELD THAT:- There was repeated non-compliance by the AO to the letters issued by the Ld. CIT(A). In such a situation like the present one, the Ld. CIT(A) has rightly decided the appeal on the basis of materials available on record before him. In view of the facts and circumstances of the case narrated above, we affirm the order of the Ld. CIT(A). - Decided against revenue.

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• 2021 (3) TMI 724
  Disallowing proportionate interest expense claimed as a deduction u/s 36(1)(iii) - AO made the said disallowance on the ground that the assessee had utilized directly or indirectly, its interest bearing funds for giving interest-free loans - HELD THAT:- The Hon ble Bombay High Court in the case of CIT v. Reliance Utilities Power Ltd. [ 2009 (1) TMI 4 - BOMBAY HIGH COURT ] has held in the context of section 36(1)(iii) of the Act that if there is interest-free funds available to an assessee sufficient to meet its investment and at the same time the assessee had raised a loan it can be presumed that the investments were from the interest-free funds available . The above ratio laid down by the Hon ble Jurisdictional High Court is to be examined in the instant case. Therefore, we set aside the order of the Ld. CIT(A) on the above issue and restore the matter to the file of the AO to examine the applicability of the ratio laid down in Reliance Utilities Power Ltd.(supra). We direct the assessee to file the relevant documents/evidence before the AO. Assessee appeal is allowed for statistical purposes.

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• 2021 (3) TMI 723
  Reopening of assessment - mismatch of income as shown by the assessee in the return of income filed with the Department , and income from contractual receipts as is reflected in Form No. 26AS - HELD THAT:- There could be a bonafide belief in including income in a particular year say in the instant case , the assessee has claimed that income was received in preceding previous year viz. 2013-14 and the assessee included the same as income for that year and paid taxes, but the Alstom T D included the said amount in TDS returns for current year under consideration . Now, it is for revenue to bring on record cogent material to prove that prejudice is caused to Revenue or there is malice on part of assessee to have included said income in preceding previous year while it ought to have been included in the current previous year income. However at the same time we are of the considered view that this contention of the assessee that the said amount is duly included in the return of income filed for preceding previous year and due taxes paid for previous year 2013-14 requires verification. We are restoring this issue to the file of the AO for fresh adjudication and the assessee is directed to provide all necessary evidences to prove that income of Rs. 18,46,865/- reflected by Alstom T D in TDS return filed for current year is the same amount which was paid by Alstom T D to assessee in preceding year and the same income was duly included by assessee in return of income filed with the department for ay: 2014-15 and dues taxes paid to Revenue . Expenses reimbursement - Again, the onus is on the assessee to prove that these are merely expenses reimbursements received from Alstom T D/Areva T D. Thus, this contention of the assessee that the said amounts are merely reimbursements of expenses requires verification . We are restoring this issue to the file of the AO for fresh adjudication and the assessee is directed to provide all necessary evidences to prove that payment as is reflected by Alstom T D in TDS return filed for current year are the expenses reimbursements and the same were included by assessee in return of income filed with the department for ay: 2015-16 and dues taxes paid to Revenue. Remaining amount uploaded by Alstom T D in its TDS return for current year as income of the assessee, but the assessee has denied that the assessee did not have any such dealings with Alstom T D and no such income was earned by assessee but rather it was erroneously uploaded by said company Alstom T D in TDS returns filed for current year. The assessee has also produced copies of emails which are placed in paper book to reflect that the assessee has requested Alstom T D to correct this error. The said emails are placed in paper book filed by assessee with tribunal - The assessee has claimed that the said concern is not responding to the assessee s request to correct TDS returns to remove said amount as to the credit of the assessee and to credit to the correct payee , mainly due to change in their management as new management has taken over. It is equally true that the assessee has dealing with said concern Alstom T D/Areva T D and primary onus is on the assessee to prove that the income as is reflected in Form No. 26AS to its credit does not belong to it. Keeping in view entire factual matrix under consideration, we are restoring this issue to the file of the AO for fresh adjudication and the assessee is directed to provide all necessary evidences to prove that payment.

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• 2021 (3) TMI 722
  Profit estimation - unaccountable sales - GP estimation - addition on account of suppression of sales price by taking G. P. rate of 40% on unaccounted cash receipts - as brought to the notice of AO that the G. P. rate for the year has mistakenly taken at 40% instead of 27.86% as declared in the audit report by the appellant - HELD THAT:- No difficulty in accepting the G. P. rate @ 20% of the unaccountable sales, respectfully relying upon the order passed by the Coordinate Bench [ 2014 (4) TMI 619 - ITAT AHMEDABAD ] instead of 27.86 as taken by Revenue. Hence, we direct the AO to take profit at 20% of the unaccountable sales in the instant case and to pass orders accordingly. This ground of appeal is allowed.

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• 2021 (3) TMI 721
  Initiation of re-assessment proceedings - AO s jurisdiction to initiate reassessment - Unexplained share capital - HELD THAT:- In order to get jurisdiction, what is necessary is to see the existence of reason to believe about the escapement of income and not any conclusive evidence of escapement, which aspect assumes significance only when the reassessment proceedings are taken up after initiation. ITO acquires jurisdiction to reopen assessment under s. 147(a) r/w s. 148 only if on the basis of specific, reliable and relevant information coming to his possession subsequently, he has reasons which he must record, to believe that by reason of omission of failure on the part of the assessee to make a true and full disclosure of all material facts necessary for his assessment during the concluded assessment proceedings, any part of his income, profit or gains chargeable to income-tax has escaped assessment. He may start reassessment proceedings either because some fresh facts come to light which were not previously disclosed or some information with regard to the facts previously disclosed comes into his possession which tends to expose the untruthfulness of those facts. In that case, the ITO was held to have rightly initiated the reassessment proceedings on the basis of subsequent information, which was specific, relevant and reliable. As such, we do not find any infirmity in the initiation of reassessment proceedings in the facts of the case under consideration. That apart, the assessee has also challenged that the ld. Addl. CIT erred in according approval to the reasons recorded by the AO for reassessment. In view of the elaborate discussion above about the factual panorama prevailing in the extant case, we do not concur with the submission advanced by the assessee. Any person properly instructed in law, would not hesitate, even once, in according his imprimatur to proposal for re-assessment in the facts of the case as are obtaining herein. We, therefore, uphold the impugned order and dismiss the grounds raised by the assessee. Addition u/s.68 of the Act on account of share capital and share premium - Section 68 requires making of an addition when the identity of the creditor, his capacity or genuineness of the transaction are not proved. Here is a case in which though the identity is proved because of the alleged shareholders being companies, but the genuineness of the transactions is wanting. In the absence of any business activity of a company, which was closed since 2007, we fail to appreciate as to how all the corporate investors coming exclusively from Mumbai and Kolkata would join and invest in the shares of such a company, and that too at a premium of 300% of the face value, which had no running business and further there were no returns on such investment. None of the alleged investors responded to the AO s notices u/s.133(6) except one company which also denied to have any transaction with the assessee company. It is further worth mentioning that no correspondence took place between the assessee company and the alleged investors companies prior to making of huge investment or after such activity as has been noted in the impugned order. In such circumstances, we are satisfied that the assessee miserably failed to prove the genuineness of the transactions. Hon ble Bombay High Court in Royal Rich Developers Pvt. Ltd. [ 2019 (7) TMI 1372 - BOMBAY HIGH COURT ] has upheld the addition made u/s 68 by observing that no rational person will invest in shares of a shell/paper company having no worthwhile business at a premium of Rs. 35. In view of the foregoing, we uphold the impugned order in sustaining the addition u/s 68 - Decided against assessee.

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• 2021 (3) TMI 720
  Addition u/s 68 - unexplained share premium and Share Capital received - low income reported by investors - search proceedings initiated - CIT-A deleted the addition - HELD THAT:- A.O. merely doubted the financial capacity of the Investors because they have reported low income in their return of income. This cannot be the sole basis to doubt the explanation of assessee. It may be suspicion of the A.O. only without bringing any evidence on record. Rather the documentary evidences produced on record clearly support the explanation of assessee. The issue is covered in favour of the assessee by the Judgment of Hon ble Delhi High Court in the case of M/s. Adamine Construction Pvt., Ltd. [ 2018 (2) TMI 1815 - DELHI HIGH COURT ] (supra). Considering the totality of the facts and circumstances of the case in the light of documentary evidences on record and the decisions referred to above, we do not find any infirmity in the Order of the Ld. CIT(A) in deleting the addition - Decided in favour of assessee.

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• 2021 (3) TMI 719
  Income from house property - ALV determination - annual letting value of the property in question by taking an instance of property let out to DRT for a rent @ 8.78 per sq.ft - HELD THAT:- Assessing Officer has taken the ALV as the rate of rent in respect of a building situated in the area, however, the Assessing Officer has not given the assessee a fair opportunity to raise the objection against adopting the said rate of rent as fair market rental value of the property in question while determining the ALV of the property. There is not dispute that in case the Assessing Officer finds that the rental income shown by the assessee is not in the parity of the reasonable expected sum for letting out of the property in terms of section 23 (1) - AO can proceed to determine the annual letting value. The Annual letting value of the property is the sum which is reasonably expected to be fetched by letting out for the property from year to year basis. Thus, the reasonable and proper criteria for determining the annual letting value is the fair market rental for which the property can be reasonably let out from year to year. AO has though adopted the rate of rent as it was agreed upon between the parties in respect of property in the vicinity however, the assessee did not give the opportunity to the assessee to present its case against such adoption of the annual letting value. The Assessing Officer has also not taken the facts which might have influenced the fair market rental value of the property being the difference in the locality of the properties, the area let out advantage and disadvantage if any attached to the properties. Therefore, the Assessing Officer has adopted the said rent without even giving a show cause notice to the assessee CIT (A) though confirmed the order of the Assessing Officer however, the comparable of the rate adopted by the Assessing Officer not been examined by the Ld. CIT (A). Accordingly, in the facts and circumstances of the case the matter is set aside to the record of the Assessing Officer for re-adjudication of the same - Appeal of the assessee is allowed for statistical purposes.

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• 2021 (3) TMI 717
  Addition u/s 68 - unsecured loan/advances - addition based on third party statement - AO took the support of the statement given by both Shri Raj Kumar Kothari as well as Shri Bijay Kumar Dokania recorded in third party proceedings to take an adverse view against the assessee - CIT-A deleted the addition - HELD THAT:- AO ought to have confronted the assessee with the entire statement of both Shri Raj Kumar Kothari as well as Shri Bijay Kumar Dokania or material against the assessee if any with him rather than giving only selective question and answer; and if the AO felt that these two persons, oral testimony is incriminating against the assessee, then in all seriousness he should have summoned them before him and elicited the direct oral evidence against the assessee and thereafter gave a copy of the recorded statement and then afforded an opportunity to assessee to cross-examine the makers of the incriminating oral testimony and thereafter the AO would be justified in using against the assessee, which in this case AO has not done, for reason best known to him; and so the selective questions and answers of the two persons with the legal infirmities discussed supra cannot be used against the assessee. Moreover the AO has not found any infirmity with the documents filed by the assessee to prove the loan transactions as discussed supra. So, other than the third party statements, which was not even examined by the AO and without providing the entire statements to assessee and the statement not tested on the touch-stone of cross-examination, cannot be the basis to draw adverse inference against the assessee. Therefore, no addition was warranted. As statement of these two persons cannot be used against the assessee. And when we remove these two statements with the legal infirmities discussed supra, there is no material at all against the assessee and the AO having failed to find any infirmity with the documents filed by the assessee/lenders to prove the loan transactions as discussed supra, no adverse view was legally tenable. - Decided against revenue.

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• 2021 (3) TMI 715
  Unexplained deposits made in Bank Account - Whether the amount represents receipt from transport business and taxable u/s 44AE - HELD THAT:- It is seen that the assessee though filed the return of income, but did not disclose the savings bank account No. 7260 maintained with Seva Vikas Cooperative Bank. The transactions recorded in this bank account were consequently not depicted in the regular books of account maintained by him. When the AO enquired about the maintenance of such a bank account and sources of the deposits, the assessee came out with a plea that he was running a transportation business outside the books of account and the receipts from such business were deposited in the bank account. This plea was taken so as to circumvent the taxation of the full amounts deposited in the bank account in this respect and accordingly get covered u/s. 44AE of the Act with a lower incidence of income. This claim could have been merited acceptance if the assessee had shown the list of persons and their confirmations etc. for whom he did the transportation business and the resultant transportation receipts. No such evidence has been placed on record. In such a scenario, it is difficult to accept the assessee s plea of running a transportation business outside books of account and depositing the proceeds of such a business in this bank account. - Decided against assessee. Addition of deposits in this bank account on the ground that the assessee could not substantiate the source of deposits in the bank account - HELD THAT:- We find that the assessee categorically stated before the AO that the deposit of Rs. 30.00 lakh in this bank account was his share in the sale of plot of land by his father. Father did sell certain property and the amount of proportionate capital gain was offered in the return of income. When such material was placed before the AO and the assessee contended that the bank account was maintained jointly with his brother, then it became the duty of the AO to examine the assessee s contention for unearthing the truth instead of simply making an addition towards the amounts credited in the bank account. Any temptation on the part of the AO to adopt short cuts and make addition without examining the assessee s contention, needs to be eschewed. We, therefore, set aside the impugned order and remit the matter to the file of the AO for examining the assessee s contention afresh in this regard and thereafter find out the amount of addition, if any, called for under the circumstances. Addition towards interest received - AO made addition for this sum on the basis of cash flow statement filed by the assessee, which indicated the interest earned but not disclosed in the return - CIT(A) affirmed the addition - HELD THAT:- AR invited our attention towards bank account recording such interest income. Correct amount of the entry in the statement is Rs. 18,314/- as against Rs. 48,314/- which was inadvertently shown as interest income and got included in the assessee s total income. Since the correct amount as per the bank account is Rs. 18,314/-, we direct to restrict the addition to this extent. Consequential relief of Rs. 30,000/- is allowed.

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• 2021 (3) TMI 714
  Excess claim of depreciation on software expenses - Commissioner deleted the addition - HELD THAT:- We find that the issue before us is squarely covered in favour of the assessee by the decision of the Co-ordinate Bench of the Tribunal in assessee s own case [ 2020 (5) TMI 84 - ITAT DELHI ] for the immediate preceding assessment year 2012-13 wherein the Bench declined to interfere with the order of the first appellate authority wherein held the nature of the software acquired were licenses, which do not confer any enduring right and could be used for the duration as acquired for by the licensor. The taxpayer s objective was to use computer software to maximize its performance and streamline efficiency. The Hon ble Bombay High Court in the case of M/s. I-Flex Solutions Ltd [ 2014 (3) TMI 1162 - BOMBAY HIGH COURT ] held that there is no reason to differentiate the computer and the software as the latter is an integral part of the former. The software cannot be seen in isolation delinked from the computers. The issue of depreciation @ 60% on the software is now a settled issue beyond any perplexity. Hence, we decline to interfere with the order of the ld. CIT(A). Revenue s appeal is dismissed.

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• 2021 (3) TMI 712
  Validity of reopening of assessment u/s 147 - under-reporting of capital gains arising to Assessee on sale of immovable property having regard to the provisions of Section 50C - HELD THAT:- In the instant case, it is a case of omission to consider the deemed sale consideration and to form a bonafide opinion on substitution thereof by apparent sale consideration for the purposes of assessments of capital gains in original assessment proceedings - The assessee cannot claim a vested right arising from a palpably erroneous conclusion owing to non-consideration of significant fact having direct bearing on escapement of income. If a relevant fact not examined in original proceedings on the basis of which the re-assessment proceedings are sought to be initiated and came to the light of the AO subsequent to the original assessment, the doctrine of change of opinion propounded by judicial fiat cannot act as embargo for exercise of powers under s.147 . In the instant case, it is found that while determining the capital gains the deemed sale consideration relevant to provision of Section 50C of the Act has not been seen at all. Mere production before AO of sale deed alongwith receipt of Registering Authority which encompasses some figures representing value on which stamp duty is payable will not, in the absence of anything more, necessarily amount to disclosure for the purpose presuming formation of opinion. We thus concur with the view taken by the CIT(A) and hold that where the relevant facts have been overlooked and has not taken cognizance of, resulting in escapement of chargeable income, such omission would not constitute change of opinion . In the absence of any other contention, we do not see any merit in the plea of assessee towards wrongful usurpation of jurisdiction under s.147 - Decided against assessee.

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• 2021 (3) TMI 711
  Assessment order passed u/s 153C - Assessee submitted no incriminating material was found which was related to the assessee company - HELD THAT:- From the perusal of the satisfaction note reproduced in the order of the CIT(A) as well as the assessment order, it can be seen that no incriminating material was found in assessee s case which was belonging to the assessee during the search and seizure operation in case of Mauria Group of cases. Thus, the reassessment u/s 153C is not complied properly. Secondly, though the Ld. DR pointed out that the original return of income was not filed, the same is contrary to the facts mentioned in Para 2 of the assessment order. Thus, at the threshold itself the assessment order passed u/s 153C was rightly quashed by the CIT(A). The CIT(A) has further given the observations on merit which is detailed and the Revenue has not given any contrary factual aspect. Therefore, the appeal of the Revenue is dismissed.

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• 2021 (3) TMI 710
  Deduction u/s 35(2AB) - expenditure incurred on R D centre - AO held that in the absence of Form 3CL, such deduction is not allowable - CIT (A) supported the contention of the Assessing Officer reiterating that in the absence of Form 3CL, the claim of the assessee cannot be quantified and verified - HELD THAT:- It is the responsibility of the AO to obtain the copy from the DSIR. We also find that the DSIR has also submits copy to the Jurisdictional Chief Commissioner of Income Tax too. There was no dispute regarding the expenditure incurred by the assessee. With regard to the issue before hand, we have also gone through the judgment of Hon ble High Court of Gujarat in the case of CIT Vs Sun Pharmaceutical Industries Ltd. [ 2017 (9) TMI 1416 - GUJARAT HIGH COURT ] where in it was held that having heard learned counsel for the parties and having pursued the orders on record, we are broadly in agreement with the view of the Tribunal. Undisputedly, the research and development facility set up by the assessee was approved by the prescribed authority and necessary approval was granted in the prescribed format. The communication in form 3CL was thereafter, between the prescribed authority and the department. If the same was not so surely the assessee cannot be made to suffer. To this extent the Tribunal was perfectly correct and the Commissioner was not, in observing that in absence of such certification, claim of deduction under Section 35(2AB) was not available. Tribunal in the case of Century Seeds Pvt. Ltd. Vs DCIT [ 2018 (8) TMI 663 - ITAT HYDERABAD ] held that AO has correctly allowed the deduction and there is no error in the order passed by AO u/s 143(3). Once a research facility is approved entire expenditure incurred on department of R D has to be allowed weighted deduction as provided u/s 35(2AB). Relying on the case of DCIT Vs Famy Care Ltd. [ 2014 (11) TMI 987 - ITAT MUMBAI ] on the same facts, the Tribunal in the case of Efftronics Systems Pvt. Ltd. [ 2016 (11) TMI 1251 - ITAT VISAKHAPATNAM ] laid down the proposition that in case Form 3CL is not available, the appellant should not be penalized and weighted deduction cannot be denied. Similarly, the ITAT Mumbai Bench in the case Mahindra Mahindra Ltd. Vs DCIT [ 2013 (9) TMI 522 - ITAT, MUMBAI ] wherein it was held that while deciding the issue related with benevolent provisions like 35(2AB), liberal and practical approach should be followed. Hence we hold that the assessee should not be shorned of the legal right bestowed upon by the provisions of the Income Tax Act. The revenue may disallow the claim of the asseseee if it can prove that the claim of the assessee is wrong after obtaining the report in Form 3CL from the concerned authority. The matter is being sent back to the file of the Assessing Officer. Education Cess disallowance - addition u/s 40(a)(ia) - allowable revenue expense u/s 37(1) - HELD THAT:- Surcharge on income-tax finds place in the First Schedule, but that is not the case so far as Education Cess is concerned. Therefore, the education cess on this reasoning cannot be equated as tax or surcharge. Based on this, it can be said that since the word Cess is not specifically included in the definition, it cannot be considered a part of tax, and accordingly, it should not be disallowed in u/s 40(a)(ii) of the Act. We also find that the proceeds from collection of Education Cess are not credited to Consolidated Fund but to a non-lapsable Fund for elementary education - Prarambhik Shiksha Kosh . Since the proceeds from collection of Education Cess are kept separate for a specified purpose, applying the principles in the aforesaid decision of Apex Court in the case of M/s Dewan Chand Builders [ 2011 (11) TMI 405 - SUPREME COURT ] , it can be said that the same is not in the nature of tax. Hence, it is allowable as deduction. Education Cess is not of the nature described in sections 30 to 36, Education Cess is not in the nature of capital expenditure, Education Cess is not personal expense of the Assessee, it is mandatory for it to pay Education Cess and for the purpose of computation of Education Cess, the Income Tax is taken as the criteria for computational purpose. Thus, the expense of Education Cess is mandatory expenses to be paid but does not fall under capital expense and personal expenditure and hence may be allowed as deduction. Referring to provisions of the Act pertaining to Section 40(a)(ii) and Section 115JB, Circular of the CBDT No. 91/58/66ITJ(19), the orders of Co-ordinate Benches of ITAT and judicial pronouncements we hereby hold that the assessee is eligible to claim the deduction of the Education Cess as per the provisions of Section 37. Incentive under Foreign Trade Policy - assessee has received incentive under Focus Product Scheme (FPS) from Government of India for exports of goods - HELD THAT:- There is no dispute that this incentive is an export incentive. The matter has been well considered by the order of the Co-ordinate of ITAT Chennai in the case of Eastman Exports Global Clothing Pvt. Ltd. [ 2016 (7) TMI 951 - ITAT CHENNAI ] The order dealt with the similar issue of market linked focus products scheme scripts has been deliberated and the same has been treated as a capital receipt in view of the decision of the Hon ble Apex Court in the case of Ponni Sugars and Chemicals Ltd. [ 2008 (9) TMI 14 - SUPREME COURT ] Thus MLFPS received by the assessed is to be treated as capital receipt only . Appeal of the assessee is allowed.

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• Customs

• 2021 (3) TMI 742
  Seeking release of seized consignment - Section 110 (2) read with the proviso thereto - SCN not issued within six month and further extension of six month sought - HELD THAT:- In interpretating the same, one has to bear in mind the position that consignments of an assessee are seized by the Department on the basis of apprehensions. The scope and veracity of such apprehensions would have to be crystallized by way of a show cause notice, putting the assessee to notice of all materials available with the department in support of its apprehensions and allegations, for which purpose the Legislature has granted a period of six months. An extension of the period as aforesaid is provided for, conditional upon reasons being recorded and such reasons and being intimated to the assessee, prior to the expiry of the original period of six months. In the case of Swees Gems and Jewellery [2 019 (7) TMI 1433 - RAJASTHAN HIGH COURT] , a Division Bench of the Rajasthan High Court has expressed the view that proceedings for extension in terms of the proviso to Section 110(2) of the Act require the recording of reasons and the intimation of such extension to the person from whom the goods were seized before the expiry of the period of seizure and hence, no separate show cause notice was necessary to be issued to the assessee. The proper interpretation of Section 110(2) read with the proviso thereto, would be (i) The Principle Commissioner/Customs of Commissioner is to record reasons in writing as to why the proposed extension by six months is justified/warranted (ii) The reasons as well as intimation of extension should be communicated to the assessee before the expiry of the first six months of the original period as completed under Section 110(2) meaning that the factum of the extension should be known to the assessee before the expiry of the period of six months under Section 110(2). The intimation will suffice as proper opportunity to the assessee in regard to the extension. Thus, any act that would have had to be carried out between the period 20.03.2020 to 29.09.2020 could now be carried out on or before 30.09.2020. In the present case the impugned intimation is dated 30.09.2020, signed on 29.09.2020 by the officer. The date of seizure is 06.03.2020 and the periods of six months (original period of seizure) expires on 05.09.2020. The intimation of extension should have been brought to the knowledge of the petitioner on or before 05.09.2020, accompanied by the reasons recorded for the extension. However, by virtue of the relaxation ordinance, such time stands extended to 30.09.2020. However, and admittedly, the intimation has been received by the petitioner only on 07.10.2020, beyond the date stipulated in the proviso to Section 110(2) and the reasons for extension have also not been supplied. The respondent directed to release the consignment in question within a period of two weeks from today - Petition allowed.

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• 2021 (3) TMI 740
  Seeking for suspension or revocation of the approval - customs cargo service provider - Regulation 11 of the Handling of Cargo in Customs Areas Regulations, 2009 - import of restricted item - HELD THAT:- By an order dated 09.10.2020, this Court merely directed the 1 st respondent to file report on the action taken based on the representation dated 11.08.2015 of the petitioner against the 2nd respondent. On the other hand, the so called compliance report dated 10.11.2020 of the 1 st respondent seems to indicate that action has been taken pursuant to a direction of this Court dated 09.10.2020. It is not clear on what basis the 1st respondent has issued the said Show Cause Notice to the 2nd respondent - Petition closed.

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• 2021 (3) TMI 733
  Seeking release the electronic consumer goods upon payment of an appropriate duty, redemption fine and penalty - Absolute Confiscation - i-phones/i pads - HELD THAT:- The request for release justified particularly seeing as the items for which the release is sought are electronic goods that are prone to speedy obsolescence - In view of the aforesaid, there is a direction to R2 to release the goods within one week from the date of petitioner remitting duty, fine and penalty. Petition allowed.

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• 2021 (3) TMI 729
  Valuation of imported goods - requirement of speaking order, for enhancement of value of goods - time limitation of filing appeal - Section 17(5) of the Customs Act, 1962 - HELD THAT:- In case of assessment done under Section 17(4) of the Customs Act, 1962, wherein the re-assessment has been accepted by the assessee importer, the proper officer shall pass a speaking order on the reassessment within 15 days on the date of re-assessment of the bills of entry. Admittedly, in this case, no speaking order under Section 17(5) of the Customs Act, 1962 has been passed till date. The appellant initially waited for the order under Section 17(5) of the Customs Act, 1962. Later on, made a protest or grievance before the authorities below and the said request was rejected. Time Limitation - HELD THAT:- When no order has been passed under Section 17(5) of the Customs Act, 1962, which is mandate in law that a speaking order is required to be passed in writing within 15 days of the reassessment of bills of entry, it can be ordered that the appeal filed before the ld. Commissioner (Appeals) is not barred by limitation. In the absence of the order under Section 17(5) of the Customs Act, 1962, it is directed that the adjudicating authority to pass a speaking order for re-assessment in writing from 15 days of received of this order - appeal allowed by way of remand.

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• 2021 (3) TMI 726
  Refund of SAD - sales during pre-GST period - Sale of goods at NIL / Exempted rate of VAT - Notification No.34/1998-Cus has been rescinded vide Notification No.58/1998-Cus dt. 01/08/1998 - HELD THAT:- the Assistant Commissioner while rejecting the refund claim of Rs. 76,706/- has relied upon the decision of the Supreme Court in the case of CC, Mumbai Vs. Seiko Brushware India but the said decision is in respect of Notification No.34/1998-Cus. dt. 13/06/1998 wherein the proviso disallows exemption from SAD if the goods are sold from a place where there is no sales tax on the goods. But in the present case, the appellant has claimed the refund of SAD on the basis of Notification No.102/2007-Cus dt. 14/09/2007 which only specifies that appropriate sales tax should be paid . This issue is no more res integra and has been settled by various decisions of the Tribunal including the decision of this Tribunal in the appellant s own case VALLABHDAS AND CO. BALAKRISHNA SALES CORPORATION VERSUS COMMISSIONER OF CUSTOMS COCHIN [ 2017 (5) TMI 1371 - CESTAT BANGALORE ] wherein the Tribunal has allowed all the appeals by relying upon the earlier decisions of the Tribunal. Besides this, I find that both the authorities have wrongly relied upon the decision of the Apex Court which was in respect of Notification No. 34/1998-Cus. dated 13.06.1998. Further I find that the said Notification 34/1998 has been subsequently rescinded by Notification 58/1998-Cus. dated 01.08.1998. Therefore, reliance by both the parties on a Notification which has been rescinded is not tenable in law. Appeal allowed - decided in favor of appellant.

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• 2021 (3) TMI 716
  Advance Authorization scheme - fulfillment of export obligation or not - delay on the part of the JDGFT to issue the discharge certificate - HELD THAT:- The appellant has fulfilled the export obligation and has submitted all the relevant documents to the JDGFT office within time but the redemption letter was issued by the JDGFT after inordinate delay and in the meantime, show-cause notice was issued and duty foregone was confirmed - the appellant has produced the redemption letter on record which shows that the appellant has fulfilled the export obligation required under the advance authorization issued under customs Notification No.96/2009-Customs dt. 11/09/2009. As export obligation is fulfilled, the appeal is allowed - decided in favor of appellant.

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• Insolvency & Bankruptcy

• 2021 (3) TMI 748
  Liquidation of Corporate Debtor - Section 33 (2) of the Insolvency and Bankruptcy Code, 2016 - HELD THAT:- Since the petitioner Company stands liquidated by order of National Company Law Tribunal, Special Bench II, Chennai ( NCLT ) dated 29.05.2020, this writ petition is closed.

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• 2021 (3) TMI 718
  Maintainability of application - initiation of CIRP - default on the part of Corporate Debtor in repayment of an amount together with the agreed rate of interest, to Financial Creditor - existence of Operational Debt or not - HELD THAT:- Although, this Tribunal has held that the instant Company appeal on the file of this Appellate Tribunal is not maintainable in Law, yet it grants liberty to the Appellant/Applicant/Corporate Debtor to raise the plea of Limitation in main Section 7 Application IB No.IBA/46/KOB/2019 filed under Insolvency Bankruptcy Code , being a question of Fact and Law . It is open to the Appellant s side to raise a plea of veracity/admissibility of True extract of Statement of Accounts maintained by the Respondent/Corporate Debtor as made mention of in the impugned Order of the Adjudicating Authority in KERALA AYURVEDA LIMITED VERSUS TATA GLOBAL BEVERAGES LIMITED [ 2021 (1) TMI 615 - NATIONAL COMPANY LAW TRIBUNAL KOCHI BENCH] , in which event, the Adjudicating Authority (National Company Law Tribunal, Kochi Bench, Kerala) shall permit the Appellant/Applicant/corporate Debtor in this regard. Application disposed off.

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• PMLA

• 2021 (3) TMI 753
  Seeking grant of Bail - Scheduled Offence - Explanation inserted to Section 44(1)(d) of PMLA - it is submitted that once the Scheduled Offence lodged against the Applicants is compromised/compounded by the Complainant therein, the structure of the present crime registered by ED falls on ground, as it does not survive and is non-est - HELD THAT:- It is the settled position of law by a catena of judgments that, a statute is an edict of the Legislature and the conventional way of interpreting or construing a statute is to seek the intention of its maker. A statute is to be construed according to the intent of them, that make it and the duty of judicature is to act upon the true intention of the Legislature. If a statutory provision is open to more than one interpretation the Court has to choose that interpretation which represents the true intention of the Legislature, in other words the legal meaning or true meaning of the statutory provision. The statute must be read as a whole in its context. It is now firmly established that the intention of the Legislature must be found by reading the statute as a whole. It is thus absolutely clear that, for initiation/registration of a crime under the PMLA, the only necessity is registration of a Predicate/Scheduled Offence as prescribed in various Paragraphs of the Schedule appended to the Act and nothing more than it. In other words, for initiating or setting the criminal law in motion under the PMLA, it is only that requirement of having a predicate/Scheduled crime registered prior to it. Once an offence under the PMLA is registered on the basis of a Scheduled Offence, then it stands on its own and it thereafter does not require support of Predicate/Scheduled Offence. It further does not depend upon the ultimate result of the Predicate/Scheduled Offence. Even if the Predicate/Scheduled Offence is compromised, compounded, quashed or the accused therein is/are acquitted, the investigation of ED under PMLA does not get affected, wiped away or ceased to continue. It may continue till the ED concludes investigation and either files complaint or closure report before the Court of competent jurisdiction - The PMLA itself, does not provide for any contingency like the case in hand and argued by the learned counsel for the Applicants. Section 44(b) only provides for filing of a complaint or submission of a closure report by the Investigating Agency under PMLA and none else. Even if the Investigating Agency investigating a Scheduled Offence has filed closure report in it and the Court of competent jurisdiction has accepted it, it will not wipe out or cease to continue the investigation of Respondent No.1 (ED) in the offence of money-laundering being investigated by it. The investigation of Respondent No.1 will continue on its own till it reaches the stage as contemplated under Section 44 of the PMLA. The contention for the learned counsel for the Applicants in that behalf is accordingly answered. There are no merits in the present Application and is accordingly dismissed.

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• Service Tax

• 2021 (3) TMI 713
  Manufacture or service - Business Auxiliary services or not - processing of goods involving the activity of fabrication of tower parts including shearing, punching, numbering, cutting, notching, marking drilling, debarring and getting inspection through QA on raw materials/ inputs, purchased and supplied by L T - benefits provided under N/N. 08/2005-ST dated March 01, 2005 and 25/2012 (ST) dated June 20, 2012 - HELD THAT:- The issue involved in these appeals, is squarely covered by the decision by a Division Bench of this Tribunal in Anil Kumar vs. Commissioner of Central Excise and Service Tax, Bhopal [ 2018 (8) TMI 253 - CESTAT NEW DELHI ] where it was held that we partly allow the appeal holding the impugned activity to be the one as that of manufacture. Benefit of Notification No.08/2005 of 1st March, 2005, is confirmed, however, denying the benefit of Notification No. 06/2005 dated 01.03.2005. The activity carried out by the appellant is that of manufacture . The benefit of Notification No. 08/2005 dated March 01, 2005, is confirmed but the benefit of Notification No. 06 of 2005 dated March 01, 2005 is denied - Appeal allowed in part.

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• Central Excise

• 2021 (3) TMI 734
  Maintainability of appeal - monetary amount involved in the appeal - CENVAT Credit - input services - freight for outward transportation from the place of removal - HELD THAT:- Appeal is dismissed on the ground of low tax effect and the substantial questions of law raised are left open.

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• 2021 (3) TMI 730
  Method of Valuation - assessable value adopted for payment of duty is lower than the actual cost of manufacture of said products - whether valuation to be done in terms of Section 4(1)(a) of the Central Excise Act, 1944 (the Act), but under Section 4(1)(b) of the said Act, read with Rule 8 and Rule 11 of the Central Excise Valuation Rules, 2000? - suppression of facts or not - time limitation - HELD THAT:- There is no dispute that the goods have been sold to the unrelated buyers and there is no flow back of additional consideration, as also have been specifically admitted by the learned Pr. Commissioner. On perusal of the clarifications issued by the CBEC vide Circular dated 15.01.2014, it is noted that the Board has accepted that mere sale of price lower than the manufacturing cost cannot be made the criterion to reject the transaction value unless the aspects such as the percentage of loss at which such sale takes place and the period for which such loss takes place, reasons of sale at such loss, etc. are examined to ascertain if there was any extra commercial consideration . The Board has also accepted the fact that the Apex Court in its judgement has observed that selling of final products below the manufacturing cost was intended to penetrate the market which also constitutes extra commercial consideration in the hands of the manufacturer. The appellant s case is squarely covered by the ratio laid down by the Apex Court in the case of COLLECTOR OF C. EX., NEW DELHI VERSUS GURU NANAK REFRIGERATION CORPN. [ 2003 (3) TMI 100 - SUPREME COURT] wherein also, in identical facts and circumstances, the Department proposed to reject the transaction value for the reason that cost of manufacture was found to be higher than the price at which goods were eventually sold. The Apex Court taking note of the fact that when there was no additional consideration and the goods were cleared to independent buyers, upheld the valuation adopted by the assessee under Section 4(1)(a). There are no positive evidence to show that there is any fraud or willful suppression on the part of the appellant and hence, the demand is clearly barred by limitation - appeal allowed - decided in favor of appellant.

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• 2021 (3) TMI 727
  Levy of Penalty - in the SCN, there is no allegation of wilful suppression, concealment of facts, mis-declaration - Applicability of Rule 9A(3)of CER - HELD THAT:- During the course of audit itself, the audit team raised the objection, but the appellant did not accept the view of the audit team and did not file the returns. In these circumstances, the extended period of limitation is rightly invoked - Further, penalty imposed under Rule 27 of the Central Excise Rules, 2002 is on higher side and the same is reduced to Rs. 2000 for non filing ER-4 (Yearly) return for the period 2013-14. For ER-4 (Yearly) return for the period 2014-15 and for ER-7 (Yearly) return for the period 2014-15, penalties in terms of Rule 12(6) of the Central Excise Rules, 2002 have been rightly imposed for non filing the returns of Rs. 20,000/- each, the same are confirmed. For ER-5 (Yearly) return for the period 2014-15 and ER-6 (Monthly) for the period August 2014 to March 2016, penalties imposed in terms of Rule 15A of the Central Excise Rules, 2002 for non filing the returns under Rule 9A(3) of the Cenvat Credit Rules, 2004, it is held that at the time of issuance of the show cause notice, the provisions of Rule 9A(3) were omitted without saving clause. - Penalties of Rs. 5000/- and Rs. 95,000/- respectively set aside.

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• Indian Laws

• 2021 (3) TMI 752
  Grant of bail - Smuggling - Tramadol, which fall under contraband narcotic drugs - narcotic substances - retraction of statement made under Section 67 of NDPS Act - HELD THAT:- In the case in hand, investigation is said to be complete. As per impugned order dated 21.07.2020 complaint/charge sheet has already been filed, however, besides confessional statement recorded under Section 67 of NDPS Act, no other material is forthcoming. Since no incriminating material was recovered at the instance of petitioner, this strengthens the view of this Court that petitioner is not likely to commit offence if released on bail. Moreover, nothing stops the prosecution to prove its case on merits during trial. In the aforesaid view of the case, requirements under Section 37 of NDPS Act are fulfilled. The petitioner is directed to be released forthwith on his furnishing personal bond in the sum of Rs. 25,000/-, and one surety in the like amount to the satisfaction of trial court/duty magistrate subject to the condition imposed - petition allowed.

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• 2021 (3) TMI 751
  Grant of Regular Bail - Smuggling - Heroin - Contraband item - Section 37 of the NDPS Act - cognisable and non-bailable offence - HELD THAT:- It is well settled that the jurisdiction of a Court to grant bail for offences under NDPS Act, bail in cases of recovery of commercial quantity is circumscribed by the provision of Section 37 of the Act. The bail can be granted only when there are reasonable grounds for believing that the accused is not guilty of the offence and he is not likely to commit any offence when released on bail. The parameters for grant of bail to accused involved in the offence under NDPS Act have been laid down in a number of judgments. The Supreme Court in CUSTOMS, NEW DELHI VERSUS AHMADALIEVA NODIRA [ 2004 (3) TMI 70 - SUPREME COURT ] has held that satisfaction contemplated regarding the accused being not guilty has to be based on reasonable grounds. The expression reasonable grounds means something more than prima facie grounds. It contemplates substantial probable causes for believing that the accused is not guilty of the alleged offence. The reasonable belief contemplated in the provision requires existence of such facts and circumstances as are sufficient in themselves to justify satisfaction that the accused is not guilty of the alleged offence. Applying the law laid down by the Supreme Court in the present case, it appears that the drugs were being sent in a very organised manner. Drugs were deftly packed and sent concealed in shock absorbers shows that the operations were well planned. The panchnama of the items recovered from the house of the petitioner includes a black and red coloured rectangular box marked as roneo shock absorber , the same type of shock absorber in which the contraband was recovered. Another broken shock absorber with broken pieces was also recovered from the petitioner. Tools which could be used for opening shock absorber and placing the contraband into the shock absorber were also recovered - It cannot be said at this point of time that the petitioner was not involved in the offence and the way in which the operation was being carried on shows that the possibility of the petitioner indulging in the same activity again cannot be ruled out. Further, the petitioner is a Nigerian and does not have roots in the society and therefore his chances of absconding also cannot be ruled out. This Court is not inclined to grant bail to the petitioner at this juncture - Application dismissed.

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• 2021 (3) TMI 739
  Seeking grant of Regular bail - Smuggling - Pseudoephedrine - restricted item or not - petitioner contends that Pseudoephedrine is only a controlled commodity and therefore the rigor of Section 37 NDPS Act does not apply to the facts of this case - HELD THAT:- Pseudoephedrine is a controlled commodity and therefore the learned counsel for the petitioner is correct in stating that the rigor of Section 37 NDPS Act is not applicable to the present case. The petitioner is in custody for about 4 months now. The petitioner does not have any criminal antecedents. At this stage this Court is not inclined to go on the merits of the case as it will cause prejudice to the parties. The petitioner shall furnish a personal bond in the sum of Rs. 1,00,000/- (Rupees One Lakh Only) with one surety of the like amount by a relative of the petitioner to the satisfaction of the Trial Court - Petition disposed off.

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