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TMI Tax Updates - e-Newsletter March 22, 2023 Case Laws in this Newsletter: GST Income Tax Customs Corporate Laws Insolvency & Bankruptcy Service Tax Central Excise CST, VAT & Sales Tax Indian Laws Articles Activity of designing and development of tools as per specification indicated by recipient of supply and getting same manufactured from third parties for eventual supply to overseas customers amounts to supply of goods and not composite supply ITC eligibility of CSR expenditure under GST and Finance Bill, 2023 amendment GST Registration cannot be cancelled when the reply to the SCN is not considered Demand not sustainable when Service Tax is already paid prior to its levy News Advisory for the taxpayer wishing to register as “One Person Company” in GST 72,42,156 is the highest number of ITR filing in a day on 31st July 2022 5,67,116 beneficiaries above age of 60 years under the National Pension System (NPS) Performance of PSBs significantly improved as a result of implementation of reforms by the Government Notifications Central Excise 14/2023 - dated 20-3-2023 - CE Prescribe rates of Special Additional Excise Duty for exports of petrol and diesel - Seeks to further amend No. 04/2022-Central Excise, dated the 30th June, 2022, to increase the Special Additional Excise Duty on Diesel. 13/2023 - dated 20-3-2023 - CE Special Additional Excise Duty on production of Petroleum Crude and export of Aviation Turbine Fuel - Seeks to amend No. 18/2022-Central Excise, dated the 19th July, 2022 to reduce the Special Additional Excise Duty on production of Petroleum Crude. Highlights / Catch Notes GST Seeking unblocking of bank account in respect of the amount, which relates to the refund sanctioned and credited in the petitioner’s bank account - By virtue of sub-section (2) of Section 83 of the Act, the said order of attachment ceases to be operative on expiry of a period of one year from the date of the order. The respondents are required to adhere to the said discipline. - HC Visit to Get Source Blocking of Input Tax Credit (ITC) for more than one year - Since the guidelines are very clear that after one year, the registered person would be able to debit input tax credit so disallowed. This petition, at this stage is being disposed of by giving direction to the respondents to unblock the credit ledger of the petitioner which has been blocked as period of 3 years have expired - HC Visit to Get Source Recovery of demand of GST - Right to file the appeal before GST Tribunal when constituted - it would be unjust for the State respondents to proceed for recovery of the balance amount, when they have not constituted the Appellate Tribunal - interest of justice and balance of convenience also lies in favour of grant of interim relief to the petitioner - HC Visit to Get Source Income Tax TDS u/s 195 - seeking certificate u/s 197 setting out the withholding tax at “NIL” rate - The concerned officer will carry out a fresh exercise and pass an order once again, having regard to what has been stated by us hereinabove. - HC Visit to Get Source Demand u/s 201(1) - assessee in default - Period of limitation - the limitation prescribed for passing orders under Section 201(1) of the Act deeming a person to be an “assessee in default” for failure to deduct tax at source in respect of payments to residents would constitute reasonable period in the absence of a legislative prescription of limitation for passing orders under Section 201(1) of the Act, deeming a person to be an “assessee in default” for failure to deduct tax at source in respect of payments to non-residents as well. - HC Visit to Get Source Validity of assessment orders - non providing time seekeed to reply to SCN - Since the documents have already been given by the petitioner to the respondent during the pendency of these writ petitions, no prejudice would be caused if the assessments are redone in respect of the assessment years - HC Visit to Get Source Reopening of assessment u/s 147 r.w.s u/s 148A - In the absence of such materials and necessary informations to the petitioner by the department it cannot be expected that the petitioner would be in a position to justify his acts and conduct, nor would he be able to provide for the reasonable explanation to these informations which have been collected and relied by the department, but have not been made available to the petitioner - Matter restored back - HC Visit to Get Source Condonation of delay in filing the Income tax returns on the specified due date u/s 119(2)(b) - As per petitioner due to covid-19 pandemic and due to change of Auditors, bonafide reasons, unavoidable circumstances and sufficient cause delay occured - having regard to the fact that the delay in filing the returns is less than one year, which cannot be said as long or inordinate delay or laches on the part of the petitioner ITR - Assessee permitted to submit returns within 3 months - HC Visit to Get Source Levy of penalty u/s 271(1)(c) - mensrea - As Section 271(1)(c) of the Act provides for strict liability and in the present case, deduction have been claimed on the basis of false and non-existent facts, thus the order of the Tribunal restoring the order for levy of penalty is in order. - HC Visit to Get Source Capital gain - Taxability in the hands of GPA holder - the sale deed executed by the assessee on 04.01.2011 is not in the capacity of GPA holder on behalf of the original owners. There is no recital in the sale deed executed by the assessee on 04.01.2011 that the sale consideration was received by the assessee on behalf of the original owners. He has also not placed any evidence to establish that he has repaid the amount to the original owners. Therefore, the capital gains arising out of the transfer occurred on 04.01.2011 should be charged in the hands of the assessee only. - AT Visit to Get Source Addition u/s 69A - In the statement recorded u/s. 131 assessee stated that he has not filed his return of income and also stated that the money found in his possession belongs to him but could not give the details of the sources for the same - AO has rightly considered the issue of submission of books of accounts as an afterthought of the assessee and hence we do not find any reason to interfere in the decision - AT Visit to Get Source Revision u/s 263 - nature and source of income surrendered - Addition invoking Section 115BBE - Where AO after due appreciation of facts and circumstances of the case, assessed the income under the head “business income” and didn’t invoke the deeming provisions as so suggested by the ld PCIT, we do not believe that there is any error on part of the Assessing officer and the order so passed by him cannot be held as erroneous. - AT Visit to Get Source Additions u/s 68 - income from un-disclosed sources - Agriculture Income or not - exemption of income u/s 10(1) read with Section 2(1A) denied - onus to prove - The assessee having miserably failed to prove that he earned agricultural income allegedly claim to have been earned by him during the year, and hence claim of earning alleged agriculture income and consequent claim of exemption stand rejected. - AT Visit to Get Source Disallowance of provision for fraud - AO and CIT(A) doubting the type of expenditure has observed that out of total expenditure for the year 1/5th is to be disallowed - this is a regular feature of the assessee bank to make provision for fraud and the actual expenditure incurred are cleared from the balance appearing in the account of provision for fraud - full claim allowed - AT Visit to Get Source Undisclosed sales - unexplained cash sales - it is the AO, who was required to establish whether those were the cash sales as claimed by him and not the fictitious sales as claimed by the assessee. In absence of any such evidence of the cash sales, the addition confirmed by the Ld. CIT(A) is not justified - AT Visit to Get Source TDS u/s 194I/194C - TDS on rent and CAM charge [Common Area Maintenance] - While there are no expenses incurred against the rent except for general building maintenance and municipal charges, the CAM involves employment of separate staff and separate operations involved on day to day basis - Provisions for rent are governed by Section 194I and CAM charges by Section 194C - AT Visit to Get Source Taxability in the hands of partners v/s firm - transfer of capital asset by firm to partners - There is no merit in the arguments advanced by assessee, that transfer of flats to partners by way of MOU does not give rise to any income in the hands of the firm, because as per provisions of section 45(4), transfer of capital asset by firm to partners is a transfer which need to be dealt in accordance with law. - The income is taxable in the hands of firm - However, the same is exemption u/s 80IB(10) - AT Visit to Get Source Customs Refund claim - seeking re-assessment of the Bills of Entry - higher amount of duty paid without noticing that the petitioner is eligible for a concessional rate of tax at of 15% - The document is a statutory Notification. - The authority is directed to hear the petitioner, consider applicability or otherwise of the Exemption Notification to its case and pass orders afresh - HC Visit to Get Source Refund / return on amount collected during investigation - in the absence of any material to establish that there was any order or adjudication made by the respondents quantifying the amount of tax / duty payable by the petitioner as on the date of collecting / recovering the same during investigation, the respondents were clearly not entitled to recover the same, leading to the sole inference that the respondents are liable to refund the amount collected by them. - HC Visit to Get Source Valuation of import goods - transaction value based on invoice price of the overseas suppliers - The appellant’s claim of payment of Customs duty on quantity received in shore tank is correct and legal and revenue claim of duty payment on transaction value based on invoices of all overseas suppliers is not sustainable - AT Visit to Get Source Confiscation of goods and levy of penalty - There is no allegation against the appellant that the disputed goods was imported for industrial use in India. Since such goods are not meant for any use in India, the same are not required to be allowed clearances in India. Hence the charges of mis-declaration of goods against the appellant by citing the non-compliance with IS 4117-1973 (2008) is completely misconceived and cannot be sustained. - AT Visit to Get Source Indian Laws Recovery of debt - sick companies - Whether on approval of a scheme by the BIFR under the Sick Industrial Companies (Special Provisions) Act, 1985 (SICA), an unsecured creditor has the option not to accept the scaled down value of its dues, and to wait till the scheme for rehabilitation of the respondent – sick Company has worked itself out, with an option to recover the debt with interest post such rehabilitation? - Held No - SC Visit to Get Source Service Tax Principles of Natural justice - long delay of 13 years in adjudication of SCN - The grounds raised before the adjudicating authority as well as in this petition appear to be on merits. The issue of delay of 13 years in adjudicating the show cause notice can also be raised by the Petitioner in an appeal under section 35B of the Excise Act,1944 which provides for an appellate remedy against an order-in-original before the Tribunal. Neither there is any allegation nor the learned counsel has been able to demonstrate that there has been any breach of the principles of natural justice. - HC Visit to Get Source Central Excise Refund of excess payment of duty - Sale of goods through depot - Valuation - The duty is payable in accordance with the Section 4 of Central Excise Valuation Rules , 2000. In terms of Rule 7 the excise duty is payable at on the value at the time of sale of goods from depot after removal from the factory. Therefore, on the differential excise duty due to the difference between the clearance value from the factory and the sale value from the depot is refundable to the appellant. - AT Visit to Get Source Refund of duty paid - remission of duty - In the present case, the quantity remains the same, the variation in KL is only due to density of the goods that due to different temperature at the time of loading and unloading therefore, it cannot be said that there is any loss of quantity of the goods consequently, there is no violation of para 2(v) of the Commissioner’s letter dated 03.10.2018. - Since there is no loss of the goods at loading and unloading as stage, no duty demand is sustainable accordingly, the duty so paid by the appellant is required to be refunded to the appellant. - AT Visit to Get Source VAT Validity of order of passed by the Revisional authority - The respondent authorities acting as quasi judiciary authority by invoking the power under statute are expected to act judiciously, but they are not expected to work as money generating authority. Very often it is noticed by this court that the orders are passed by the respondent authorities in an arbitrary manner which is driving the Tax-payers/dealers to file appeals by depositing 50% of the disputed tax while filing statutory appeals. But for the casual approach of the respondent-authorities, a Tax-payer/dealer cannot be put to hardship. - HC Visit to Get Source Case Laws: GST 2023 (3) TMI 879 Maintainability of petition - availability of alternative remedy of appeal - non-constitution of Tribunal - recovery proceedings for the balance amount - HELD THAT:- It appears that conscious of the fact of non constitution of the Tribunal, a notification dated 11.12.2019 for removal of difficulties, in exercise of powers under Section 172 of the B.G.S.T. Act has been issued by the State of Bihar - the notification dated 11.12.2019 provides that the period of limitation, for the purpose of preferring an appeal under Section 112 of the B.G.S.T. Act, shall start only after the date on which the President or the State President, as the case may be, of the Tribunal, after its constitution under Section 109 of the B.G.S.T. Act, enters office. It is thus apparent that petitioner's statutory right to prefer an appeal survives. Considering the facts and circumstances above, including the admitted position regarding non-constitution of the Tribunal under Section 109 of the B.G.S.T. Act, this Court is of the opinion that keeping the writ petition pending would serve no useful purpose - If the petitioner makes a deposit of a sum equal to 20 percent of the remaining amount of tax in dispute, in addition to the amount deposited earlier under Sub-Section 6 of Section 107 of the B.G.S.T. Act, then the petitioner must be extended the statutory benefit of stay under Sub-Section 9 of Section 112 of the B.G.S.T. Act, for he cannot be deprived of the benefit, due to non-constitution of the Tribunal by the respondents themselves. The recovery of balance amount, and any steps that may have been taken in this regard will thus be deemed to be stayed. The statutory relief of stay on deposit of the statutory amount, in the opinion of this Court, cannot be open ended. For balancing the equities, therefore, the Court is of the opinion that since order is being passed due to non-constitution of the Tribunal by the respondent-Authorities, the petitioner would be required to present/file his appeal under Section 112 of the B.G.S.T. Act, once the Tribunal is constituted and made functional and the President or the State President may enter office. The appeal would be required to be filed observing the statutory requirements after coming into existence of the Tribunal, for facilitating consideration of the appeal. Application disposed off. 2023 (3) TMI 878 Seeking unblocking of bank account in respect of the amount, which relates to the refund sanctioned and credited in the petitioner s bank account - HELD THAT:- Section 73 and 74 of the Act also provide for recovery of refund where the same has been erroneously granted. Clearly, if the respondents are of the view that the refund has been erroneously granted, they would be required to take appropriate action under Section 73 or 74 of the Act. Recourse to Section 107(2) may be necessary only if the Adjudicating Authority has adjudicated any contentious issue, which in the opinion of the Commissioner requires to be reviewed. Insofar as the blocking of the bank account is concerned, the said action is taken under Section 83 of the Act. By virtue of sub-section (2) of Section 83 of the Act, the said order of attachment ceases to be operative on expiry of a period of one year from the date of the order. The respondents are required to adhere to the said discipline. Considering the averment that the auditor has already reviewed the petitioner s case and has directed refund for the sum of ₹38,786/-, it is considered apposite to direct the respondent to reconsider the petitioner s request for lifting of the block placed on the petitioner s bank account and continue the same only if it is satisfied that the conditions as specified in Section 83 of the Act continue to exist. Petition disposed off. 2023 (3) TMI 877 Refund claim - rejection on the ground that the period covered under the refund applications did not match with the tax period for which GSTR-1 were filed - petitioner had filed GSTR-1 on a quarterly basis but the refunds were applied on a monthly basis. HELD THAT:- Ms Jain, learned counsel appearing for the petitioner, states that although the requisite information has already been provided, the petitioner would have no objection in filing the aforesaid information as required by the respondents. She submits that the same would be done within a period of one week from today. The impugned Order-in-Original and the impugned Order-in-Appeal are set aside - the respondents are requested to consider the petitioner s claim for refund as per law, as expeditiously as possible and preferably within a period of four weeks from today. Petition disposed off. 2023 (3) TMI 876 Cancellation of GST registration of petitioner - non-filing of GST returns for a continuous period of six months - opportunity of hearing not provided - violation of principles of natural justice - HELD THAT:- Considering that the impugned order dated 27.11.2020 cancelling the petitioner s registration had been passed without affording, the petitioner, an opportunity to be heard, the same cannot be sustained. The impugned order dated 27.11.2020 and the Show Cause Notice dated 18.11.2020 are set aside. Consequently, the order in appeal dated 22.08.2022 is also set aside. The respondents are directed to restore the petitioner s registration as expeditiously as possible and, in any event, within a period of one week from today. Petition allowed. 2023 (3) TMI 875 Cancellation of GST registration of petitioner - effective date of cancellation - HELD THAT:- There is no cavil that the petitioner s registration is required to be cancelled. The petitioner had applied for the same, stating its reason for seeking cancellation as discontinued its business/ closure of business - Although Respondent No. 1 had rejected the said application; it had proceeded to cancel the petitioner s registration, albeit with retrospective effect from 01.07.2017. After some arguments, Mr. Aggarwal, learned Counsel for the respondent submits that he has no objection if the petitioner s GSTIN registration is directed to be cancelled with effect from 11.01.2020 as prayed for by the petitioner - it is directed that the cancellation of the petitioner s registration will take effect from 11.01.2020. Petition disposed off. 2023 (3) TMI 874 Seizure of goods alongwith vehicle - case of petitioner is that while issuing the show cause notice, the authority never intended to invoke the jurisdiction under section 130 of the Act and further that without succeeding steps under section 129 releasing the goods, the invocation of section 130 readily stands to be arbitrary and illlegal exercise of powers. HELD THAT:- As far as the release of the goods are concerned, the prayer of the petitioner is found reasonable. The goods could be released as per the precedent in Irshadbhai Hamidbhai Rain [ 2022 (12) TMI 1025 - GUJARAT HIGH COURT ], by imposing stricter condition of securing amount of tax and penalty. The proceedings would continue under section 130 of the Act. In this regard, attention of the court was invited to the order of the Apex Court in State of Punjab vs. M/s. Shiv Enterprises and Ors. being Civil Appeal No. 359 of 2023 arising out of SLP (C) No. 19295 of 2022) [ 2023 (1) TMI 842 - SUPREME COURT ] wherein in the similar circumstances, the Apex Court was of the view that the proposed notice under section 130 was yet to be adjudicated. The court finds it appropriate to dispose of the present petition with certain conditions and directions. Learned advocate for the petitioner stated that the petitioner is ready to comply with the conditions of the very nature imposed in Irshadbhai Hamidbhai Rain - it is directed that the respondents shall release the goods and conveyance of the petitioner, confiscated and detained pursuant to impugned order dated 25.11.2022 (GST MOV 10) subject to the following conditions imposed. Petition allowed in part. 2023 (3) TMI 873 Violation of principles of natural justice - petitioner was not granted personal hearing in the impugned assessment proceedings - Validity of assessment order - Section 75(4) of the GST Act 2017 - HELD THAT:- Section 75(4) of the GST Act 2017 makes it clear that in cases, where an adverse decision is taken by the Assessing Officer against the assessee, personal hearing is mandatory. Admittedly, in the assessment proceedings, pertaining to the assessment year 2017-18, no personal hearing was afforded to the petitioner. This being the case, on the ground of violation of principles of natural justice as the impugned assessment order has been passed contrary to Section 75(4) of the GST Act 2017, which mandates personal hearing, the impugned assessment order dated 31.10.2022, pertaining to the assessment year 2017-18 has to be quashed and the matter has to be remanded back to the respondent for fresh consideration, on merits and in accordance with law. The impugned assessment order dated 31.10.2022 passed in respect of the assessment year 2017-18 is hereby quashed and the matter is remanded back to the respondent for fresh consideration, on merits and in accordance with law - Petition disposed off. 2023 (3) TMI 872 Blocking of Input Tax Credit (ITC) for more than one year - Since the petitioner was not getting figures of its output liability which could have been set off with the inputs available, the petitioner filed monthly GSTR-3B as NIL for the financial year 2017-18 (Annexure P-9) as well as for the financial year 2018-19 to avoid late fee. - Subsequently, the petitioner claimed its total input tax credit in the month of August 2019 in Form GSTR-3B. Seeking writ of certiorari (a writ issued by a superior court for the reexamination of an action of a lower court) - Constitutional Validity of amendment dated 09.10.2019 (Annexure P-7) amending Rule 61 of the Central GST Rules, 2017 with retrospective effect from 01.07.2017 - seeking unblocking of credit HELD THAT:- A perusal of the notification dated 02.11.2021 issued by Govt. of India Ministry of Finance, Department of Revenue, Central Board of Indirect Taxes and Customs shows that the Department has laid down guidelines for disallowing debit of electronic credit ledger under Rule 86A of the CGST Rules, 2017. The detailed guidelines have been issued whereby powers under Rule 86A can be exercised by the Officers on the monetary limits prescribed under Rule 3.1. Since the guidelines are very clear that after one year, the registered person would be able to debit input tax credit so disallowed. This petition, at this stage is being disposed of by giving direction to the respondents to unblock the credit ledger of the petitioner which has been blocked vide Annexure P-14 and P-15 as period of 3 years have expired on 28.01.2023 after the credit ledger was blocked on 28.01.2020 (Annexure P- 15) - challenge to the vires of Rule 61 of the Central GST Rules, 2017 (Annexure P-7) and notification dated 10.09.2018 (Annexure P-5) shall remain open. Application disposed off. 2023 (3) TMI 871 Recovery of demand of GST - Right to file the appeal before GST Tribunal when constituted - Demand to deposit outstanding amount against the State Goods and Services Tax (SGST) - It is the petitioner's case that the show-cause notice was not served upon the petitioner, rather it obtained a copy of the said show-cause notice subsequently on 18.12.2018 - violation of principles of natural justice - HELD THAT:- Section 112 of the BGST Act provides for an appeal before the Goods and Services Tax Appellate Tribunal, which, admittedly, has not been constituted. Petitioner, thus, has a grievance that had the Tribunal been functioning it would have availed the remedy by preferring an appeal against the order of the Appellate Authority upon payment of the amount as contemplated under sub-Section (8) of Section 112 of the Act. By deeming fiction, the recovery proceedings for balance amount would have been stayed by virtue of sub-Section (9) of Section 112 of the BGST Act. It is apparent thus that the petitioner's statutory right to prefer appeal under Section 112 of the BGST Act still survives and is not barred by limitation. The petitioner is not only willing to prefer an appeal, but claims to have deposited the requisite amount for preferring Appeal before the Appellate Tribunal, as also for stay of recovery proceedings as per Section 112(9) of the BGST Act. On account of the absence of the Tribunal, petitioner has not been able to do so. The situation arising out of non-existence of the Tribunal has been acknowledged by the State of Bihar by exercising its power under Section 172 of the Act - thus, it would be unjust for the State respondents to proceed for recovery of the balance amount, when they have not constituted the Appellate Tribunal. This Court would find that the petitioner has been able to make out a strong prima facie case. On account of non constitution of the forum of Appellate Tribunal, by the authorities, the petitioner cannot be deprived of the statutory remedy under Section 112 (8) and (9) of the BGST Act. The Court, therefore, is of the opinion that interest of justice and balance of convenience also lies in favour of grant of interim relief to the petitioner - the impugned notice stands stayed. 2023 (3) TMI 870 Appeal filed by petitioner rejected - rejection merely on the grounds of being barred by limitation - ex-parte order. HELD THAT:- The delay stands sufficiently explained on account of COVID-19 restrictions. Revenue, states that he has no objection if the matter is remanded to the Appellate Authority for deciding the appeal afresh. Also, while considering and deciding the appeal, the ground of delay shall not be taken into account and the appeal shall be decided on merits. Also, during pendency of the appeal, no coercive steps shall be taken against the petitioner. The present petition disposed off in the mutually agreeable terms. Income Tax 2023 (3) TMI 869 TDS u/s 195 - seeking certificate u/s 197 setting out the withholding tax at NIL rate - scope of the proceedings under Section 197 - contention is that payment received by the petitioner against software-based information security solutions to its partners under the Reseller Agreements cannot be treated as Royalty, both as per Indo-US DTAA and the judgement rendered in Engineering Analysis Centre of Excellence (P.) Ltd [ 2021 (3) TMI 138 - SUPREME COURT] - HELD THAT:- The concerned officer would have to re-examine the application filed on behalf the petitioner under Section 197 of the Act, both, in the backdrop of Article 12 of the Indo-US DTAA and the judgment of the Supreme Court rendered in Engineering Analysis Centre of Excellence (P.) Ltd. That said, the other decisions which have been cited by the petitioner, will also have to be adverted to by the concerned officer. Accordingly, the impugned certificate dated 03.08.2022 and communication/order dated 17.08.2022 are set aside. The concerned officer will carry out a fresh exercise and pass an order once again, having regard to what has been stated by us hereinabove. This exercise will be carried out by the officer within the next two weeks. The concerned officer will grant hearing to the petitioner and/or its authorized representative. The date and time of hearing will be communicated to the petitioner via email. The concerned officer will be at liberty to accord hearing via video conferencing (VC). Writ petition is disposed of in the aforesaid terms. Pending application shall stand closed. 2023 (3) TMI 868 Reopening of assessment u/s 147 - notice issued u/s 148A - no information has been relied upon with regard to the alleged income that has escaped - whether proceedings invoking Section 148A is invalid as no information has been relied upon with regard to the alleged income that has escaped? - HELD THAT:- The Respondent would submit that the challenge to the notice dated 03.05.2021 does not survive any longer in view of the subsequent order rejecting the objections filed by the petitioner. This Court finds merit in the submission of Respondent, inasmuch as the challenge to the notice would no longer survive, in view of the subsequent notice/orders of the Respondent u/s 148A which is not challenged. Writ petition challenging the notice is dismissed. This would not preclude the petitioner from challenging the order made on the basis of the notice inter alia raising the plea of voidity, in view of the notice having been served on a dead person. 2023 (3) TMI 867 Demand u/s 201(1) - assessee in default - payments made to a non-resident - limitation being prescribed for the purpose of passing orders under Section 201(1) - payment made beyond reasonable period - reasonable period for the purpose of passing an order u/s 201(1) of the Act, deeming a person to be an assessee in default for failure to deduct tax at source in respect of payments to non-residents - HELD THAT:- The object of TDS being common for payments both to residents and nonresidents, that the limitation prescribed by the legislature to pass orders u/s 201 (1) of the Act, deeming a person to be an assessee in default for failure to deduct tax at source in respect of payments to residents should be applied in respect of passing orders deeming a person to be an assessee in default for failure to deduct tax at source even in respect of payments to non-residents. Presumption of Reasonableness vis-a-vis legislative action - The legislature having prescribed the limitation for passing order u/s 201(1) of the Act deeming a person to be an assessee in default for failure to deduct tax at source in respect of payments to residents, the above prescription of limitation is instructive and would serve as a guide to the Courts in determining what would constitute a reasonable period under Section 201(1) of the Act deeming a person to be an assessee in default for failure to deduct tax at source in respect of payments to non-residents. Thus the limitation prescribed for passing orders under Section 201(1) of the Act deeming a person to be an assessee in default for failure to deduct tax at source in respect of payments to residents would constitute reasonable period in the absence of a legislative prescription of limitation for passing orders under Section 201(1) of the Act, deeming a person to be an assessee in default for failure to deduct tax at source in respect of payments to non-residents as well. Reasonableness not a static concept - Limitation introduced vide Section 201(3) of the Act while passing orders deeming a person to be an assessee in default for failure to deduct tax at source in respect of payments to residents which was originally fixed at four years and amended subsequently extending the limitation to six years with retrospective effect and thereafter to seven years, serves as a reflection of the legislature's recognition of the need for a longer period of limitation to make the provision effective. The need for reparation by way of successive amendments extending the limitation for deeming a person to be an assessee in default for failure to deduct tax at source in respect of payments to residents within a short period, is an outcome and result of experience. The above legislative action by way of extended period of limitation is indicative of the need to revisit the question as to what would constitute reasonable period for deeming a person to be an assessee in default for failure to deduct tax at source in respect of payments to non-residents and to provide for a longer period. In the circumstances, I am of the view that it is imperative to adopt the period of limitation prescribed by the legislature for passing order under Section 201(1) of the Act as constituting the reasonable period for passing orders under Section 201(1) of the Act deeming a person to be an assessee in default for failure to deduct tax at source in respect of payments to non-residents. Fiscal laws - Result of Trial and Error - The limitation for passing orders under Section 201(1) of the Act deeming a person to be an assessee in default for failure to deduct TDS on payments to residents has been extended in view of the inadequacy of the original period of limitation which was fixed at 4 years as a result of trial and error. The above legislative action providing and extending the limitation for passing orders under Section 201(1) of the Act with regard to residents as stated above is instructive and serves as a guide in determining the reasonable period for passing orders u/s 201 (1) of the Act deeming a person to be an assessee in default for failure to deduct TDS on payments to non-residents. The limitation for passing orders under Section 201(1) of the Act deeming a person to be an assessee in default for failure to deduct TDS on payments to residents must thus be adopted and treated as constituting reasonable period for the purpose of passing orders under Section 201(1) of the Act deeming a person to be an assessee in default for failure to deduct TDS on payments to non-residents. Impact of amendment vide the Finance Act 2014 extending period of limitation for passing orders under Section 201 of the Act, in respect of residents - As relying on B.K. Educational Services (P) Ltd. [ 2018 (10) TMI 777 - SUPREME COURT] extended period of limitation of 7 years would be available for passing orders under Section 201(1) of the Act deeming a person to be an assessee in default for failure to deduct taxes in respect of payments to residents. The sequitur is that the reasonable period for passing orders under Section 201(1) of the Act deeming a person to be an assessee in default for failure to deduct taxes in respect of payments to non-residents shall also be 7 years from the end of the Financial year in which the payment is made or credit given w.e.f. 1.4.2010. As the challenge in these writ petitions were limited to the aspect of limitation which is clarified, it is left open to the petitioner to file appeals challenging the order on merits. If the petitioner raises the plea of limitation, the same shall be decided by the appellate authority in accordance with legal position clarified by this Court and it would also be open to the respondents to rely upon the Taxation and other Laws (Relaxation of Certain Provisions) Ordinance, 2020 No.2 of 2020 (TOLO) and the judgment of the Hon'ble Supreme Court in exercise of suo moto power Cognizance for Extension of Limitation, [ 2020 (5) TMI 418 - SC ORDER] If the petitioner chooses to file an appeal, the time spent in these writ petitions shall stand excluded while reckoning limitation and the same shall be decided in accordance with law. 2023 (3) TMI 866 Validity of assessment orders - violation of the principles of natural justice - non providing time seekeed to reply to SCN - documents/records sought for by the respondent in the Show Cause Notice are voluminous in nature, even without waiting for the documents to be submitted by the petitioner for which they have sought for two weeks time, the impugned assessment orders passed - HELD THAT:- Admittedly, as seen from the impugned assessment orders, the reason for rejection of the petitioner's request in his reply seeking two weeks time to furnish the particulars/documents sought for by the respondent in their Show Cause Notice has not been considered by the respondent. Having not been informed and that too when the impugned assessment orders do not give reasons as to why the respondent has not granted time despite a specific request having been made by the petitioner in their reply this Court is of the considered view that principles of natural justice has been violated by the respondent. Since the documents have already been given by the petitioner to the respondent during the pendency of these writ petitions, no prejudice would be caused if the assessments are redone in respect of the assessment years - Thus the impugned assessment orders are hereby quashed and the matters are remanded back to the respondent for fresh consideration, on merits. 2023 (3) TMI 865 Challenge to vires of certain Sections of the Black Money (Undisclosed Foreign Income Assets) and Imposition of the Tax Act 2015 - HELD THAT:- Issue notice to the Advocate General. A courtesy copy of the Petition is to be sent to the office of the Additional Solicitor General. We make notice returnable on 20th February 2023. There is an Affidavit in Reply. It is to be filed in the Registry. Delay in filing the Affidavit in Reply is condoned. A Rejoinder is permitted by 13th February 2023. In the meantime and until the next date, the previous ad-interim order of 26th September 2022 will continue. 2023 (3) TMI 864 Validity of reopening of assessment u/s 147 - Validity of order u/s 148A - non-supply of the necessary information and the material documents on the basis of which the notices u/s 148 and notice u/s 148A(d) has been issued - HELD THAT:- Undisputedly, the details of the information documents sought for by the petitioner in his request letter has not been made available to the petitioner by the department. The plain reading of the notice issued u/s 148A(d) would reveal that though there is a reference of these informations by the department but the department as such has not made these documents and material informations available to the petitioner. In the absence of such materials and necessary informations to the petitioner by the department it cannot be expected that the petitioner would be in a position to justify his acts and conduct, nor would he be able to provide for the reasonable explanation to these informations which have been collected and relied by the department, but have not been made available to the petitioner. Thus notice u/s 148A(d) and u/s 148 issued in this regard by the department are set-aside/quashed. The matter stands remitted back to the department concerned with a further direction that in the light of the decision of Union of India others v. Ashish Agrawal ( 2022 (5) TMI 240 - SUPREME COURT] the necessary informations and material documents are made available to the petitioner, those which are referred to in the notice u/s 148A(b) - Decided in favour of assessee. 2023 (3) TMI 863 Condonation of delay in filing the Income tax returns on the specified due date u/s 119(2)(b) - As per petitioner due to covid-19 pandemic and due to change of Auditors, bonafide reasons, unavoidable circumstances and sufficient cause delay occured - HELD THAT:- Having regard to the specific assertion on the part of the petitioner to file the returns on or before the specified date due to bonafide reasons, unavoidable circumstances and sufficient cause coupled with the contention that the said delay was on account of change of Auditors and due to prevailing covid-19 pandemic and having regard to the fact that the delay in filing the returns is less than one year, which cannot be said as long or inordinate delay or laches on the part of the petitioner in filing the returns, by adopting a justice oriented approach set aside the impugned order and permit the petitioner to file the returns within a period of three weeks from the date of receipt of a copy of this order. Petition allowed. 2023 (3) TMI 862 Reopening of assessment u/s 147 - accommodation entry receipts - VAT returns filled by assessee to substantiate payments - HELD THAT:- As during the investigation it has been found that M/s Seema Enterprises is not involved in any real business and hence the contention of petitioner that it made payments in the course of business was not accepted. AO has specifically recorded that the proprietor Smt. Seema Gupta has accepted that her firm was not engaged in real business activities. This Court is of the view that merely filing of VAT returns cannot be held to establish genuineness of transaction especially when it was not shown that the VAT Department had made any physical or spot enquiry. Moreover, neither M/s Seema Enterprises nor the Petitioner had produced before the AO the transport details, purchase contract or bills with regard to the alleged purchases. Prima facie this Court is also of the view that income has escaped assessment. Decided against assessee. 2023 (3) TMI 861 Levy of penalty u/s 271(1)(c) - rejection of claim of deduction towards expenditure of research and development - Whether there is no mensrea on part of assessee? - HELD THAT:- There is no doubt that the claim of deduction towards expenditure on Research and Development constitutes furnishing inaccurate particulars in the sense it does not reflect the true state of facts/ affairs inasmuch as the appellant was not carrying on any business operation and has also sold the fixed assets during the relevant years in question. The claim of the appellant that there is no mensrea as the appellants are reporting loss is again a submission which proceeds on a misconception as to the scope of Section 271(1)(c) of the Act. Objective behind enactment of Section 271(1)(c) of the Act read with the Explanations indicate that the said section was for providing remedy for loss of revenue and such a penalty was a civil liability, therefore wilful concealment is not an essential ingredient for attracting civil liability as was the case in the matter of prosecution under Section 276-C. The submission of the appellant that only losses have been reported and thus penalty under Section 271(1)(c) of the Act is not warranted is an argument which has been rejected by the Hon'ble Supreme Court in Dharamendra Textile Processors [ 2008 (9) TMI 52 - SUPREME COURT ] - As a matter of fact an amendment has also been introduced to Section 271(1)(c) of the Act vide Explanation 4 to the said Section that income would also include losses and merely because an assessee had reported losses, it cannot be submitted that Section 271(1)(c) of the Act would not get attracted. The challenge to the levy of penalty is unsustainable. As Section 271(1)(c) of the Act provides for strict liability and in the present case, deduction have been claimed on the basis of false and non-existent facts, thus the order of the Tribunal restoring the order for levy of penalty is in order. Decided in favour of the revenue. 2023 (3) TMI 860 Capital gain - Taxability in the hands of GPA holder - delivery of possession of impugned property - Transfer u/s 2(15) - HELD THAT:- After considering the recitals mentioned in the sale agreement cum GPA and sale deed, there is no dispute that the assessee purchased the property for a consideration of Rs.5,00,000/- and took possession of the property on 04.04.2007 itself and sold the property to Shri K.Anil Kumar on 04.01.2011. Therefore, the oral contention of the assessee that he acted only as an agent on behalf of the owners is not at all acceptable since the recitals clearly established the sale transaction between the assessee and sellers. No hesitation to come to conclusion that the sale deed executed by the assessee on 04.01.2011 is not in the capacity of GPA holder on behalf of the original owners. There is no recital in the sale deed executed by the assessee on 04.01.2011 that the sale consideration was received by the assessee on behalf of the original owners. He has also not placed any evidence to establish that he has repaid the amount to the original owners. Therefore, the capital gains arising out of the transfer occurred on 04.01.2011 should be charged in the hands of the assessee only. AO as well as the Ld.CIT(A) has rightly taxed the capital gains in the hands of the assessee after allowing deduction of indexed cost of acquisition. Estimation of the value of the impugned property as per fair market value - Special provision for full value of consideration in certain cases u/s 50C - HELD THAT:- As per sale agreement cum GPA executed on 04.04.2007, the assessee purchased the property for Rs.5,00,000/- and sold the property for Rs.17,00,000/-. But as per the sale deed, the stamp duty value of the property is Rs.20,00,000/-. Therefore, as per section 50C of the Act, the AO has correctly computed the capital gains against the sale consideration of Rs.20,00,000/- after allowing indexed cost of acquisition at Rs.6,54,090/- and arrived at the long term capital gains. Assessee appeal dismissed. 2023 (3) TMI 859 Addition u/s 69A - In the statement recorded u/s. 131 assessee stated that he has not filed his return of income and also stated that the money found in his possession belongs to him but could not give the details of the sources for the same - HELD THAT:- In the statement recorded by the assessee assessee has clearly stated in response to Q. No. 14 that he has not taken any loan from any person and has also denied to give any detailed sources for the seized amount. The assessee also in response to Q.No. 16 has voluntarily agreed to pay income tax both in his name and in his wife s name. Since the assessee has not maintained any books of accounts and has accepted that he has not maintained any books of accounts at the time of interception as well as during the survey action, production of books of accounts after a period of 3 months is an afterthought of the assessee and hence the Ld. AO did not consider the books of accounts submitted by the assessee. AO has rightly considered the issue of submission of books of accounts as an afterthought of the assessee and hence we do not find any reason to interfere in the decision. Decided in favour of revenue. Ownership of two immovable properties - HELD THAT:- Cash book submitted by the Ld. AR could not be relied upon on the issue of receipt of advance from Mr. RP Naidu who also happened to be the power holder of the vendor. Hence, we find the cash book of the firm M/s. AR Builders could not be relied upon on the cash payments made by the firm towards purchase of the land from Mr. RP Naidu - sources for the cash paid for the purchase of the land has not been properly explained by the Ld. AR and we hereby uphold the order of the Ld. AO on this ground for the limited amount where the balance paid towards the registration charges has been demonstrated by the Ld. AR. We therefore partly allow the ground raised by the Revenue on this issue. Short term capital gains - Year of assessment - DR argued that the assessee has sold one acre of property / land on outright basis and has entered into a development agreement with M/s. MVV Builders for the construction of flats - HELD THAT:- Since the transfer as defined U/s. 2(47) of the Act has not taken place during the impugned assessment year, the computation of short term capital gains does not arise and the Ld. CIT(A) has rightly directed the Ld. AO to delete the addition - We therefore find no infirmity in the order of the Ld. CIT(A) and do not wish to interfere in the order of the Ld. CIT(A) on this issue. Unexplained cash deposits - HELD THAT:- In the absence of any proper explanation with substantiated evidence by the Ld. AR, we find that these cash deposits remain unexplained and the additions made by the Ld. AO to this extent as assessee denied to explain the sources for the cash deposits into the Karur Vysya Bank savings account are being upheld. Accordingly, this ground raised by the Revenue is partly allowed. 2023 (3) TMI 858 Additions u/s. 69A r.w.s 115BBE - unexplained cash deposits in bank accounts - gift from mother-in-law - HELD THAT:- As find from the translated copies of the sale deed produced by the AR confirms the sale of two lands for Rs. 9 lakhs each. In view of the above, the claim made by the assessee that it is a gift from mother-in-law and it was deposited into the bank account on 30/07/2016 itself in our considered view is acceptable and allowed. Addition on account of sale of paddy, fertilizers and pesticides - AO has merely relied on the reported turnover as per VAT returns and has considered the submissions of the assessee as illogical. We find merit in the arguments of the Ld. AR that the assessee has acted as a mediator between the rice millers and the farmers for a commission and has routed the transactions through his account. This commission was also disclosed in the return of income filed by the assessee. We therefore are inclined to delete the addition made by the Ld. Revenue Authorities on account of sale of paddy. Unaccounted agricultural income - We find that the Ld. AO has not considered this exempt income as disclosed by the assessee in his return of income. AO has therefore erred in treating the agricultural income of Rs. 4 lakhs as unexplained. We therefore direct the Ld. AO to delete this addition as it has been properly explained and disclosed in the return of income filed by the assessee. Addition out of savings - Considering the submissions, this amount was out of surplus available with the assessee and which has been deposited into the bank account, we are inclined to direct the Ld. AO to delete the addition which was made out of the savings of the assessee. Addition of cash deposits made by the assessee into the bank account - Deposits during the demonetization period for Rs. 33,00,000/- in both the bank accounts by way of cash is out of the capital alleged to be introduced by the partners of the firm. In the absence of any substantiated evidence with regard to deposits of the cash into the assessee s account instead of partnership firm s account we could not accept that these deposits are from explained sources. We are therefore inclined to uphold the addition of Ld. Revenue Authorities to the extent of Rs. 33,00,000/- deposited by way of cash during the demonetization period and hereby confirm the order of the Ld. Revenue Authorities. Cash deposited during the demonetization period we find that these cash deposits in the bank account of the assessee arise out of the alleged cash contribution by the partners. Revenue Authorities have erred in disallowing the same cash deposits and we therefore direct the Ld. AO to delete the addition. 2023 (3) TMI 857 Deduction u/s 54F - Long Term Capital Gains (LTGC) was not offered to tax - tenancy of the assessee was nothing but a colourable device - HELD THAT:- On the first issue wherein Ld. AO has stated that tenancy was nothing but a colourable device, submitted that father of the assessee was not a director at the relevant time, who had died way back in 1963 and thereafter the affairs of the said company were looked after by its Board of Directors. Further, as submitted that GSPL had entered into an agreement with CDPL in 1995 for the development of properties which was after a gap of 32 years of the death of father of assessee. Thus, the allegation of colourable device for the transfer is the so-called planning qua transfers after more than 30 years is misplaced and erroneous on the part of the Ld. AO. M/s. B. K. Tushar, HUF was the tenant of the property and not the assessee or his spouse and the assessee could not relinquish the tenancy rights which did not belong to him - As already stated, rent receipt issued by GSPL also reflects the name of the assessee and his spouse as tenants and the rent payments were also admittedly made from the individual bank account of these two tenants. In this respect, findings given by the Ld. CIT(A) are also noted, who had also held that conclusion of AO on B. K. Tushar, HUF being the tenant and not the assessee is erroneous and untenable on facts. Considering the facts on record, perusal of the settlement agreement dated 28.10.2013 along with evidence for payment of rentals by the assessee and his spouse, corroborated by individual bank statements and well reasoned findings given by the Ld. CIT(A), we do not find any reason to interfere with the findings given by the Ld. CIT(A) in this respect. Decided against revenue. 2023 (3) TMI 856 Difference in contract receipts as compared with Form 26AS - HELD THAT:- As assessee submitted that his plea on this account is very limited that reconciliation should be done with the entries of 26AS assessee s books and the assessee should be permitted to explain the same before the AO. We agree with the above proposition and accordingly direct the AO to examine the issue of difference between Form 26AS and the books of accounts after giving assessee appropriate opportunity of being heard. Disallowance out of sub-contractor charges expense - HELD THAT:- As disallowances have been done on ad hoc basis without specifying particular mistake. Such approach cannot be supported by noting that there is slight fall in the GP ratio as done by the ld. CIT (A). Accordingly, we set aside the orders of the authorities below and decide the issue in favour of the assessee. 2023 (3) TMI 855 Delay in deposit of employee s contribution towards provident fund and ESI fund - intimation issued u/s 143(1) - HELD THAT:- Hon ble Supreme Court in the case of Checkmate Services Pvt. Ltd. [ 2022 (10) TMI 617 - SUPREME COURT] has held that the contribution by the employees to the relevant funds is the employer s income u/s 2(24)(x) of the Act and the deduction for the same can be allowed only if such amount is deposited in the employee s account in the relevant fund before the date stipulated under the respective Acts. Thus the deduction u/s 36(1)(va) of the Act can be allowed only if the employees share in the relevant funds is deposited by the employer before the due date stipulated in respective Acts. As identical issue of disallowance of delayed deposit of PF/ESI dues in the intimation issued u/s 143(1) in the case of Cemetile Industries vs. ITO [ 2022 (12) TMI 354 - ITAT PUNE] as held CIT(A) was justified in sustaining the adjustment u/s 143(1)(a) by means of disallowance made in these cases for late deposit of employees share to the relevant funds beyond the date prescribed under the respective Acts. Contrary binding decision on the issue nor has placed on record to demonstrate that the order of Pune Bench of Tribunal in the case of Cemetile Industries (supra) has been set aside, stayed or overruled by higher judicial forum. Decided against assessee. 2023 (3) TMI 854 Revision u/s 263 - nature and source of income surrendered by the assessee during the course of survey and the explanation so offered by the assessee - deeming provisions on the amount so surrendered by the assessee - Addition invoking Section 115BBE - assessee surrendered income during the course of assessment proceedings - HELD THAT:- The nature of surrendered income was difference in stock and unrealized sundry receivables generated out of out of book sales undertaken by the assessee. The factum thereof has been accepted by the Survey team lead by ld DDIT (Investigation) and thereafter by the AO during the course of assessment proceedings after due examination. AO has duly taken cognizance of the findings of the survey team, the documents found during the course of survey, the statement of the partner/director of the assessee company recorded during the course of survey, the surrender letter and the return of income, and after examination thereof and due application of mind, income has been rightly assessed under the head business income . Order so passed by AO cannot be held as erroneous due to lack of enquiry or for that matter, requisite enquiry on the part of the AO. Where AO after due appreciation of facts and circumstances of the case, assessed the income under the head business income and didn t invoke the deeming provisions as so suggested by the ld PCIT, we do not believe that there is any error on part of the Assessing officer and the order so passed by him cannot be held as erroneous. Deeming provisions are not applicable. Where there are specific questions asked during the course of survey regarding the nature and source of income and which has been adequately responded to by the assessee and thereafter acted upon in terms of disclosing the income in the return of income under the appropriate head of income and where the same is duly examined and taken into consideration by the AO during the course of assessment proceedings, the order so passed by the Assessing officer cannot be held as erroneous in nature. Order of the ld PCIT u/s 263 is set-aside - Decided in favour of assessee. Revision u/s 263 - income so surrendered by way of account receivables - HELD THAT:- It a case where the surrender which was otherwise to be made in the hands of the partnership firm has been made and accepted in the hands of the assessee where he was a partner and the fact that such surrender was voluntarily declared in the return of income has been accepted by the AO, the order so passed by the AO may be held as erroneous in so far as the taxability in the wrong hands is concerned, however, the same cannot be held as prejudicial to the interest of the Revenue in so far as the nature of surrendered income and non-applicability of the deeming provisions read with provisions of section 115BBE of the Act are concerned and for the purposes, the detailed discussion and reasoning given supra in case of assessee equally applies in the instant case and not being repeated for the sake of brevity. In the entirety of facts and circumstances of the case, the income so surrendered by way of account receivables cannot be brought to tax under the deeming provisions u/s 69 r/w section 115BBE. In the result, the order of the ld PCIT u/s 263 is set-aside and that of the Assessing officer is sustained. Appeal of the assessee is allowed. 2023 (3) TMI 853 Condonation of delay - appeals were filed late belatedly beyond the time stipulated u/s 253(3) - Mandation to file appeal fees - assessee is a Super Senior Citizen aged about 90 years confined to bed now, and he cannot speak or write-paralysed and dependent on servant AND was not having any money to deposit appeal fee as prescribed u/s 253(6)(c) - appellant claim that he approached the Registry of tribunal on or around 26th December, 2019 (within prescribed time) to file these four appeals with tribunal, but since the appeal fees as provided u/s 253(6)(c) was not pre-deposited by assessee with Government Treasury by the assessee, the appeals could not be filed at that time owing to refusal by registry to accept these four appeal - HELD THAT:- If technicalities are pitted against substantial justice, the Courts will lean towards substantial justice, unless malice is at writ large in filing the appeal belatedly. The litigant is not likely to gain anything in delay in filing the appeal, and the Courts will not shut the door of justice unless malice is at writ large. In the instant case, the assessee was a Super Senior Citizen of around 90 years of age, and he was not likely to gain by delay in filing these four appeals. Reference is drawn to the decision of Hon ble Supreme Court in the case of Collector, Land Acquisition, Anantnag v. Mst. Katiji Ors. [ 1987 (2) TMI 61 - SUPREME COURT] . Thus, we admit these four appeals by condoning delay in filing of these four appeals beyond the time provided u/s 253(3). Now, we proceed to adjudicate these four appeals on merit in accordance with law. Additions u/s 68 - income from un-disclosed sources - Agriculture Income - exemption of income u/s 10(1) read with Section 2(1A) denied - onus to prove - HELD THAT:- The assessee is claiming exemption of alleged agricultural income under the provisions of Section 2(1A) read with Section 10(1) of the 1961 Act, and the onus is entirely on the assessee to prove that the assessee earned agricultural income as defined u/s 2(1A) of the 1961 Act before any exemption can be granted u/s 10(1) of the 1961 Act. It is well settled that exemption provisions are to be strictly construed and the onus is strictly on the assessee to prove that his case falls within four corners of the exemption provision. The assessee having miserably failed to prove that he earned agricultural income allegedly claim to have been earned by him during the year, and hence claim of earning alleged agriculture income and consequent claim of exemption stand rejected. Thus, We do not find any infirmity in the well reasoned decision of ld. CIT(A), and we concur with the decision of ld. CIT(A) which we uphold. The assessee fails on this issue. Addition u/s 68 - unexplained cash deposits - assessee has claimed that the same was deposited two people with whom the assessee has claimed to be partner for construction of flats on the plot of land owned by them - HELD THAT:- The assessee has himself admitted that during the year, no sale of flats purported to be constructed by him on the aforesaid plot of land, has taken place, nor there is any evidence on record that Mrs. Shashi Singh and/or Mrs. Anita Kesarwani gave any amount in cash to the assessee, and moreover, as per Ikrarnama, both Mrs. Shashi Singh and Mrs. Anita Kesarwani were not required to contribute any amount towards this venture, apart from contributing plot of land on which construction was to be carried out, of which both of them namely Mrs. Shashi Singh and Mrs. Anita Kesarwani were the owners. This claim is raised by the assessee of having received Rs. 20 lacs in cash which stood deposited in PNB, from Mrs. Shashi Singh and Mrs. Anita Kesarwani, for the first time before tribunal, and that too without filing any evidence on record to substantiate the aforesaid claim, and this claim is merely a balled claim without any evidence. Thus, we have no hesitation in rejecting this claim of the assessee. CIT(A) has rightly made the addition which we affirm, as the said cash deposits are income of the assessee from the undisclosed sources. The assessee fails on this issue too. 2023 (3) TMI 852 Reopening of assessment proceedings by issuance of notice u/s 148 - reasons to believe - treating the status as A.O.P. - HELD THAT:- As return of the assessee was processed u/s 143(1), there was specific information of amalgamation of erstwhile five Rural Banks with the assessee bank. Proper reasons were recorded before selecting the case for scrutiny. Based on this specific information, reopening was initiated which, in our view is valid. CIT(A) has rightly held the re-assessment proceedings as valid. Hence, no interference is called for. Accordingly, Ground Nos. 1, 2 3, raised by the assessee are dismissed. Status as AOP - Whether AO was wrong in treating the status as A.O.P.? - HELD THAT:- We fail to find no merit in this ground because in the assessment order also the ld. AO has mentioned the status as Regional Rural Bank and since no other submissions were made on this ground before us, we fail to find any merit in this ground raised by the assessee and the same is accordingly dismissed. Disallowance of carry forward loss/set off of brought forward losses - whether the assessee is eligible to claim brought forward/set off of the accumulated losses of the five rural banks? - HELD THAT:- Case of the assessee falls u/s 72AA of the Act since it is a banking company doing the business of banking and the amalgamation of the five rural banks has been brought into force under the directions of Central Government vide the notification and since the quantum of loss is not in dispute and also the assessee company having filed the return before the due date prescribed u/s 139(1) AO erred in not allowing the claim of accumulated brought forward loss of the five rural banks which were merged with the assessee bank during the Financial Year 2006-07 and, therefore, the assessee has rightly claimed the set off of brought forward losses to in the income tax return furnished for Assessment Year 2007-08. Accordingly, Ground No. 5, raised by the assessee is allowed. Disallowance of provision for fraud - HELD THAT:- AO without mentioning any reason and doubting the type of expenditure has observed that out of total expenditure for the year 1/5th is to be disallowed - This finding of the AO has been affirmed by the ld. CIT(A), which we fail to find merit since the same is merely an ad hoc disallowance without giving any reason for the said disallowance and ignoring the fact that this is a regular feature of the assessee bank to make provision for fraud and the actual expenditure incurred are cleared from the balance appearing in the account of provision for fraud. Thus, this finding of the ld. CIT(A) is set aside and the ground raised by the assessee is allowed. Accordingly, Ground No. 6 is allowed. Disallowance on payment of gratuity - Both the lower authorities have denied the claim stating that the assessee has not made any payment - HELD THAT:- No merit in this finding since the payment of gratuity is an ascertained liability and it has been held time and again and also clarified that the Central Board of Direct Taxes (CBDT) that provisions for payment of gratuity that has become payable during the previous year is allowable. Our view is further fortified by the decision of this Tribunal in the case of DCIT, CIR-I, KOLKATA, Kolkata v. M/s Reliance Jute Mills International Ltd [ 2017 (3) TMI 1914 - ITAT KOLKATA] - Accordingly, Ground No. 7 raised by the assessee is allowed. Disallowance of expenditure for provision of contingencies - HELD THAT:- This being an adhoc disallowance and ignoring the fact that banking companies are required to make provisions for true and fair financials of the bank, ought to be allowed as an expenditure. Hence, we set aside the findings of the ld. CIT(A) on this issue and allow this ground. Accordingly, Ground No.8 of the assessee is allowed. Disallowance of expenditure treated as penalty in nature - HELD THAT:- We, however, for lack of information about the nature of penalty and whether it does not fall under explanation (1) to Section 37 of the Act, confirm the disallowance and dismiss the ground raised by the assessee. Accordingly, Ground No. 9 raised by the assessee is dismissed. 2023 (3) TMI 851 Undisclosed sales - unexplained cash sales - whether those were the cash sales as claimed? - HELD THAT:- We find that firstly, the assessee during the course of the survey, brought to the notice of the income tax authorities, the figures of the profit worked out were on higher side. During the course of the survey proceedings, the accountant of the assessee was not available, and the director of the company cannot be expected to explain each and every entry of sales to the Income tax authorities, without specifically pointed out to him, particularly, about the monthly sales recorded in the name of XYZ. Secondly, the series of bills recorded in respect of the XYZ is different from the series in respect of the undisputed sales, which also indicate that those are not part of regular sales. Thirdly, when the assessee himself is submitting that those sales are fictitious sales, then onus is on the AO to establish whether those are cash sales. The income tax authorities have carried out survey at the premises of the assessee and no evidence suggesting cash sales by the assessee has been found. The assessee cannot substantiate more than that that no such party in the name of XYZ Private Limited exist in the registrar of companies. Allegation of the revenue, that non-existence of XYZ Private Limited in the ROC does not support the case of the assessee, are rejected. In the preceding assessment year the turnover of the assessee was of Rs.4.43 crore, and in the year under consideration turnover was only of ₹2.5 Crores, therefore any such attempt for increasing the turnover for the purpose of availing bank loan by an accountant or other person cannot be ruled out, though it is an illegal act and Bank Authorities should take note of this. Thus it is the AO, who was required to establish whether those were the cash sales as claimed by him and not the fictitious sales as claimed by the assessee. In absence of any such evidence of the cash sales, the addition confirmed by the Ld. CIT(A) is not justified and accordingly, we set aside the finding of the Ld. CIT(A) on the issue in dispute. Appeal of the assessee is allowed. 2023 (3) TMI 850 TDS u/s 194I/194C - TDS on rent and CAM charge [Common Area Maintenance] - HELD THAT:- As decided in Yum Restaurants India (P.) Ltd [ 2022 (10) TMI 256 - ITAT DELHI] while the lease rentals are paid based on a fixed percentage on the net revenue, the CAM charges are based on the per sq. ft. area. The observation of CIT(A) is that the rent by any name, lease, sub-lease, tenancy or the reliance on the judgment wherein the services are intrapolated into the rent stand on a different pedestal. In the instant case, the determination of the rent or CAM are separate and the CAM arrangements are not essential and an integral part for use of the premises. While there are no expenses incurred against the rent except for general building maintenance and municipal charges, the CAM involves employment of separate staff and separate operations involved on day to day basis - Provisions for rent are governed by Section 194I and CAM charges by Section 194C - AO is directed to re-compute the CAM charges, taking into consideration the two sections mentioned above. Appeals of the assessee are allowed for statistical purpose. 2023 (3) TMI 849 Taxability in the hands of partners v/s firm - Undisclosed profit on sale of 20 flats - transfer of capital asset by firm to partners - Addition in hands of firm - transfer of flats to partners by way of unregistered MOU - whether flats were sold by the firm and not by the partners ? - HELD THAT:- We find that the assessee had transferred 20 flats by way of unregistered MOU to its partners and claimed that said transfer does not give rise to any income and consequent income cannot be assessed in the hands of the partnership firm. There is no merit in the arguments advanced by assessee, that transfer of flats to partners by way of MOU does not give rise to any income in the hands of the firm, because as per provisions of section 45(4), transfer of capital asset by firm to partners is a transfer which need to be dealt in accordance with law. Assuming for a moment, what was transferred by the assessee firm is not a capital asset, but stock in trade, when the assessee has treated asset as stock in trade, then sale of said asset to partners is as good as sales to outsiders and the assessee needs to consider profit derived from sales in the hands of the firm. Thus to this extent the findings of the facts recorded by CIT(A) that transfer of flats to partners by way of unregistered MOU does not give rise to any income in the hands of the firm and reasons given by the CIT(A) to reach said conclusion is not correct. Whether is there any tax impact on transfer of flats by the firm to its partners, more particularly when the firm is enjoying the benefit of exemption u/s. 80IB(10)? - Since, the assessee is enjoying the benefit of deduction u/s. 80IB(10) of the Act, we are of the considered view that, whatever profit computed by the AO in the hands of the firm, consequent to transfer of 20 flats to partners by way of MOU dated 08.10.2009, is also eligible for deduction u/s. 80IB(10) of the Act and thus, we direct the AO to compute profit towards transfer of 20 flats to its partners and further, allow benefit of deduction u/s. 80IB(10) of the Act to entire profit derived from transfer of flats to its partners. In this case, although we do not appreciate the findings of the ld. CIT(A) in allowing relief to the assessee on the aspect of taxability of income in the hands of the firm, but yet the assessee is entitled for deduction u/s. 80IB(10) of the Act on entire profit and further, the CIT(A) has allowed deduction claimed u/s. 80IB(10) of the Act to entire profit, in our considered view, there is no error in the reasons given by the ld. CIT(A) to delete additions made by the AO towards profit derived from transfer of flats to its partners. Thus, we are inclined to uphold the findings of the ld. CIT(A) and dismiss appeal filed by the revenue. Customs 2023 (3) TMI 848 4th bail application under Section 439 of the Code of Criminal Procedure, 1973 - Smuggling - gold - bail also claimed on medical grounds - habitual offender - Revenue opposes the bail application and prays for its rejection submitting that the applicant's earlier two bail applications have been rejected on merit after considering all the facts and circumstances of the case and there is no material changes in the circumstances, in which the applicant may be deserve for bail. HELD THAT:- Taking note of the fact that the applicant's earlier two bail applications were rejected on merit after considering all the facts and circumstances of the case and the arguments advanced by counsel for the applicant; the applicant is a habitual offender or not is the fact which may be proved during trial; although the co-accused Shankar Singh Yadav has been enlarged on bail in SHANKAR SINGH YADAV VERSUS DIRECTORATE OF REVENUE INTELLIGENCE ANR. [ 2023 (3) TMI 791 - SC ORDER ], but the case of present applicant is different from the co-accused Shankar Singh Yadav, therefore, he cannot claim parity with the co-accused Shankar Singh Yadav. So far as medical ground taken by the applicant is concerned, from the report dated 06/03/2023 issued by Meeical Officer, Central Jail, Indore, it is clear that proper treatment is being provided to present applicant and he had been sent to M.Y. Hospital, Indore for the purpose of colonoscopy and other treatment and he was advised for surgery at M.Y. Hospital, Indore, but after admission, the applicant himself denied for the aforesaid surgery; the applicant himself is not ready to take treatment; the required treatment is available in Government Hospital also, therefore, on the basis of the treatment, he cannot be enlarged on bail. This Court is not inclined to grant bail to the applicant - Application dismissed. 2023 (3) TMI 847 Maintainability of appeal - allegations regarding fraudulent import of goods (tyre scrap) - forging customs copy of the Bills of Entry - right to prefer an appeal under Section 129A or 129D of the Customs Act, 1962 against an order passed under Regulations 21 or 23 of the Custom Broker Licensing Regulations, 2013 is available only to a Custom Broker? HELD THAT:- In terms of Regulation 21 of the CBLR, 2013, an appeal against the order of the Commissioner is available only to the Custom Broker and not to the Revenue. The question whether an appeal by the Revenue would be maintainable is covered against the Revenue, by the decision of this Court in CCOMMISSIONER OF CUSTOMS (GENERAL) VERSUS FALCON INDIA [ 2018 (11) TMI 314 - DELHI HIGH COURT] . The said decision was also followed by a Co-ordinate Bench of this Court in COMMISSIONER OF CUSTOMS (GENERAL) VERSUS D.S. CARGO AGENCY [ 2022 (10) TMI 752 - DELHI HIGH COURT] . The Court had held that, CBLR was a complete code. Further, the expression any person aggrieved as used in Section 129A of the Customs Act, 1962 would not include Revenue insofar as any order passed by the Commissioner of Customs under the CBLR, 2013 is concerned. Appeal dismissed/ 2023 (3) TMI 846 Refund claim - seeking re-assessment of the Bills of Entry in terms of Section 149 read with Section 154 of the Customs Act, 1962 - duty paid without noticing that the petitioner is eligible for a concessional rate of tax at of 15% vide Notification No.57 of 2018 Cus dated 07.08.2018 - rejection of request for re-assessment and refund on the ground that the petitioner had not filed statutory appeal with the appropriate authority seeking modification of the self-assessment. HELD THAT:- Inter-alia the first respondent refers to a Public Notice issued by the Commissioner of Customs / R2 in Public Notice No.88 of 2009 dated 18.10.2019. In this public notice, the authority refers to a judgment of the Hon'ble Supreme Court in the case of I ITC LIMITED VERSUS COMMISSIONER OF CENTRAL EXCISE, KOLKATA -IV [ 2019 (9) TMI 802 - SUPREME COURT] . In that judgment, the Hon'ble Supreme Court was concerned with the question as to whether in the absence of any challenge to an order of assessment by way of appeal, a refund application against the assessed duty could be entertained. Public Notice No.88 of 2019 which states that 'no reassessment shall be allowed unless the order of assessment including self assessment is duly modified by way of appeal ' is incorrect as it places a restriction on the mode of re-assessment. No restrictions was envisaged by the Hon'ble Supreme Court that has made it clear that the modification could be by way of statutory appeal or under relevant provisions of the Act. To this extent, the stipulation in public notice dated 15.10.2019, does not align with the ratio of the judgment of the Supreme Court. In light of the categoric pronouncement of Hon'ble Supreme Court as aforesaid, resort to Section 149 of the Customs Act is perfectly in order and thus the application of the petitioner is restored to the file of the first respondent for consideration in line with the conclusion in the case of ITC and observations made herein - In the present case, the document is a statutory Notification. The authority is directed to hear the petitioner, consider applicability or otherwise of the Exemption Notification to its case and pass orders afresh, all within a period of four weeks from date of receipt of this order. Petition allowed. 2023 (3) TMI 845 Refund / return on amount collected during investigation - It submitted that, teh amount collected and retained by the Respondent No.3 without the authority of law - payment was made under compulsion and has to be construed as payment under protest - respondents/revenue contended that the petitioner had deliberately chose to insure value of the imported goods and excluded the customs duty and consequently, the question of refunding the customs duty / tax to the petitioner do not arise. Can any subsequent show-cause notice or adjudication proceedings be made the basis to deny refund? HELD THAT:- As can be seen from the Circular dated 25.05.2022, no recovery can be made unless the amount become payable in pursuance of the order passed by the Adjudicating Authority or otherwise become payable under the provisions of the GST Act as well as under the provisions of the Customs Act also. The Circular dated 19.01.2022 clearly states that arrears are the over due payment of the amount of tax, interest, fine or penalty that is confirmed against a person who is liable to pay the same to the exchequer and it arises as result of Order-in-Original. The said Circular also clarifies the amount in the case under investigation, unconfirmed demands, Show Cause Notice etc., and the Order-in-Original that has been set aside or remanded for de-novo adjudication by Appellate authority do not fall under the category of arrears. In the instant case, it is an undisputed fact that prior to recovery of a sum of INR 1.5 crores from the petitioner, there is no adjudication or any order made/passed by the respondents, which entitled them to recover the money paid by the petitioner. As rightly contended by the learned Senior counsel for the petitioner, the respondents have themselves admitted in their statement of objections that the petitioner did not voluntarily make the payment and that he made it under protest. Under these circumstances, in the light of the aforesaid material on record, which clearly establishes that the petitioner had made the payment under protest and that the payment was not preceded by any order of adjudication, the respondents did not have any jurisdiction or authority of law to recover INR 1.5 crores, which is clearly violative of Article 265 of the Constitution of India and consequently, the petitioner would be entitled to refund of the aforesaid amount collected by the respondents without jurisdiction or authority of law. In the case of M/S. VALLABH TEXTILES VERSUS SENIOR INTELLIGENCE OFFICER AND ORS. [ 2022 (12) TMI 1038 - DELHI HIGH COURT] the High Court of Delhi has held that The violation of the safeguards put in place by the Act, Rules and by the Court, to ensure that unnecessary harassment is not caused to the assessee, required adherence by the official respondents/revenue, as otherwise, the collection of such amounts towards tax, interest and penalty would give it a colour of coercion, which is not backed by the authority of law. This Court has categorically held that the contention of the Department that the amount under deposit must be made subject to the outcome of the pending investigation cannot be accepted. It is therefore clear and evident that in the instant case also, the subject amount of INR 1.5 crores collected from the petitioner company by the respondents is in violation of Articles 265 and 300-A of the Constitution of India and the same deserves to be refunded back to the petitioner - in the facts of the instant case, in the absence of any material to establish that there was any order or adjudication made by the respondents quantifying the amount of tax / duty payable by the petitioner as on the date of collecting / recovering the same during investigation, the respondents were clearly not entitled to recover the same, leading to the sole inference that the respondents are liable to refund the amount collected by them. The facts of the instant case clearly establishes that the respondents have recovered INR 1.5 crores during the course of search proceedings, is without jurisdiction or authority of law and without being any order of adjudication and consequently, in the facts of the instant case, the respondents would be liable to pay refund with applicable interest - Petition allowed. 2023 (3) TMI 844 Applicability of doctrine of unjust enrichment to claims of refund made prior to the introduction of Section 11 B of the Central Excise Act, 1944 and Section 27 (1A) of the Customs Act, 1962 - applicability of the doctrine to capital goods, raw material/ test material. HELD THAT:- The view of the Tribunal that in the absence of an express provision the doctrine of unjust enrichment cannot be applied is contrary to the judgment of the Hon ble Supreme Court in the case of SAHAKARI KHAND UDYOG MANDAL LTD. VERSUS COMMISSIONER OF C. EX. CUS. [ 2005 (3) TMI 116 - SUPREME COURT] , wherein it was held that the doctrine of unjust enrichment is based on equity and has been accepted and applied in several cases. In our opinion, therefore, irrespective of applicability of Section 11-B of the Act, the doctrine can be invoked to deny the benefit to which a person is not otherwise entitled. Section 11-B of the Act or similar provision merely gives legislative recognition to this doctrine. That, however, does not mean that in the absence of statutory provision, a person can claim or retain undue benefit. Before claiming a relief of refund, it is necessary for the petitioner-appellant to show that he has paid the amount for which relief is sought, he has not passed on the burden on consumers and if such relief is not granted, he would suffer loss. The Hon ble Supreme Court in the case of COMMNR. OF CENTRAL EXCISE, CHENNAI-III VERSUS GRASIM INDUSTRIES [ 2015 (4) TMI 389 - SUPREME COURT] had held that the unjust enrichment will also apply to the capital goods, inputs and raw materials and any claim for refund ought to be tested by examining whether the higher duty paid has led to higher costing/price of the final product which should be demonstrated by the assessee to be in the negative to claim the benefit of refund. It thus appears that the order of the Tribunal insofar as it holds that the doctrine of unjust enrichment is not applicable to the facts is erroneous. In view of the same, the matter is remanded back to the original authority to decide the claim of the Respondent/Assessee to refund applying the doctrine of unjust enrichment after giving the Respondent/Assessee a reasonable opportunity. Appeal allowed by way of remand. 2023 (3) TMI 843 Valuation of import goods - Levy of custom duty on the value determined on the quantity received in Shore Tanks as claimed by the Appellants or on transaction value based on invoice price of the overseas suppliers - bulk liquid cargo imports of Motor Spirit (MS) - whether the cargo is chargeable to ad valorem rate of duty or to specific rate of countervailing duties? HELD THAT:- The issue is no longer res integra as the same has been decided by the Hon ble Supreme case in the of MANGALORE REFINERY AND PETROCHEMICALS LTD. VERSUS COMMISSIONER OF CUSTOMS, MANGALORE [ 2015 (9) TMI 245 - SUPREME COURT] where it was held that the quantity of crude oil actually received into a shore tank in a port in India should be the basis for payment of customs duty. Consequential action, in accordance with this declaration of law, be carried out by the customs authorities in accordance with law. A The appellant s claim of payment of Customs duty on quantity received in shore tank is correct and legal and revenue claim of duty payment on transaction value based on invoices of all overseas suppliers is not sustainable - appeal allowed. 2023 (3) TMI 842 Classification of imported goods - import of de-natured ethyl for re-exports - classifiable under the Chapter Heading 22072000 of the Customs Tariff or under CTH 22071000? - confiscation alongwith option of redemption fine - penalty - case of the revenue in the present matter is that subject goods found to be Ethyl Alcohol in terms of test report dated 20.01.2021 and further clarification issued by the CRCL, Kandla. HELD THAT:- In the present matter by relying the test report given by CRCL, Kandla revenue argued that sample of goods are not considered as denatured Alcohol as per the Indian Standard, Alcohol Denaturants Specification IS 4117 (2008). Therefore the impugned goods are Ethyl Alcohol and not denatured ethyl alcohol. In this context we noticed that Board issued circular 02/2006 dated 10.01.2006 wherein the requirement of IS 4117-1973(2008) related to alcohol denaturants is made. We agree with the argument of Learned Counsel that the aforesaid Circular is not applicable to the disputed goods under consideration because the above circular issued with regard to denaturation of ethyl alcohol that is to be allowed clearance for industrial use in India and not with regards the goods imported and bonded for re-export. There is no allegation against the appellant that the disputed goods was imported for industrial use in India. Since such goods are not meant for any use in India, the same are not required to be allowed clearances in India. Hence the charges of mis-declaration of goods against the appellant by citing the non-compliance with IS 4117-1973 (2008) is completely misconceived and cannot be sustained. Confiscation of goods on the non-compliant of IS 4117 (2008) - HELD THAT:- As per the Board Circular No.2/2006 dated 10.01.2006 this requirement is applicable to goods meant for clearance into India and not to any such goods which are meant for re-export and use outside India, the goods which are admittedly meant for re-export. First of all, there is no violation of compliant of IS 4117 (2008) even if it is required in view of the goods being re-exported. There is no case of confiscation of goods under Section 111(m) of the Customs Act, 1962 accordingly, the penalty under Section 112 and 114 of the Customs Act, 1962 are not sustainable. Penalty under Section 114AA of the Customs Act, 1962 - charge of mismatch in the date of bill of lading in as much as the date mentioned in the bill of lading presented by appellant along with bill of entry was also reported by the master/agent in the Import General Manifest filed in the EDI system - HELD THAT:- It is clearly mentioned in the bill of lading that the shipment of 1900 MT. was loaded on board of vessel as part of one original lot of 38,386.137 MT. as Galveston Tx, USA on 27.10.2020. This has been corroborated by the statement of various representative recorded by the officers in the course of inquiry therefore, in absence of contrary evidence, the allegation that the date of lading mentioned in the bill of lading is incorrect and not justified. There are force in the appellant s submission as reliance placed on Commercial Certificate of Quality No. LABORATORY JOB NO.DP 20-11252.004 dated 29.10.2020 when the goods were mentioned as Undenatured Ethyl Alcohol is misplaced in as much as the said invoice was issued prior to denaturation at the Galveston anchorage. After arrival into India, the Chemical Examiner of Custom House laboratory at Kandla has certified that goods have been denatured with Bitrex/Denatonium Benzoate. On this basis, the conclusion of the authorities below that the bill of lading is incorrect and false in respect of description of goods as well as imposing penalty on the appellant under Section 117 of the Customs Act, 1962. The order of confiscation and subsequent penalties is bad in law as well in fact - the confiscation and redemption fine are set aside - Penalties also set aside - appeal allowed. 2023 (3) TMI 841 Levy of penalty for non finalization of provisionally assessed Bills of Entry - HELD THAT:- It is seen that in case of 4 Bills of Entry, the assessment were not finalized without any fault on the part of the Appellant. The issue is also covered by the case law of Jai Balaji Industries Ltd. [[ 2021 (1) TMI 767 - CESTAT KOLKATA] ] wherein, this Tribunal has held The department has not been able to establish any deliberate delay or any mala fide intention on the part of the appellant. As and when the appellant could gather the requisite documents they were presented before the assessing officers for finalizing the provisional assessments. In fact, out of the 35 Bills of Entry involved, 27 could be finalized even before passing of the adjudication order. Keeping all this in view, the adjudicating authority took a fair decision and imposed a nominal penalty of Rs.20,000/ which comes to Rs.2,500/- for each of the remaining 8 Bills of Entry yet to be finalized for want of all the documents. The Appeal is allowed holding that the Adjudicating Authority was correct in taking a lenient view imposing penalty of Rs.10,000/- 2023 (3) TMI 840 Demand of Differential Duty - inclusion of clean energy cess with the Basic Customs Duty for the calculation of Customs Education Cess and Higher Education Cess - HELD THAT:- The issue stands covered in the appellant s own case CHEMPLAST SANMAR LTD. VERSUS COMMISSIONER OF CUSTOMS, TIRUCHIRAPALLI [ 2018 (2) TMI 89 - CESTAT CHENNAI ] where it was held that it is amply clear that Education Cess levied under Section 81(1) of Finance Act, 2004 on imported goods specified in First Schedule to the Customs Tariff Act, 1975 into India at the rate of 2% on aggregate duty of Customs levied under Section 12 of Customs Act, 1962 as per Section 84 (1) read with Section 84 (2) of Finance Act, 2004 will also levied on Clean Energy Cess as being part of aggregate of Customs. There are no merit in these appeals. Appeals filed by the appellants are dismissed. Corporate Laws 2023 (3) TMI 839 Validity of ICC Arbitral Award - The termination of the Devas Agreement by Antrix was disputed by Devas - Whether the ICC Award suffers from patent illegality, fraud and is in conflict with the public policy of India - binding nature of the the judgment in DEVAS MULTIMEDIA PRIVATE LTD. VERSUS ANTRIX CORPORATION LTD. ANR. [ 2022 (1) TMI 774 - SUPREME COURT] - applicability of principles of res judicata - The petitioner contended that the the Judgment of the Apex Court are at best obiter dicta and do not constitute ratio decidendi HELD THAT:- It is summarised as under: a) The findings of the Apex Court in its Judgment in DEVAS MULTIMEDIA PRIVATE LTD. while upholding the findings of the NCLT and NCLAT, noted that Devas was incorporated for a fraudulent purpose and that its affairs were being conducted in a fraudulent manner. The Apex Court has given these findings after being aware of the fact that an arbitral award has been passed in favour of Devas and the same is under challenge in a petition under Section 34 of the Arbitration Act. The Apex Court has repelled the contention of Devas that the application for winding up was filed only to circumvent the enforcement of the arbitral award. Without the findings rendered by the Apex Court regarding fraud, the Apex Court could not have come to the conclusion that Devas had been incorporated for fraudulent purposes and that its affairs were being conducted in a fraudulent manner and, therefore, the order of winding up Devas under Section 271(c) of the Companies Act, 2013 was correct. These findings, therefore, become the ratio and not the obiter of the case and therefore, were binding on the learned Single Judge under Article 141 of the Constitution of India. It is settled law that even obiter of a judgment of the Hon ble Supreme Court is binding on all Courts subordinate to it. The Apex Court in PEERLESS GENERAL FINANCE INVESTMENT CO. LTD. VERSUS RESERVE BANK OF INDIA [ 1992 (1) TMI 337 - SUPREME COURT] has reiterated that though the focus of the Apex Court may not be directly on a partiuclar point, yet, a pronouncement by the Apex Court, even if it cannot be called the ratio decidendi of the judgment, will still be binding on the High Courts. b) The proceedings before the Apex Court in DEVAS MULTIMEDIA PRIVATE LTD. are formal proceedings between the same parties i.e., Antrix, Devas and DEMPL, arising out of the same factual matrix, and the issue of the effect of fraudulent actions of Devas was directly and substantially in issue before the Hon'ble Supreme Court. The issue of fraud was raised and agitated before the Apex Court in Civil Appeal No.5766/2021 and has been heard and finally decided by the Apex Court which was competent to render the findings on the issue before it. As a consequence, the findings of the Apex Court in its Judgment in Civil Appeal No.5766/2021, particularly Paragraphs No. 12 and 13, would be binding between the parties on the basis of the principle of res judicata. c) Article 144 of the Constitution of India mandates every authority to aid in enforcing the orders and decrees of the Supreme Court. The Apex Court in DEVAS MULTIMEDIA PRIVATE LTD. has held that Devas was incorporated for fraudulent purposes and the affairs of the company were being conducted in a fraudulent manner, and therefore, the agreement, from which the present arbitration arises, was a product of fraud. After such a finding has been rendered by the Apex Court, it was not open for the learned Single Judge to come to the conclusion that the award, which has been held to be a product of fraud, would still be enforceable in the country. Such a finding by the learned Single Judge would be against the spirit of Article 144 of the Constitution of India. d) The phrase the Court finds that , which finds mention in Section 34(2)(b) of the Arbitration Act, enables the Court to look into attendant circumstances to form its own opinion as to whether the award is in conflict with public policy of India or not. As a corollary, it follows that the Court would also have the power to discover on its own, whether the making of an award is induced or affected by fraud or corruption or is in violation of Section 75 or 81 of the Arbitration Act. This phrase has been interpreted by the Court, as an enabling provision, allowing the Court while deciding an application under Section 34 of the Arbitration Act to grant leave to amend an application under Section 34 of the Arbitration Act, if the peculiar circumstances of the case so warrant and it is so required in the interest of justice. e) In view of the various Judgments of the Hon'ble Supreme Court interpreting Section 34 of the Arbitration Act, the amendments to Section 34 of the Arbitration Act and in view of the categorical findings of the Apex Court in its Judgment passed in DEVAS MULTIMEDIA PRIVATE LTD. , nothing prevented the learned Single Judge from relying on those findings and using them for the purpose of setting aside the ICC Award under Section 34 of the Arbitration Act on the ground that the agreement itself was a product of fraud and, therefore, the making of award is automatically induced by fraud and corruption. The findings by the Apex Court, which is the highest Court of the land, could not have been ignored by the learned Single Judge and those findings would automatically become the findings of the learned Single Judge while considering an application under Section 34 of the Arbitration Act for which there was no necessity of a specific pleading. From a comprehensive reading of the Impugned Judgment, it is evident that the learned Single Judge has applied his mind to the amendment applications and has taken it into consideration while deciding the petition under Section 34 of the Arbitration Act and the issue as to whether the making of award was vitiated by fraud or corruption. f) The principle of fraud vitiates all solemn acts is applicable not only to the primary proceedings, but also to all collateral proceedings that arise out of the same facts and circumstances. The act of fraud is an anathema to all equitable principles and every transaction tainted with fraud must be viewed with disdain by Courts. In the instant case, the Supreme Court in DEVAS MULTIMEDIA PRIVATE LTD. has held that the commercial relationship between Devas and Antrix is a product of fraud, and as a consequence, the Devas Agreement, the ICC Award, and all other disputes arising out of the transaction would be tainted by fraud. Permitting Devas and its shareholders to reap the benefits of the ICC Award would amount to this Court perpetuating the fraud. Such a view would be against all principles of justice, equity and good conscience. g) The learned Single Judge has not made an error in setting aside the ICC Award on the grounds of fraud and it being in conflict with the public policy of India. Accordingly, the challenge to the Impugned Judgment by the Appellant, on the ground that the Ld. Single Judge could not consider the grounds of public policy and fraud under Section 34 fails. Appeal dismissed. 2023 (3) TMI 838 Termination of proceedings pending, with immediate effect - rectification of the name of the company - premise of the challenge is that the proceedings are lacking in jurisdiction and ex-facie, barred by limitation - assumption of jurisdiction and the bar of limitation - HELD THAT:- The issue relating to assumption of jurisdiction and the bar of limitation hinges upon Section 16 of the Companies Act, 2016. Section 16 deals with rectification of name of company and states that if, through inadvertence or otherwise, a company on its first registration by a new name, is registered by a name which, in the opinion of the Central Government, or on an application by a registered proprietor of a trademark, is identical with, or too nearly resembles the trademark of a proprietor under the 1999 Trade Marks Act, such claim may be rectified, if such application were filed within 3 years of incorporation/registration/change of name of the company. The right of the officer has come to an end on 31.03.1956 and as on that date, the proceedings lapse. There was no possibility for the dead proceedings to be revived thereafter merely because the amended Section gave vested authority in the power to issue notice. Thus, and since the right to issue notice under the earlier Act had come to an end before the new Act came into force, the notice was struck down - In the present case, it is not merely a provision that has been amended but an entirely new enactment, the 2013 Act that has replaced the 1956 Companies Act. There is simply no avenue for the timelines under the old Act to enure to the benefit of R2. Thus, the limitation under Section 22 of the 1956 Act had long expired with the repeal of that Act and there is no question of any person being entitled to the benefit of the same thereafter. This argument is rejected. Thus, the jurisdictional fact of bar of limitation is clearly attractive/established. The Court has observed that a Writ of Prohibition is not normally issued for a mere error of law unless the error makes the proceedings fall outside the jurisdiction of the authority. Writ of Prohibition as sought for is issued and this Writ Petition is allowed. Insolvency & Bankruptcy 2023 (3) TMI 837 Maintainability of petition - initiation of CIRP - Corporate Debtor failed to make repayment of its dues - Operational Creditors - existence of disputes between the parties prior to the issuance of the Demand Notice - HELD THAT:- It is observed that the emails dated 07.08.2014, 27.03.2015, 01.02.2016, 25.03.2016 and 08.04.2016 sent by the Respondent to the Appellant shows that there was pre-existence dispute between the parties before issuance of Demand Notice which is not permissible in IBC to initiate the Corporate Insolvency Resolution Process. Therefore, the reasons assigned by the Adjudicating Authority in the impugned order is fully agreed upon. Keeping in view of the facts, there are no merit found in the Appeal to interfere with the order impugned passed by the Adjudicating Authority. The impugned order passed by the Adjudicating Authority (National Company Law Tribunal, Court No. IV, New Delhi) is hereby affirmed. Appeal dismissed. 2023 (3) TMI 836 Maintainability of petition - initiation of CIRP - Corporate Debtor failed to make repayment of its dues - Financial Creditors (Homebuyers) - minimum threshold as required under Section 7 of the I B, Code, 2016 (regarding minimum number of allottees), met or not - Respondents stated that total 39 Financial Creditors file the original application filed under Section 7 of the I B Code, 2016 who were allotted 20 Real Estate Units of a Phase II having 170 units and therefore met the threshold limits. Whether, the Application under Section 7 of the I B Code, 2016 was complete and without defects and the same was considered accordingly, by the Adjudicating Authority? - HELD THAT:- From the reading of the ingredients of Section 7 of the Code, it is obvious that, if an Application, filed under Section 7 of the I B Code, 2016, is found to be incomplete, then the Adjudicating Authority, in compliance of proviso to Section 7 of the I B Code, 2016 is required to issue Notice, and provide an opportunity to rectify the Defects, within seven days, failing which, the Petition, can be rejected. An incomplete or improper authorisation, may vitiates, the entire proceedings, rendering Legal Action, Devoid of Authority. It is therefore, felt that the rectification of defects, if any, is of utmost importance and cannot be ignored. This Tribunal, aptly points out the decision of the Hon ble Supreme Court of India in M/S. SURENDRA TRADING COMPANY VERSUS M/S. JUGGILAL KAMLAPAT JUTE MILLS COMPANY LIMITED AND OTHERS [ 2017 (9) TMI 1566 - SUPREME COURT ], wherein it is observed and held that the time provided for rectifying the Defective Application, under Section 9 (5) of the I B Code 2016, is directory in nature, and in the given circumstances, the Adjudicating Authority (Tribunal), can provide more than 7 days time, to rectify the defect. The requirement of Section 7 of the Code, is that the Application, should be complete in all respects and in case of defects, the Adjudicating Authority (Tribunal), should provide an opportunity, to the Applicant, for rectifying these defects, before Accepting/ Rejecting of the Application - The Finding in the impugned order, is cryptic, bereft of any qualitative or quantitative discussions, smacks of any reasoned speaking order, is therefore, clearly Unsustainable. Even, the Respondents herein, have not brought out any details, to allay the doubts raised, by the Appellant herein, either in the Appeal or in the Reply/ Rejoinder in the Original Petition, before the Adjudicating Authority. This Tribunal, relevantly points out that it is not expressing its opinion on the merits or demerits of the case, and hence, remits back the case to the Adjudicating Authority (Tribunal), with directions to look into all factual and legal aspects and decide the Petition Denovo, on merits, by providing, adequate opportunity of Hearing, to the respective Parties, and also, by adhering to the Principles of Natural Justice. Appeal disposed off. Service Tax 2023 (3) TMI 835 Nature of activity - sale or service - sale of photo books to photographers/photo studios and individual photographers - it was held by CESTAT that As the activity of printing has also been exempted from payment of service tax, if we take note of the fact that the activity undertaken by the appellant in relation to photography service then also the activity undertaken by the appellant is not taxable service. HELD THAT:- There is no substantial question of law requiring consideration by this Court in these appeals. Appeal dismissed. 2023 (3) TMI 834 Principles of Natural justice - long delay of 13 years in adjudication of SCN - HELD THAT:- Admittedly, Petitioner has participated in the adjudication proceedings from time to time. The grounds raised before the adjudicating authority as well as in this petition appear to be on merits. The issue of delay of 13 years in adjudicating the show cause notice can also be raised by the Petitioner in an appeal under section 35B of the Excise Act,1944 which provides for an appellate remedy against an order-in-original before the Tribunal. Neither there is any allegation nor the learned counsel has been able to demonstrate that there has been any breach of the principles of natural justice. It is deemed appropriate to relegate the Petitioner to the remedy of appeal under section 35B of the said Act. Petition dismissed. Central Excise 2023 (3) TMI 833 Sale of goods through depot - Valuation - Refund of excess payment of duty (made on account of Discounts) - rejection of refund claim merely on the ground that the appellant have not opted for the provisional assessment - Removal of goods from factory on presumptive value - principle of unjust enrichment - HELD THAT:- The appellant have made excess payment of duty on account of discount. The discount was given at the time of sale of the goods from the depot. There is no dispute about the nature and quantum of discount. The removal of goods from the factory is on presumptive value and the transaction value is finalized only at the time of sale of goods from the depot. Therefore, the discount given by the appellant at the time of sale of goods from the depot is legal and correct and the same shall not be includible in the assessable value. Accordingly, if there is any excess payment of duty in comparison with the value at which the goods were cleared from the factory and the same goods sold from the depot , the appellant is primafacie entitled for the refund. Non-opting for the provisional assessment - HELD THAT:- Firstly the same was not made charge in the show cause notice therefore the order travels beyond the scope of show cause notice which is not permissible under the law as settled in various judgments cited by the appellant. Secondly, merely because the appellant has not opted for the provisional assessment the legal provision for valuation will not get altered. The duty is payable in accordance with the Section 4 of Central Excise Valuation Rules , 2000. In terms of Rule 7 the excise duty is payable at on the value at the time of sale of goods from depot after removal from the factory. Therefore, on the differential excise duty due to the difference between the clearance value from the factory and the sale value from the depot is refundable to the appellant. It is settled by the Hon ble High Court of Madhya Pradesh in the case of THE PRINCIPAL COMMISSIONER CGST AND CENTRAL EXCISE HEADQUARTERS BHOPAL VERSUS M/S GODREJ CONSUMER PRODUCTS LTD. [ 2019 (5) TMI 222 - MADHYA PRADESH HIGH COURT] that merely because the appellant have not followed the provisional assessment, the methodology adopted for adjustment of excess payment of duty cannot be questioned. Therefore, even though the appellant have not opted for the provisional assessment , the admitted excess payment of duty has to be refunded to them. Principle of unjust enrichment - HELD THAT:- The appellant have submitted the Chartered Accountant Certificate and JV Entries whereby it is established that the incidence of duty for which the refund was sought for has not been passed on. Thus, the appellant is prima facie entitled for the refund subject to verification of the documents - the impugned order set aside and matter remanded to the Adjudicating Authority for passing a fresh order - appeal allowed by way of remand. 2023 (3) TMI 832 Refund of duty paid - remission of duty - shortage in quantity or not - rejection of refund claim on the ground that the word whatsoever in condition 2(v) of the Commissioner s letter dated 03.10.2018 was much enough to cover the expansion and contraction of the hydrocarbon fuels which was natural/scientific phenomenon - the plea of the appellant is that there is no difference in the overall quantity difference which was pointed out by the department is not of the physical shortage but due to contraction in the goods which occurs due to difference in the temperature. HELD THAT:- From the reading of the Circular No.778/11/2004-CX dated 11.03.2004 and Circular No. 367/83/97-CX dated 19.12.1997, though it is not directly on the fact in the present case but it establishes that due to temperature variation, the petroleum product gets contracted and due to which there is variation in the quantity of the same quantum of the goods between one temperature and other temperature therefore, the fact that the petroleum product gets contracted is not under dispute. In the present case, it is admitted fact the weight of the product remains unchanged or very minor difference as compared to the difference shown in K15 and KL of a liquid product which obviously varies at a time of a particular temperature and at different time at a different temperature, the appellant have also shown that the temperature at the time of loading and unloading where different - there is shortage of quantity in KL whereas, quantity in MT is almost same except the variation in 0.847 MT as against the total weight of 64030.568 MT which is negligible. As per the above table, it can be seen that when the total quantity of goods in weight is same and the quantity in KL varies at different time due to different temperature, there is absolutely no case of shortage or loss of the goods. Thus, it is clear that if there is physical loss due to handling, transit, storage or in case of accident or natural calamity or whatsoever, no remission shall be permitted. In the present case, as discussed above the quantity of goods in weight stand intact therefore, in fact there is no loss of the goods, para 2(v) shall apply only in a case where there is actual loss in the quantity. In the present case, the quantity remains the same, the variation in KL is only due to density of the goods that due to different temperature at the time of loading and unloading therefore, it cannot be said that there is any loss of quantity of the goods consequently, there is no violation of para 2(v) of the Commissioner s letter dated 03.10.2018. Remission of duty - HELD THAT:- This will come into picture only when there is actual loss and appellant seeks remission of duty - In the present case since there is no loss at all, there is no question of seeking remission therefore, the process of remission of duty is not relevant in the present case. Since there is no loss of the goods at loading and unloading as stage, no duty demand is sustainable accordingly, the duty so paid by the appellant is required to be refunded to the appellant. Unjust enrichment - HELD THAT:- The appellant have accepted that the amount of refund shown as received in their books of accounts therefore, they have satisfied that the incidence of refund amount has not been passed on to any other person. Appeal allowed. 2023 (3) TMI 827 Applicability of exemption Notification No. 4/2006-CE dated 1.3.2006 at Sl. No. 72 - matches classifiable under Chapter 3605.00.10 or 3605.00.90? - HELD THAT:- The issue involved in these appeals has been already settled in favour of the Revenue by this Tribunal by denying exemption under Notification No. 4/2006-CE dated 1.3.2006 in the case of M/S SRI GANAPATHY PACKAGING VERSUS THE COMMISSIONER OF GST CENTRAL EXCISE [ 2020 (2) TMI 1114 - CESTAT CHENNAI] . The facts and issue being identical in these appeals, there are no ground to take a different view - the demands were sustained and the assessees appeals were dismissed. CST, VAT & Sales Tax 2023 (3) TMI 831 Disallowance of Input Tax Credit (ITC) arising out of the alleged mismatch between the returns filed by the petitioners when compared with the returns and annexures filed by the purchasing / selling third party dealers - reversal of ITC on the allegations that there has been no actual movement of goods qua the transactions in question. HELD THAT:- A Bench of this Court in the case of M/S. JKM GRAPHICS SOLUTIONS PRIVATE LIMITED VERSUS THE COMMERCIAL TAX OFFICER [ 2017 (3) TMI 536 - MADRAS HIGH COURT ] had issued certain directions for conduct of verification and assessment in such matters. While some of these directions have been complied with in the present cases, learned counsel concur on the position that there are other conditions that have been set out under Circular No.5 of 2021 dated 24.02.2021 that yet remain to be complied. The second issue relating to movement of goods has been the subject-matter of detailed deliberations in a batch of cases in W.A.No.2607 of 2021, wherein orders have been reserved by the Tax Bench on 01.12.2022. In the interregnum, the Hon'ble Supreme Court has also had occasion to pronounce judgment in the case of THE STATE OF KARNATAKA VERSUS M/S ECOM GILL COFFEE TRADING PRIVATE LIMITED [ 2023 (3) TMI 533 - SUPREME COURT] on the same issue, though in the context of the Karnataka Value Added Tax Act - thus, there is direction to the assessing authority to await decision in W.A.No.2607 of 2021 and complete the assessments thereafter in light of the judgment of the Hon'ble Supreme Court in Ecom Gill Coffee Trading Private Limited and the decision of the Division Bench within a period of 12 weeks from date of pronouncement of the decision in W.A.No.2607 of 2021. These writ petitions are disposed off. 2023 (3) TMI 830 Validity of order of passed by the Revisional authority - Non-speaking order - Refund of the excess amount paid - jurisdictional error in completing the assessment, on the part of Commissioner of Taxes - case of petitioner is that the Commissioner of Taxes without assuming jurisdiction under Section 70(1) of the Act the order has been passed - HELD THAT:- In the case in hand, there is no jurisdictional error in the assessment of the assessing authority, and accordingly, the respondent no. 2 has acted beyond section 70(1) of the Act. This casual approach of the respondent no. 2 cannot be permitted since he is trying only to prevent the payment of refund amount to the petitioner. The respondent authorities acting as quasi judiciary authority by invoking the power under statute are expected to act judiciously, but they are not expected to work as money generating authority. Very often it is noticed by this court that the orders are passed by the respondent authorities in an arbitrary manner which is driving the Tax-payers/dealers to file appeals by depositing 50% of the disputed tax while filing statutory appeals. But for the casual approach of the respondent-authorities, a Tax-payer/dealer cannot be put to hardship. Such action of the respondent-authorities cannot be appreciated. The impugned order dated 21.05.2020 is due of its nature. This is nothing else, but a burden on the business class. This court finds that the officers need to be more vigilant and tax-payers friendly. Accordingly, a cost of Rs. 25,000/- is imposed upon the revisional authority, and the said amount to be paid from his salary to the credit of Tripura High Court Bar Association for passing such orders. Petition allowed. 2023 (3) TMI 829 Legality of default assessment framed by the VATO - levy of penalty - sales of SKO were exempted from tax or not - alleged clerical error in reported sale in return - contravention to provision of Section 86(10) of DVAT Act - Opportunity of hearing not provided - violation of principles of natural justice - HELD THAT:- The Appellate Tribunal accepted the appellant s contention that it was not afforded any opportunity to clarify the doubts that had crept in the mind of OHA regarding genuineness of transportation of goods for the reason that the Value Added Tax Inspectors (hereafter VATI ) were unable to verify the transportation of goods by some transporters. The Appellate Tribunal was of the view that it would be in the interest of justice to afford the appellant an opportunity to substantiate its claims regarding inter-state sales. Accordingly, the Appellate Tribunal remanded the matter to the OHA for consideration and decide afresh. Similarly, the Appellate Tribunal also remanded the matter to OHA to consider the movement of goods in respect of invoice dated 20.05.2005. The question regarding levy of penalty under Section 86(10) of the DVAT Act with regard to inter-state sales was also remanded for consideration afresh by the OHA. Whether the Arbitral Tribunal had erred in not accepting that there was a clerical error in reporting the sales as ₹1,38,82,000/- instead of ₹13,82,000/-? - HELD THAT:- It is relevant to note that there is no dispute that the tax computed in the said returns was commensurate with the turnover of ₹13,82,000/-. The appellant claims that the same was correctly computed. Thus, prima facie, the contention that a typographical error had crept in the sales figure as reported is not insubstantial - More importantly, it is not disputed that the appellant had produced his books, which were subjected to audit. The same would have clearly revealed the sales turnover as recorded in the books of accounts. The appellant had also filed a revised return which was produced before the Appellate Tribunal. In addition, the appellant had also filed a chartered accountant s certificate confirming that the turnover as reflected in the books of account for the relevant period is ₹13,82,000/- - this Court is unable to concur with the decision of the Arbitral Tribunal to disregard the revised returns or the chartered accountant certificate, which are undeniably relevant for deciding the question whether a typographical error had crept in the returns. The impugned order, to the extent that it outrightly rejects the appellant s contention that its turnover was erroneously reported at ₹1,38,82,000/- instead of ₹13,82,000/-, is set aside. This issue is remanded to the OHA to consider afresh - appeal disposed off. Indian Laws 2023 (3) TMI 828 Recovery of debt - sick companies - Whether on approval of a scheme by the BIFR under the Sick Industrial Companies (Special Provisions) Act, 1985 (SICA), an unsecured creditor has the option not to accept the scaled down value of its dues, and to wait till the scheme for rehabilitation of the respondent sick Company has worked itself out, with an option to recover the debt with interest post such rehabilitation? HELD THAT:- The SICA, 1985 basically and predominantly is a remedial and ameliorative enactment, insofar as it empowers a quasi-judicial Body - BIFR to take appropriate measures for revival and rehabilitation of the potentially viable sick industrial companies as quickly as possible and also to salvage the productive assets and realise the amounts due to the banks and financial institutions, to the extent possible, from the non-viable sick industrial companies through liquidation of those companies. The primary concern of the Board would be the revival of the sick company and to save the sick company from winding up. That is why with a view to see that there is no impediment in framing the rehabilitation scheme and to get out the sick company from sickness. Section 22 provides for suspension of legal proceedings, contracts etc. On a bare reading of Section 22 and Section 22A of SICA, it appears that these two provisions primarily ensure that the scheme prepared by BIFR does not get frustrated because of certain other legal proceedings and to prevent untimely and unwarranted disposal of the assets of the sick industrial company. These sections clearly state certain restrictions which will impact upon the implementation of the scheme as well as on the assets of the company. As observed and held by this Court in the case of Tata Motors Limited [ 2008 (5) TMI 423 - SUPREME COURT ], SICA, 1985 has been enacted to secure the principles specified in Article 39 of the Constitution of India. It seeks to give effect to the larger public interest and, therefore, it should be given primacy over other laws because of its higher public purpose - In the case of Raheja Universal Limited [ 2012 (10) TMI 233 - SUPREME COURT] , it is observed and held that the SICA, 1985 is a special law, giving overriding effect vis - vis other laws and the provisions of general laws like Companies Act for regulation, incorporation, winding up etc. of the companies would have still been overridden to the extent of inconsistency. Thus, the provisions of SICA, 1985 shall normally override other laws except the laws, which have been specifically excluded by the legislature under Section 32 of SICA, 1985. At this stage, it is required to be noted that if a sick company is ordered to be wind up, in that case, the unsecured creditors otherwise may not get anything. However, on the other hand on sanctioning the rehabilitation scheme under Section 18, the unsecured creditors may get part of their dues /debts, which otherwise, they may not get. At this stage, it is required to be noted that as per Section 18(8) of SICA, 1985, which has been substituted by Act 12 of 1994, on and from the date of the coming into operation of the sanctioned scheme or any provision thereof, the scheme or such provision shall be binding on the sick industrial company and the transferee company or, as the case may be, the other company and also on the shareholders, creditors and guarantors and even the employees of the said companies - The intention of the legislature is very clear. Creditors includes unsecured creditors. The submission on behalf of the unsecured creditors that the word creditors is not defined like IBC, 2016 and therefore, the scheme shall not bind the unsecured creditors, cannot be accepted. Looking to the object and purpose of the SICA, 1985 and the provisions of Sections 18 and 19 of the SICA, 1985, the word creditors shall have to be construed in a broad manner and is not required to be construed narrowly, otherwise, the object and purpose of rehabilitation scheme shall be frustrated. If the scheme binds the creditors, including other creditors like financial institutions etc., who may have a better claim than the unsecured creditors, there is no reason to treat the unsecured creditors separately and not to treat them as creditors. Therefore, even as per Section 18(8), the scheme shall bind all the creditors and guarantors and even the employees of the sick company, for whose revival the scheme is sanctioned. Thus, the primary object and purpose of SICA, 1985 is revival of a sick industrial company even by providing rehabilitation scheme under Section 18. A reading of the statement of objects and reasons says that the effect of the ill effects of sickness in industrial companies was a serious concern not only to the Government but also to the society at large. Therefore, it was found that there is a need to fully utilise the productive industrial assets; afford maximum protection of employment and optimize the use of the funds of the banks and financial institutions and it is imperative to revive and rehabilitate the potentially viable sick industrial companies. Considering Section 20 of the Act it becomes clear that winding up of a company is only resorted to as a last resort and only when it is just and equitable to wind up the sick industrial company - minority creditors and that too some unsecured creditors cannot be permitted to stall the rehabilitation of the sick company by not accepting the scaled down value of its dues. Unless and until there is a sacrifice by all concerned, including the creditors, financial institutions, unsecured creditors, labourers, there shall not be any revival of the sick industrial company / company. The view taken by the High Court of Delhi in Continental Carbon India Ltd. [ 2012 (7) TMI 980 - DELHI HIGH COURT ] that on approval of a scheme by the BIFR under the Sick Industrial Companies (Special Provisions) Act, 1985, the unsecured creditors has an option not to accept the scaling down value of its dues and to wait till the rehabilitation scheme of the sick company has worked itself out with an option to recover the debt with interest post such rehabilitation is erroneous and contrary to the scheme of SICA, 1985 and the same deserves to be quashed and set aside and is accordingly quashed and set aside. It is observed and held that the rehabilitation scheme under Section 18 of the SICA, 1985 shall bind all the creditors including the unsecured creditors and the unsecured creditors have to accept the scaled down value of its dues provided under the rehabilitation scheme. Appeal allowed.
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