TMI Tax Updates - e-Newsletter
March 30, 2022

Case Laws in this Newsletter:

GST Income Tax Customs Securities / SEBI Insolvency & Bankruptcy Service Tax CST, VAT & Sales Tax Indian Laws

Articles

1. Activities to be undertaken for GST Compliances of FY 2021-22 in March, 2022

   By: Bimal jain

2. QUESTIONING OF APPROVED RESOLUTION PLAN BY STATUTORY AUTHORITIES, REGULATORY BODIES INCLUDING DIRECT AND INDIRECT TAX DEPARTMENTS

   By: DR.MARIAPPAN GOVINDARAJAN

News

1. India-UAE CEPA will be operationalized on May 1, 2022, says Shri Piyush Goyal

2. Shri Piyush Goyal calls for practical climate funding programs by the developed world

Notifications

DGFT

1. 63/2015-2020 - dated 29-3-2022 - FTP

Amendment in Import policy of Urad [Beans of the SPP Vigna Mungo (L.) Hepper] (ITC(HS) 0713 3110) and Tur/Pigeon Peas (Cajanus Cajan) (ITC(HS) 0713 60 00) under ITC (HS) 2022, Schedule — I (Import Policy)

GST - States

2. AE-I/DT&T/2021-22/75 - dated 24-3-2022 - Delhi SGST

Commissioner, State Tax confer powers under section 69, section 70, section 71, section 73 & section 74 of the DGST Act 2017, Jurisdictional Officer

3. AE-I/DT&T/2021-22/73 - dated 24-3-2022 - Delhi SGST

Commissioner, State Tax confer powers under section 69, section 70, section 71, section 73 & section 74 of the DGST Act 2017, Jurisdictional Officer

Income Tax

4. 16/2022 - dated 28-3-2022 - IT

Modification of Notification Nos. 93/2020 dated the 31st December, 2020, No. 10/2021 dated the 27th February, 2021, No. 20/2021 dated the 31st March, 2021, No. 38/2021 dated 27th April, 2021 and No. 74/2021 dated 25 June 2021 and NO. 113/2021 dated 17 September 2021

5. 15/2022 - dated 28-3-2022 - IT

Faceless Jurisdiction of Income-tax Authorities Scheme, 2022

Circulars / Instructions / Orders

SEBI

1. SEBI/HO/MIRSD/CRADT/CIR/P/2022/38 - dated 29-3-2022

Operational guidelines for ‘Security and Covenant Monitoring’ using Distributed Ledger Technology (DLT)

2. SEBI/HO/IMD/IMD-I/DOF6/P/CIR/2022/0000000037 - dated 28-3-2022

Calculation of investment concentration norm for Category III AIFs

GST - States

3. CCT/26-4/2017-18/E/3080 - dated 28-3-2022

Important advisory for e-Invoice for Taxpayers having annual turnover exceeding ₹ 20 Crores

Highlights / Catch Notes

GST

• Electronic Credit Ledger Blocked; Balance Use Restricted Until Show Cause Notice Issued Under CGST Act Section 73/74.

  Case-Laws - HC : Blocking of input tax credit - The respondents are directed to withdraw the negative block of the electronic credit ledger at the earliest. The negative block. Whatever balance remained in the electronic credit ledger after the removal of the balance to negative figure, the same shall not be utilized by the writ applicant till the show cause notice is issued if any under Section 73 or 74 respectively of the C.G.S.T. Act. - HC
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Income Tax

• Amounts Received by Coparceners from Hindu Undivided Family Not Taxable as Gifts u/s 56(2)(vii.

  Case-Laws - AT : Taxability of the amount received by the assessee from his HUF, in which he is a coparcener - money received without consideration -Taxability of gift received by the assessee from his HUF u/s. 56(2)(vii) - the amount received by the assessee from its HUF is not in the nature of any sum received without consideration/gift and therefore not exigible to tax as per provisions of Section 56(2)(vii) of the Act - AT
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• Expenses Can't Be Denied Just for Non-Appearance; Valid Evidence Supports Real Purchases, Not Bogus Claims.

  Case-Laws - AT : Disallowance of expenses on account of bogus purchases - Merely on account of non appearance of parties, purchase transactions conducted with them could not be said to be bogus when otherwise the assessee had filed all relevant evidences in support and the book results of the assessee were accepted including sales made by it. - AT
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• Company's Reassessment u/ss 147/148 for Incomplete Income Disclosure Triggered by Related Entity's 2007-08 Royalty Payment.

  Case-Laws - AT : Reassessment proceedings u/s. 147/148 - assessee company has not disclosed its income fully and truly - A perusal of the reasons recorded for reopening assessment shows that the entire exercise has been done by the Assessing Officer on the basis of assessment of GBN for AY 2007-08 wherein an amount on account of royalty paid to the assessee was found. The amount accrued by the payer in its books has no relevance as it is a trite law that payment may be treated differently in the books of payer and the payee. - AT
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• Reassessment Invalid Without Notice u/s 148; Section 292BB Misapplied by Tax Commissioner.

  Case-Laws - AT : Validity of reopening of assessment - Non-issuance of notice u/s. 148 - Once it is proved that notice u/s.148 was not issued, there cannot be any question of making any reassessment. Reliance of CIT(A) on the provisions of section 292BB is misplaced because the said section only stipulates that participation in the assessment proceedings/reassessment proceedings would be deemed as a proper service of notice. - AT
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Customs

• High Court Urges Detailed Inquiry into Mis-Declared Goods Seizure; Ownership Dispute Remains Unresolved Under Article 226.

  Case-Laws - HC : Seizure of imported consignment - mis-declaration of goods - Ownership of goods - BOE is in different name - In the facts of this case, it is not possible for us to conclude that Rekhatex has title over the goods only because it is in possession of the original BOLs. Dehors the materials on record and the manner in which the transactions have taken place pursuant to the seizure, leaves us with no manner of doubt that the claim of Rekhatex of ownership of the goods on the basis of the documents of title, BOLs, cannot be said to be undisputed. We cannot turn a blind eye to the attending circumstances which necessitate an in-depth inquiry before rendering a factual finding regarding ownership of the consignment which may not be possible for us to do so in this writ petition under Article 226 of the Constitution of India. - HC
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• Penalty Under Customs Act Section 114(i) Overturned; Appellant Credited for Preventing Smuggling Attempt of Prohibited Goods.

  Case-Laws - AT : Levy of penalty u/s 114(i) of the Customs Act, 1962 - Smuggling - The reason for imposing the impugned penalty is that the appellant has not verified the Let Export Order before the goods reached the loading area. As it is established that it is the appellant who had frustrated the attempt to smuggle the prohibited goods, the penalty imposed under Section 114(i) of the Customs Act, 1962 cannot sustain and requires to be set aside- AT
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• Court Overturns LED Panel Confiscation, Dismisses Differential Duty Demand Due to Inadequate Challenge of Declared Value.

  Case-Laws - AT : Valuation of imported goods - LED panel - rejection of declared value - The impugned goods are not in breach of certification standards and the onus for disturbing the transaction value in 16 bills of entry as well as the value of goods in the other consignment has not been duly discharged. The confiscation is set aside along with confirmation of demand of differential duty - AT
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IBC

• Suspended Board Members Must Provide Info to Resolution Professional in 2 Weeks or Face Consequences Under CIRP.

  Case-Laws - Tri : CIRP - Failure to supply the requisite information to RP - The suspended members of the Board of Directors are directed to hand over and provide all the information mentioned in the said emails if not already sent within two weeks. There should not be any lapse on the part of the suspended Directors because any further delay will be taken as causing an intentional delay in the process of liquidation and would lead to serious consequences - Tri
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SEBI

• Supreme Court affirms Tribunal's decision reversing SEBI findings; no legal questions for Section 15Z review.

  Case-Laws - SC : Violation of provisions of the Act and the PFUTP Regulations - The freedom to evolve and interpret laws must belong to the Tribunal to subserve the Regulatory regime for clarity and consistency. These are policy and functional considerations which the Supreme Court will keep in mind while exercising its jurisdiction under Section 15Z. - Tribunal has reversed the findings of SEBI on the basis of its own inferences drawn from the documents on record. The decision of the Tribunal is fact-based and does not give rise to any question of law for invoking the jurisdiction of the Supreme Court under Section 15Z. - SC
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Service Tax

• Appellant Cleared as Principal Manufacturer Paid Applicable Duty; Revenue's Exemption Assumption Unfounded. Demand Set Aside.

  Case-Laws - AT : CENVAT Credit - rendering both taxable as well as exempted services - When the appellant claims right from the beginning that insofar as job work issue was concerned, the applicable duty/tax was paid by the principal manufacturer, no attempt was made to disprove the same by the revenue, they simply went on the premeditated misconception that the job work on which the appellant was not paying taxes, was an exempt service. This is without any basis which cannot be sustained. - Demand set aside - AT
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Case Laws:

• GST

• 2022 (3) TMI 1249
  Blocking of input tax credit including the negative block of electronic credit ledger - Seeking permission to raise of E-way bill - interest and penalty due to late filing of GSTR-3B return - HELD THAT:- The principal issue involved in the present writ application is no longer res integra in view of the recent pronouncement of of this Court in the case of SAMAY ALLOYS INDIA PVT. LTD. VERSUS STATE OF GUJARAT [ 2022 (2) TMI 843 - GUJARAT HIGH COURT] where it was held that Rule 86A is not the rule which entitled the proper officer to make debit entries in the electronic credit ledger of the registered person. The rule merely allows the proper officer to disallow the registered person debit from the electronic credit ledger for the limited period of time and on a provisional basis. The respondents are directed to withdraw the negative block of the electronic credit ledger at the earliest. The negative block is to the extent of Rs. 14,11,678/-. Whatever balance remained in the electronic credit ledger after the removal of the balance to negative figure, the same shall not be utilized by the writ applicant till the show cause notice is issued if any under Section 73 or 74 respectively of the C.G.S.T. Act. Once the negative block is removed, the writ applicant shall proceed to file his returns with appropriate tax, penalty and interest, that may be determined in accordance with law. Application allowed.

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• Income Tax

• 2022 (3) TMI 1248
  Reopening of assessment u/s 147 - Non filling of objection with the AO prior to the filing the present writ petition - HELD THAT:- This Court is of the view that the present writ petition is not maintainable inasmuch as the petitioner has not followed the procedure laid down in GKN Driveshafts (India) Ltd [ 2002 (11) TMI 7 - SUPREME COURT] prior to the filing of present writ petition. It is pertinent to mention that in the said judgment, it has been held by the Supreme Court that if an assessee is aggrieved by a reassessment notice, he is entitled to file objections before the Assessing Officer, who is bound to dispose of the same by way of a speaking order. Consequently, this Court is of the view that since the alternative effective remedy has not been resorted to, the present writ petition is not maintainable. This Court is of the view that the judgment of the Gujarat High Court is not applicable to the facts of the present case. In any event, it is not open to a High Court to distinguish a judgment of the Apex Court especially when the latter is clear and categorical. Consequently, this Court is in agreement with the preliminary objection raised by the learned counsel for the respondent-revenue that the present writ petition is premature. Accordingly, the same is dismissed with liberty to the petitioner to raise all its objections before the Assessing Officer in accordance with the judgment of the Supreme Court in GKN Driveshafts (India) Ltd. (supra).

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• 2022 (3) TMI 1247
  Validity of assessment - notice under Section 143(2) of the Act was not issued within the period of limitation - failure or delay in issuing the statutory notice required to be issued under Section 143(2) - HELD THAT:- As on the basis of admitted fact that notice under Section 143(2) of the Act was not issued within the period of six months prescribed for the purpose, jurisdiction assumed by the Assessing Officer under Section 143(3) of the Act was assumed erroneously. Further, it is settled law that the issue of jurisdiction goes to the roots of the cause and such an issue can be raised at any belated stage of the proceeding including appeal - See KANWAR SINGH SAINI [ 2011 (9) TMI 960 - SUPREME COURT] and MAVANY BROTHERS [ 2015 (10) TMI 1093 - BOMBAY HIGH COURT] - no substantial question of law.

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• 2022 (3) TMI 1246
  Validity of reopening of assessment u/s 147 - foreign assessee has earned interest income on rupee denominated bonds issued by an Indian company as specified under Section 194LD - respondents has doubted as to whether interest was received by the petitioner-assessee on rupee denominated bonds issued by an Indian company or a dollar denominated bonds issued by an Indian company - HELD THAT:- A perusal of the paper book reveals that petitioner s case was selected for re-assessment on the ground that petitioner s case was flagged in the Non-filers Monitoring System (NMS). Consequently, there is a contradiction between the reason given by the respondent in the re-assessment notice and the defence taken by the respondent in the present proceeding. Keeping in view the aforesaid, this Court quashes the impugned order and notices mentioned hereinabove and permits the respondent-revenue to issue a fresh re-assessment notice in accordance with law

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• 2022 (3) TMI 1245
  Addition u/s 69C read with Section 40A (3) - Whether ITAT was not justified in law in allowing relief to the assessee overlooking the fact that the purchases shown under the head Milk Purchase Tanki were made through the traders (other than farmers) in cash which was not covered under Rule 6DD read with Section 40A (3)? - HELD THAT:- ITAT after considering the entire material on record and submissions of the parties, inter alia, held that the purchases under the head tanki have been duly recorded in the books of account and is reflected in the audited financial statements. The total purchases including Milk Tanki purchases have been debited to the profit and loss account and the entire source of purchases are duly recorded in the books of account thus source of such purchase/expenditure stands established as having been incurred out of the funds shown in the books of account. ITAT further held that therefore at the threshold, addition u/s 69C cannot be resorted to - ITAT further inter alia held that the nature of business of the assessee and modus operandi for milk tanki purchases has to be understood. ITAT noted that since the purchase of such a huge quantity of milk is from a large number of farmers and individuals, it is very difficult to make an individual account of each and every farmer who comes from nearby villages with their milk production to the assessee s factories to sell their milk. Tribunal acknowledged the fact that the assessee keeps the records of the person/farmer of each village who collects all the milk and send the same to the assessee s factory and common entry of purchase in the books of account is made in order to avoid multiple of hundreds of ledgers. The tribunal has also noted in the order that the assessee duly maintains other records i.e. when the milk is received at the factory gate, its weight/ quantity is taken and is then tested for quality; a quality slip is generated which contains the details of the milk including gross weight/ net weight, temperature, test, acidity contents, etc. The purchase invoices are also duly generated based on the weight and quality brought by the farmers and then payment is released to the farmers substantially in cash for which detailed reasons have been given. The tribunal noted that the quantity of purchase of the milk procured is again put to laboratory testing and there are test reports which are then sent for processing and are entered in the process. The assessee also duly maintains the stock register, sale register and the assessee had duly filed the supporting documents. Before proceeding further, it is necessary to examine the scope of 260A of the Act. Section 260A of the Act provides for an appeal to the High Court against a decision of ITAT. Sub-Section (1) of Section 260A of the Act provides for an appeal against the order of the Tribunal only on a substantial question of law. A bare perusal of Section 260A of the Income Tax Act makes it clear that the appeal is permissible in the High Court only if there involves a substantial question of law. The necessary corollary of Section 260A would be that the Income Tax Appellate Tribunal is the final arbiter of facts. The appeal before the High Court would be entertained only if it involves a substantial question of law. The object and purpose of establishing the ITAT would be defeated if the facts are agitated before the High Court also

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• 2022 (3) TMI 1244
  Reopening of assessment u/s 147 - entitled to the benefit of Section 80P - Writ petitioners submitted that in view of the change in scenario, the respondents / co-operative societies are inclined to appear before the assessing officer, by submitting their explanations and seek the reason for issuance of the notices u/s 148 of the Act and thereafter, act upon in the manner known to law - HELD THAT:- We are not inclined to interfere with the order impugned herein. However, the appellant shall submit the reasons for reopening the assessment under section 148 of the Act, within a period of two weeks from the date of receipt of a copy of this judgment. On receipt of the same, the respondents / co-operative societies shall file their objections to the notices issued u/s 148, within a period of four weeks. Thereafter, the appellant shall consider the same and pass appropriate orders, in the manner known to law, as expeditiously as possible.

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• 2022 (3) TMI 1243
  Taxability of the amount received by the assessee from his HUF, in which he is a coparcener - money received without consideration - Taxability of gift received by the assessee from his HUF u/s. 56(2)(vii) - impugned gift was treated as taxable by the A.O. and the same confirmed by the CIT(A) noting that identical issue had arisen in the case of the assessee for assessment year 2012-13 wherein the addition was confirmed by the Ld. CIT(A) - HELD THAT:- We are of the view that the decision of the ITAT Chandigarh Bench in the case of Pankil Garg [ 2019 (9) TMI 337 - ITAT CHANDIGARH] would squarely apply to the present case following which we hold that the amount received by the assessee from its HUF of Rs. 50 lakhs is not in the nature of any sum received without consideration/gift and therefore not exigible to tax as per provisions of Section 56(2)(vii) of the Act .The addition so made and upheld by the Ld. CIT(A) is therefore directed to be deleted. The order of the Ld. CIT(A) is accordingly set aside. Grounds of appeal raised by the assessee are allowed

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• 2022 (3) TMI 1242
  Disallowance on account of proportionate interest attributable to capital work-in-progress - Since the interest paid on the capital borrowed for acquisition of asset in the form of capital work-in-progress was not an allowable deduction as per the proviso to Section 36(1)(iii) of the Act, the assessee was called upon by the Assessing Officer to explain as to why the proportionate interest attributable to the capital borrowed for capital work-in-progress should not be disallowed being capital expenditure - HELD THAT:- DR has not raised any material contention to dispute this position. He, however, has contended that neither the Assessing Officer nor the learned CIT(A) has given any specific finding on this aspect of the matter on the basis of overall financial position of the assessee-company and the matter may, therefore, be sent back to the Assessing Officer for such verification. We are inclined to accept this contention of the learned DR. The impugned order of the learned CIT(A) on this issue is accordingly set aside and the matter is restored to the file of the AO to decide the same afresh after verifying overall financial position of the assessee-company in order to ascertain whether the investment in capital work-in-progress was made by the assessee-company out of its own interest free funds or interest-bearing borrowed funds. AO is accordingly directed to decide this issue afresh after such verification and after giving the assessee proper and sufficient opportunity of being hear. Disallowance on account of proportionate interest attributable to the borrowed funds allegedly utilized by the assessee for giving interest free advances to its subsidiary company - HELD THAT:- The case of the assessee as made out before the authorities below and specifically before the Tribunal is that sufficient interest free funds in the form of share capital, reserve surplus and internal accruals were available at the relevant time to give interest free advance to the subsidiary company and there being the case of mixed funds maintained by the assessee-company, this issue is required to be considered having regard to the overall financial position of the assessee-company and not by applying the direct nexus theory. Following our conclusion drawn on the issue raised in Ground No.2, we restore this issue also to the file of the Assessing Officer for deciding the same afresh after verifying the overall financial position of the assessee-company in order to ascertain as to whether the interest free advance was given by the assessee-company out of interest free funds available at the relevant time or from the interest-bearing borrowed funds. Appeals of the assessee treated as allowed for statistical purposes.

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• 2022 (3) TMI 1241
  Revision u/s 263 by CIT - claim of additional depreciation u/s 32(1)(iia) and investment allowance u/s. 32(AC) of the Act of machineries which were not new but transferred from earlier plant of the assessee at Uttarakhand to present plant at Gokak Karnataka - HELD THAT:- Assessee had sufficiently demonstrated to the Ld.PCIT that both his claim of additional depreciation and investment allowance on new assets as also claim of expenses relating to legal professional and advertisement were in accordance with law. The assessee we have noted had demonstrated to the Ld.PCIT that no benefit of additional depreciation and investment allowance had been claimed on the old assets transferred from Uttarakhand to Karnataka, which as per the Ld.PCIT the assessee had been erroneously allowed since the AO had not examined the claim. The entire list of new assets purchased during the year and on which addl. Depreciation and investment allowance was claimed, as reflected in the tax audit report and in conformity with the financial statements of the assessee, was filed to the Ld.PCIT and the bills of old assets transferred also submitted to him, pointing out that the said bills were not included in the list of new assets on which addl. depreciation and investment allowance had been claimed by the assessee. Similarly the assessee had filed all details of TDS deducted on legal, professional and advertisement expenses, correlating it with their ledger accounts in the books of the assessee and further supplementing the claim with TDS returns filed. Thus the assessee had demonstrated that the claim of the assessee to these expenses was in accordance with law, none being disallowable on account of non deduction of tax at source as apprehended by the Ld.PCIT. We have also noted that the assessee had been subjected to tax audit u/s 44AB of the Act, and the tax auditors had not reported any such incorrect /disallowable claims of the assessee. Nothing adverse has been pointed out by the Ld.PCIT with regards to the either of the above claims. The Ld.PCIT, we find, has not even cared to consider the contention of the assessee and simply held that these issues not having been examined by the AO ,has resulted in the assessment order being erroneous so as to cause prejudice to the Revenue. We are not in agreement with the same. The assessee having demonstrated his claim being in accordance with law and nothing adverse being pointed out by the Ld.PCIT in the explanation of the assessee, there arises no question of the assessment order being erroneous at all. No inquiry may have been conducted by the AO in the present case, but if the assessee demonstrates to the Ld.PCIT that his claim was in accordance with law,as in the present case and no infirmity is pointed out by him in the explanation of the assessee, how can the assessment order be erroneous. The fact of mere non inquiry in itself,in such circumstances, will not be sufficient to hold the assessment order erroneous so as to cause prejudice to the Revenue. ITAT Mumbai Bench has considered Explanation 2 to section 263, in the case of Narayan Tatu Rane [ 2016 (5) TMI 1162 - ITAT MUMBAI] ITAT holding that it cannot be said to have overridden the law interpreted by courts that before holding any order to be erroneous, the PCIT should have conducted inquiries to show that the finding of the AO was erroneous. That the provision would apply only if an order has been passed without making inquiries which a prudent officer should have carried out - Appeal of assessee allowed.

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• 2022 (3) TMI 1240
  Income deemed to accrue or arise in India - dividend income from Joint venture with investment in the P.E. Oman - as per AO assessee has not paid tax either in the source country or in India - HELD THAT:- Issue of dividend income from investment in the P.E. in Oman is concerned the same being included in the taxable income and thereafter rebate of tax has been allowed to the assessee by means of tax credit u/s 90(2) read with Article 25(2) and (4) of the Indo Oman DTAA, the dividend earned can be said to be exempt from tax and but the provisions of section 14A would not be attracted. This consistent view has been taken by the predecessor of Ld. F.A.A. for the assessment year 2008-09 and 2009-10 and also upheld in assessee s own case [ 2018 (5) TMI 1035 - ITAT DELHI] and [ 2018 (5) TMI 1021 - ITAT DELHI] No Reason is cited by revenue to distinguish the same. Thus, in regard to ground no. 1 and 2, the appeal of revenue has no substance to interfere in the Ld FAA order. Allowability of Horticulture expenses u/s 37(1) - Addition of 10% of horticulture expenses as element of personal use - CIT-A deleted the addition - HELD THAT:- Tribunal is of considered opinion that assessee is not a private entity but a Multi State Cooperative Society registered under Multi State Co-operative Society s Act, 2002 and thereby bound by statutory provisions with regard to utilization of funds so there cannot be any presumption of use of the funds for any private use. Ld FAA rightly observed that Ld. AO while making the disallowance has failed to bring on record any specific finding that element of personal nature is involved in these expenses Assessee is engaged in the manufacturing of chemical fertilizers and certainly the premises of the assessee require maintenance of extensive green channels and green belts for balancing environmental hazards which are quite probable, due to the nature of activities of the assessee company. The ld. F.A.A has taken into consideration the requirements laid by Central Pollution Control board and Environment Protection Laws to justify the expenses. There is no prudence in expecting the assessee to maintain log book for employee wise / premise wise expenditure, as expenditure was for maintenance of the green belts in the township and manufacturing units and not on identifiable individuals. Thus, in regard to grounds no. 3 4 also there is no substance to interfere in the Ld. FAA order. - Decided against reveue.

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• 2022 (3) TMI 1239
  Correct head of income - treatment to the interest income being interest eared on fixed deposits as Business Income or Income from Other Sources . - HELD THAT:- We have perused the findings returned by the Ld. CIT(A) who has decided the issue in favour of the assessee by following the order passed by the Tribunal in assessee s group company cases passed [ 2015 (12) TMI 1649 - ITAT MUMBAI] which are based upon the decision rendered by Hon ble Karnataka High Court in case of Swish Chandra Co. [ 1998 (7) TMI 73 - KARNATAKA HIGH COURT] and decision rendered by Hon ble Bombay High Court in case of CIT Vs. Lok Holdings [ 2008 (1) TMI 365 - BOMBAY HIGH COURT] When it is settled principle of law that in cases where assessee is engaged in development of properties, advances taken by it from customer to purchase the flats was deposited with the banks in the course of business, the interest income earned there from is to be treated as business income and not as income from other sources . So in these circumstances, we find no illegality or perversity in the findings returned by the Ld. CIT(A) hence Ground No.1 Claim of business loss on account of depreciation and amortization of amalgamation expenses which was capitalized to work in progress - CIT(A) has allowed the business loss claimed by the assessee on account of depreciation and amortization of amalgamation expenses, which was capitalized to work in progress as the assessee was having only one contract - HELD THAT: When this issue has already been decided in favour of the assessee by the Tribunal in an appeal filed against the assessment order passed under section 143(3) of the Act, the same was liable to be decided in favour of the assessee when again disallowed during the assessment framed under section 153C read with section 143(3) - when the assessee has been consistently following the particular accounting method, business loss claimed by the assessee on account of depreciation and amortization of amalgamation expenses is liable to be allowed. A particular accounting method consistently being followed by the assessee cannot be disturbed by the AO in treating the impugned expenses as part of work in progress and as such when the claim of the assessee is in accordance with the method of accounting consistently being followed the claim of the assessee is allowable. Moreover, this issue has already been decided by the Tribunal in favour of the assessee during the appellate proceedings initiated on the basis of assessment framed under section 143(3) - Decided against revenue.

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• 2022 (3) TMI 1238
  Disallowance of expenses on account of bogus purchases - contention of the Assessee that he had submitted all possible evidences to prove their genuineness and merely because the parties were not found at the address on the notices u/s. 133(6) of the Act,the expenses could not be held to be ingenuine - HELD THAT:- It is not the case of the revenue that even in the year in which the enquiry was conducted, the assessee was carrying on transactions with the said party, which could have raised doubts regarding the said transaction. Further considering the fact that the assessee made purchases of raw materials from two parties only ,as noted by the AO having purchased raw material worth Rs. 25.04 lakhs from Coating specialties and 13.41 lakhs from Gautam Stone ,treating the entire purchases from Gautam Stone bogus would tantamount to disallowing 1/3 of the total purchases approximately of raw material, and without doubting the factum and quantum of sales made by the assessee ,the same would result in the consumption ratio of raw material and the gross profit of the assessee going for a toss. Without dealing with this aspect of the matter as also without conducting further inquiries from its own records and ignoring the evidences filed by the assessee showing purchase of raw material from the said party and payment also being made to it by banking channels, the disallowance of purchases merely for the reason that notice u/s. 133(6) of the Act remained unserved, we hold is not justified. Merely on account of non appearance of parties, purchase transactions conducted with them could not be said to be bogus when otherwise the assessee had filed all relevant evidences in support and the book results of the assessee were accepted including sales made by it. The disallowance of purchase made from M/s Gautam Stone Grinding Mill is directed to be deleted. Ground no. 1 is allowed. Disallowance of depreciation and additional depreciation on account of purchases made of plant and machinery - Burden of proof - HELD THAT:- We have noted that copies of bills of purchases of plant and machinery as also the bank statement highlighting payments made to the said party mentioned in the narration were filed. Therefore the burden of proof stood duly discharged by the assessee and we have noted that nothing adverse has been pointed out by the revenue with respect to aforementioned evidences. It is only the fact that the party was not traceable in response to notice u/s. 133(6) issued by the AO. and the assessee was unable to produce him that the evidences were discarded by the revenue as not sufficient to prove the claim of the assessee. As in the case of Bogus purchases, dealt with us above at para 11-12 we hold that in the light of evidences filed by the assessee, nothing adverse having been pointed out against which by the revenue, the onus of proving the genuineness of the claim stood duly discharged and the purchases of plant and machinery could not have been held to be bogus merely for the reason that the party was not found at the stated address. In view of the above, disallowance of depreciation and additional depreciation on the impugned assets purchased from Pneucon Process Technologies deleted. Ground no. 2 is allowed. Disallowance of claim of freight outward expenses - HELD THAT:- As noted that the facts are identical as in the case of bogus purchases and purchase of plant and machinery discussed and adjudicated by us by above in the preceding paragraph wherein the assessee has filed all possible evidences available with it to prove the genuineness of its claim by way of invoices of the said party as also demonstrating payment to the said party through banking channels and the revenue, we have noted has without pointing anything adverse in the said evidences has held the same to be bogus for the reason that the notice issued by the A.O. u/s. 133(6) remained unserved/unresponded - thus the impugned expenses are also held to have been proved by the assessee to be genuine and disallowance made is directed to be deleted. Disallowing preoperative expenses - HELD THAT:- Preoperative expenses has been sufficiently demonstrated by the assessee as relating to R D expenses incurred of which 1/5 had been claimed during the year. CIT(A) we have noted has given no reason for not allowing the claim of the assessee and has failed to appreciate the contention of the assessee and the facts as pointed out by him. We therefore hold that the claim of the assessee to preoperative expenses was duly established and the disallowance of same is therefore directed to be deleted. Appeal of assessee allowed.

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• 2022 (3) TMI 1237
  Deposit of employees contributions qua ESI PF after the due date - As argued Assessee has deposited the employee s contributions towards ESI PF before the due date of filing of the return of income u/s 139 of the Act, hence no disallowance is warranted - Scope of amendment - HELD THAT:- ITAT including Hyderabad Bench in the case of Value Momentum Software Services Pvt. Ltd. [ 2021 (5) TMI 989 - ITAT HYDERABAD] have taken into consideration the identical issue qua applicability of the amendment to Sections 36(1)(va) and Section 43B of the Act, by inserting Explanations by the Finance Act, 2021 and clearly held that the amendment shall be applicable from 1st April, 2021 onwards . It is also relevant to note that the CBDT has also issued Memorandum of Explanation qua applicability of the amended provisions of Sections 36(1)(va) 43B of the Act w.e.f. 1st April, 2021 and Assessment Year 2021-21 onwards, hence there is no doubt qua applicability of the amended provisions referred above, prospectively. The second aspect as considered by the ld. CIT(A) qua applicability of the amended provisions of Sections 36(1)(va) and 43B of the Act to the case in hand, is also un-sustainable. - Decided in favour of assessee.

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• 2022 (3) TMI 1236
  Computation of income u/s 44AD - Special provision for computing profits and gains of business on presumptive basis - income returned may be maintained, as the assessee is not a professional, hence entitled to file her return u/s. 44AD - HELD THAT:- At what rate of tax the clients deduct while making payments to the assessee is of absolutely no relevance to determine the character of receipt in the hands of the assessee recipient and for determining the status of the assessee as to whether he is engaged in business or profession. The assessee s plea is that he is engaged in the business of rendering Consultancy services. We find that the expression Consultancy does not form part of various professions mentioned in Section 44AA - The assessee has filed return her return of income u/s. 44AD of the act, considering her receipts from business and not of profession. The assessee has declared an income of Rs Rs. 14, 66,462/- out of total receipt of Rs. 32, 40,000/- which works out to around 45% of the gross receipts which is fair enough. In this view of the matter, we set aside the orders of the authorities below. The assessing officer is directed to accept the income returned at Rs. 14, 66,462/-. Appeal filed by the assessee is allowed.

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• 2022 (3) TMI 1235
  Reassessment proceedings u/s. 147/148 - assessee company has not disclosed its income fully and truly and proceeded by issuing notice - Reopening beyond beyond four years - HELD THAT:- We are of the considered opinion that the reassessment notice has been issued after four years and, therefore, the 1st proviso to section 147 squarely applies on the facts of the case. A perusal of the factual matrix considered during the original assessment proceedings shows that there was no failure on the part of the assessee to disclose fully and truly all material facts. In our considered opinion, no new facts or information has come in the possession of the AO, which could have led to the formation of the belief that any income chargeable to tax has escaped assessment. Assessment order for Assessment Year 2009-10 framed u/s.143(3) wherein the assessee has offered income from GBN whereas the notice issued u/s. 148 of the Act is dated 20.02.2012 which means that the assessment order for AY 2009-10 was very much available with the AO before assuming jurisdiction u/s 148 - It is clear that reassessment proceedings are initiated on same set of facts as existed in the course of original assessment and reasons so recorded clearly show that it is re-application of mind on same set of facts. A perusal of the reasons recorded for reopening assessment shows that the entire exercise has been done by the Assessing Officer on the basis of assessment of GBN for AY 2007-08 wherein an amount on account of royalty paid to the assessee was found. The amount accrued by the payer in its books has no relevance as it is a trite law that payment may be treated differently in the books of payer and the payee. We have no hesitation in holding that assumption of jurisdiction u/s.147 of the Act by issuing of notice u/s.148 of the Act is bad in law and assessment order so framed is liable to be quashed. We, accordingly, quash the assessment order. - Decided in favour of assessee.

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• 2022 (3) TMI 1234
  Unexplained credit u/s 68 - notice u/s. 133(6) was issued to various sundry creditors to ascertain their creditworthiness and most of the creditors have not replied with satisfactory explanation except few - HELD THAT:- AO has not been able to specify the deficiency and could not bring any material on record to substantiate his findings in light of the fact that all the necessary documents in respect of purchase creditors were furnished by the appellant during the course of assessment proceedings. Considering the facts mentioned above, the action of the AO appears to be arbitrary and is found to be not supported with cogent reasons and material. In view of the above, addition cannot be upheld and the same is deleted. Accordingly, the above grounds of appeal of appeal are allowed.

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• 2022 (3) TMI 1233
  Revision u/s 263 - Case of limited scrutiny to verify large cash deposits into savings bank account - HELD THAT:- AO has completed assessment after verifying cash deposits in savings bank account and has made additions, when the assessee was unable to explain source for part of cash deposits. It is an admitted position of law that in limited scrutiny assessments, scope of verification is limited to the issues mentioned in the notice issued under CASS system. AO cannot travel beyond the issues on which assessment has been taken up for scrutiny - once the AO does not have power to go beyond the issues on which he has taken up case for scrutiny, then obviously, PCIT cannot term the assessment order passed by the AO as erroneous, insofar as it is prejudicial to the interests of revenue on issues other than the issue taken up by the Assessing Officer in scrutiny assessment proceedings. In this case, on perusal of materials available on record, we find that the learned PCIT has revised assessment order on the issues other than the issue considered by the AO in assessment proceedings - PCIT has exceeded her jurisdiction in examining issues other than the issues which is subject matter of limited scrutiny assessment proceedings before the AO. Hence, we are of the considered view that revision order passed by the learned PCIT u/s.263 - Appeal of assessee allowed.

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• 2022 (3) TMI 1232
  Validity of reopening of assessment - Non-issuance of notice u/s. 148 - case of the assessee is that no notice u/s. 148 was issued, which is a condition precedent for exercising jurisdiction u/s. 147 - HELD THAT:- As evident that recourse to reassessment under section 147 can be taken only after notice u/s. 148. In the absence of any notice u/s. 148, there can be no re-assessment. Here is a case in which there is no evidence of the AO issuing notice u/s. 148 of the Act, which fact has also transpired from the remand report furnished by the AO. Once it is proved that notice u/s.148 was not issued, there cannot be any question of making any reassessment. Reliance of CIT(A) on the provisions of section 292BB is misplaced because the said section only stipulates that participation in the assessment proceedings/reassessment proceedings would be deemed as a proper service of notice. This section does not deal with the issuance of the requisite notice. In the case of CIT vs. Laxman Das Khandelwal [ 2019 (8) TMI 660 - SUPREME COURT ] has held that section 292BB deals with failure of service of notice and not failure to issue notice. Since, admittedly, no notice was issued u/s. 148 in this case, we are satisfied that the entire edifice of reassessment created by the AO is without any bedrock. Appeal of allowed.

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• 2022 (3) TMI 1231
  Addition on account of difference as per statement shown in Form 26AS and the total receipt shown by the assessee - difference qua the statement shown in Form 26AS and total receipt shown by the assessee - AO made addition for want of proper verification - CIT(A) deleted the addition by accepting the version that total value of contract - HELD THAT:- We find that the ld. CIT(A) deleted the addition after verification of bank account, contract amount which was received by the assessee on the basis of running bills. We find that ld. CIT(A) arrived on a correct conclusion after verification of receipt ultimately credited d in the bank account of the assessee for the year under consideration. In our view the order of ld CIT(A) does not require any further inference, which we affirm. In the result, the ground of appeal raised by the revenue is dismissed.

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• 2022 (3) TMI 1230
  Reopening of assessment u/s 147 - absence of proper sanction u/s 151 - HELD THAT:- It should be kept in mind that approval u/s. 151 of the Act is a power given to the higher officer (Addl. CIT/Joint CIT) in certain cases like that of the assessee in this cases is for granting approval to re-open the assessment of the assessee which is a valuable safeguard to check against any arbitrary exercise of power by ITO/AO. This safeguard given by the Parliament to the higher officer cannot be granted mechanically or in a ritualistic manner. Merely by scribbling approved or for argument sake even if the Ld. Addl. CIT has written I am satisfied with the reason so approval given . This standard of approval cannot satisfy the test as to whether the Addl. CIT has applied his mind or not before approval was granted. It is noted that even this kind of approvals given by the higher authorities as contended by the Ld. DR has been found not to satisfy the test as to whether the approving authority has applied its mind to the information received by the AO and to the reason recorded by the AO justifying the re-opening as held in UNITED ELECTRICAL CO. P. LTD. [ 2002 (10) TMI 86 - DELHI HIGH COURT] and M/S S. GOYANKA LIME AND CHEMICALS LTD. [ 2015 (5) TMI 217 - MADHYA PRADESH HIGH COURT] Therefore, in my opinion, approval granted by the Addl. CIT, Shillong Range has been done in a ritualistic manner mechanically without application of mind - the approval granted by the Addl. CIT is bad in law for non-application of mind. Therefore, the issuance of notice u/s. 148 by the AO without getting proper approval from the Addl. CIT as per section 151 being invalid, the action of the AO issuing notice u/s. 148 of the Act is without jurisdiction and, therefore, consequently framing of assessment order is bad in law and accordingly quashed. - Decided in favour of assessee.

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• 2022 (3) TMI 1211
  Levy of penalty u/s 271(1)(c) - Defective notice u/s 274 - non specifying under which limb of Section 271(1)(c) penalty proceedings had been initiated i.e., whether for concealment of particulars of income or furnishing of inaccurate particulars of income and finally imposed the penalty - HELD THAT:- The penalty provisions of section 271(1)(c) of the Act are attracted, where the Assessee has concealed the particulars of income or furnished inaccurate particulars of such income - a well-accepted proposition that the aforesaid two limbs of section 271(1)(c) of the Act carry different meanings - It is imperative for the AO to specify the relevant limb so as to make the Assessee aware as to what is the charge made against him so that he can respond accordingly. Having regard to the manner in which the Assessing Officer has issued the notice u/s 274 read with 271(1)(c) without specifying the limb under which the penalty proceedings have been initiated and proceeded with, apparently goes to prove that notice in this case has been issued in a stereotyped manner without applying mind which is bad in law, hence can not be considered a valid notice sufficient to impose penalty u/s 271(1)(c) and therefore we are of the considered view that under these circumstances, the penalty is not leviable as held by the various Court including Apex Court and hence, we have no hesitation to delete the penalty levied by the AO and affirmed by the ld. Commissioner. - Decided in favour of assessee.

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• 2022 (3) TMI 1210
  Disallowance u/s 14A read with Rule 8D(2)(ii) on account of interest - As argued AO without recording any satisfaction has proceeded to make disallowance - assessee made suo motu disallowance under section 14A read with Rule 8D for earning dividend income - HELD THAT:- Assessee s specific contention was that no borrowed funds have been utilized and all the investments have been made in the earlier years from the assessee s own funds and, has not been rebutted and therefore, there was no reason for making any disallowance on account of interest. AO however without recording his satisfaction or examining the nature of investment and expenditure debited in books of account and mechanically applied Rule 8D without recording any satisfaction which is evident from the assessment order and succinctly made disallowance of expenditure of interest under Rule 8D(2) and under Rule 8D(2)(iii). CIT(A), after calling the remand report and considering the material available on record, restricted the amount of disallowance of exempt income, however, has not specifically dealt with assessee s argument how interest cost can be apportioned when assessee has used its own funds for making the investment. It is well settled proposition that if assessee has own funds which is higher than the investment for earning tax free income then presumption is drawn that all the investments in the tax free earning income has been made out of assessee s own fund. This proposition has now been approved in the case of South Indian Bank Ltd. [ 2021 (9) TMI 566 - SUPREME COURT] Accordingly, no disallowance of interest can be made and the same is directed to be deleted. Moreover, we find that in the earlier year also, similar finding has been given by the Tribunal. Accordingly, the appeal filed by the assessee is allowed.

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• 2022 (3) TMI 1209
  Income accrued in India - payment received by the appellant from supply of equipment on an offshore basis were taxable in India u/s. 9(1)(i) of the Act r.w. Article 7 of the India - USA DTAA - presence of expat employees - business connection and PE in India - HELD THAT:- There is no dispute that the Revenue has taken a particular stand in Assessment Years 2002-03 to 2006-07 which was upheld in the subsequent appellate proceedings. It is also not in dispute that for the year under consideration, there is no specific finding given neither by the Assessing Officer nor by the DRP in respect of the presence of the expat employees. In our considered opinion, whether an assessee has PE in a particular Assessment Year has to be decided on facts of that Assessment Year and not by the facts of earlier Assessment Years. When the assessee has raised specific objections before the DRP, the DRP ought to have given findings on the objections raised by the assessee. We find that the order of the DRP is silent in this respect. Moreover, the premises which were considered to be at the disposal of the employees of the assessee were not in use any more in Assessment Years 2014-15 and 2015-16. This fact is also not dealt with by the revenue authorities. Since the entire assessment order/DRP orders are based on the findings given in Assessment Years 2002-03 to 2006-07, cannot be basis for framing assessment under consideration. Therefore, in the interest of justice and fair play, we deem it proper to restore the appeals to the file of the Assessing Officer/DRP. AO is directed to examine the presence of expat employees for each Assessment Year under consideration and decide the issue afresh after giving reasonable and sufficient opportunity of hearing to the assessee. AO is further directed to examine the transactions claimed to be at arm s length and if found correct, decide the issue as per provisions of law and settled propositions of the Hon ble High Courts/Supreme Court. Assessee is directed to furnish all necessary details in support of its claim that no expat employees were present during the Assessment Year under consideration. Income from supply of software in India treating the same as royalty in terms of provisions of section 9(1)(vi) of the Act and Article 12 of the DTAA - AO was of the opinion that the words use of or right to use denote that both specific use and use of copy right result in earning of royalty income, even if it is called as sale can be treated as royalty under the provisions of the Act - HELD THAT:- This quarrel is now well settled by the decision of the Hon ble Supreme Court in the case of Engineering Analysis Center of Excellence Pvt. Ltd. [ 2021 (3) TMI 138 - SUPREME COURT ] - we direct the Assessing Officer to delete the impugned addition in the captioned Assessment Years.

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• 2022 (3) TMI 1208
  Disallowance of set off of losses by treating as speculative loss - assessee has claimed set-off of losses incurred from trading in shares and securities with the capital gain income from other sources ad share activities undertaken by assessee is speculative in nature and losses sustained thereto cannot be set-off against the capital gain income or other sources - whether assessee wrongly set-off his income with the business losses of speculative nature and are hit by the Explanation of section 73 of Income Tax Act? - HELD THAT:- On perusal of profit and loss account, we find that the main business of the assessee during the year is of trading in shares and securities. In the balance sheet as on 31.03.2015, the assessee has shown stock in trade however, the closing stock of property and at Shilaj Plot No. 1507A and Block No. 73 Jaspur Ahmedabad respectively. Similarly on 31.03.2014, the assessee has shown stack in trade, and the closing stock of property at Shilaj Plot No. 1507A and Block No. 73 Jaspur Ahmedabad respectively. We have also noted that the Ld. CIT(A) in his finding has accepted that during the assessee has shown only profit and loss account where turnover consist of sale of shares - we are of the view that the assessee is entitled for set off of losses as the principal business of assessee is in trading of shares. In the result, the ground of appeal raised by the assessee is allowed.

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• 2022 (3) TMI 1207
  Revision u/s 263 by CIT - denial of claim of exemption u/sec 10(38) - Addition u/s 68 - purchases price as the part of the long term capital gains and the whole sale proceeds are to be treated as income u/sec 68 - HELD THAT:- We find that the assessee has complied with the statutory notice u/sec148 and 142(1) of the Act and the show cause notice. The submissions of the Ld. AR are realistic duly supported with the material information and judicial decisions. We Considering the overall facts, circumstances, ratio of the judicial decision and the details submitted in the course of hearing are of the view that the if any query is raised in the assessment proceedings and it was responded by the assessee, mere fact that it is not dealt within by the A.O. in the order cannot implied that there is no application of mind. Hence, the PCIT action cannot be acceptable as the order passed by the A.O. does not satisfy the twin conditions of erroneous and prejudicial to the interest of the revenue. Accordingly we do not find any merits in the order and we set aside the order u/s 263 passed by the PCIT and allow the grounds of appeal of in favour of the assessee.

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• Customs

• 2022 (3) TMI 1229
  Seizure of imported consignment - mis-declaration of goods - Ownership of goods - BOE is in different name - Electrolytic Tough Pitch copper wire rods - prohibited goods or not - whether Rekhatex undisputedly is the owner of the goods and in the event of a dispute as to the title of the goods? - HELD THAT:- This is not a case where the application for amendment to the IGM or the BOLs in favour of Sagun Copper is made prior to the search or seizure. The invoices drawn by Rekhatex in favour of Shine Metal, the BOEs indicating the name of Shine Metal as importer , the application made by Sagun Copper for substitution of their name for filing fresh BOEs in place of Shine Metal, for clearing the goods for home consumption, indicates that Shine Metal is the importer. The record reveals that Shine Metal filed the BOEs for home consumption. In the facts of this case, it is not possible for us to conclude that Rekhatex has title over the goods only because it is in possession of the original BOLs. Dehors the materials on record and the manner in which the transactions have taken place pursuant to the seizure, leaves us with no manner of doubt that the claim of Rekhatex of ownership of the goods on the basis of the documents of title, BOLs, cannot be said to be undisputed. We cannot turn a blind eye to the attending circumstances which necessitate an in-depth inquiry before rendering a factual finding regarding ownership of the consignment which may not be possible for us to do so in this writ petition under Article 226 of the Constitution of India. The stand of the Department that the documents viz. BOEs, BOLs and invoices in the name of Shine Metal are sufficient indicator to suggest that there exists a dispute of title cannot be brushed aside. The stand of the Department, of there being a failed business contract between Rekhatex and Shine Metal upon seizure of the goods, cannot be ruled out altogether. From the materials on record, it is obvious that Rekhatex took steps to effect changes in the documents only after seizure of the goods - Except for the oral submissions made by learned counsel for Rekhatex, there is nothing on record to indicate that the process for sale of the consignment commenced before the seizure. On one hand, Rekhatex has taken a plea that Shine Metal abandoned the goods after submitting the BOEs, whereas on the other hand, it relies upon the NOC issued by Shine Metal for sale of the goods much later in distance of time from the date of seizure, which is self-contradictory. The present writ petition involves a disputed question of fact regarding ownership of Rekhatex over the goods, it is not open for us to assess the evidence ourselves - petition dismissed.

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• 2022 (3) TMI 1228
  Levy of penalty u/s 114(i) of the Customs Act, 1962 - Smuggling - export of prohibited goods - Star Tortoises - levy of penalty for the reason that the appellant had not verified as to whether Let Export Order was issued or not - HELD THAT:- From the facts narrated, it is clear that the attempt to export the prohibited goods (Star Tortoises) had come to light on the information given by the appellant that there was a pungent smell coming from the cargo. It is very much clear that it is the appellant who had taken the first step to note that there was something fishy in regard to the cargo that was attempted to be exported. If the appellant was colluding / intentionally facilitating import of the said prohibited goods, he would not have intimated the higher officials - In such circumstances, it cannot be held that the appellant has facilitated the attempt to export the prohibited goods in question. The Adjudicating Authority has imposed the penalty holding that the appellant has not been diligent in obtaining all documents and had not verified as to whether Let Export Order was issued. This cannot be the reason to hold that the appellant has abetted the attempt to export the prohibited goods. The reason for imposing the impugned penalty is that the appellant has not verified the Let Export Order before the goods reached the loading area. As it is established that it is the appellant who had frustrated the attempt to smuggle the prohibited goods, the penalty imposed under Section 114(i) of the Customs Act, 1962 cannot sustain and requires to be set aside - Appeal allowed - decided in favor of appellant.

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• 2022 (3) TMI 1227
  Valuation of imported goods - LED panel - rejection of declared value - enhancement of assessable value - restriction on importation conflate - Confiscation of goods - breach of specification of standards or not - HELD THAT:- It would appear that the present proceedings must determine breach, if any, of certification standards which, admittedly, had ceased to be of import by the time of issue of show cause notice, the appropriate approach to the dispute over valuation of goods imported against 16 bills of entry and the correctness in inclusion of the value of the invoice for services in the assessable value of the goods. On the valuation of goods imported against 16 bills of entry, the show cause notice had proposed that the stream of fixed returns incorporated in the Collaborative Framework Agreement (CFA) be adopted as the assessable value. Even if the submission on behalf of the appellant that the said agreement had been voided by inability of the overseas entity to supply the goods specified therein were to be ignored, the scheme of valuation under section 14 of Customs Act,1962 cannot be for it is the transaction value, and the transaction value alone, as declared in the bill of entry that is assured of acceptance for assessment except for varying from the qualifying circumstances therein as well as in rule 3 of Customs Valuation (Determination of Value of Imported Goods) Rules, 2007. There is no finding, either of additional payments having been made as consideration or of the value not being in conformity with the parameters therein, for rejection of rule 12 of the Rules to warrant resort to the sequential application of the several methods in the Rules. The impugned order has relied upon a pro forma invoice as rationale for the enhancement. That may have sufficed for re-determination of transaction value after rejecting declared value. However, the provisions for inclusion of cost of services are a special law within the Rules which require ascertainment per the circumstances in rule 10 of Customs Valuation (Determination of Value of Imported Goods) Rules, 2007. There is no such determination in the impugned order and the enhancement of assessable value is, thereby, tainted. The impugned goods are not in breach of certification standards and the onus for disturbing the transaction value in 16 bills of entry as well as the value of goods in the other consignment has not been duly discharged. The confiscation is set aside along with confirmation of demand of differential duty - Appeal dismissed - decided against Revenue.

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• Securities / SEBI

• 2022 (3) TMI 1226
  Violation of provisions of the Act and the PFUTP Regulations - What is the scope and ambit of statutory appeal to the Supreme Court under Section 15Z of the Act against an order passed by the Securities Appellate Tribunal? - HELD THAT:- Supreme Court will exercise jurisdiction only when there is a question of law arising for consideration from the decision of the Tribunal. A question of law may arise when there is an erroneous construction of the legal provisions of the statute or the general principles of law. In such cases, the Supreme Court in exercise of its jurisdiction of Section 15Z may substitute its decision on any question of law that it considers appropriate. Not every interpretation of the law would amount to a question of law warranting exercise of jurisdiction under Section 15Z. The Tribunal while exercising jurisdiction under Section 15T, apart from acting as an appellate authority on fact, also interprets the Act, Rules and Regulations made thereunder and systematically evolves a legal regime. These very principles are applied consistently for structural evolution of the sectorial laws. This freedom to evolve and interpret laws must belong to the Tribunal to subserve the Regulatory regime for clarity and consistency. These are policy and functional considerations which the Supreme Court will keep in mind while exercising its jurisdiction under Section 15Z. Whether the advertisements dated 07.04.2005, 20.04.2005, are in violation of Regulations 3 (a), (b), (c), (d) read with Regulation 4 (1), (2) (k) and (r) as amounting to misleading and defrauding the investors? - As per the first advertisement dated 07.04.2005, it was alleged by SEBI that in violation of Regulation 4 (2) (k) and 4 (r) of the PFUTP Regulations, the Company proceeded to announce on 07.04.2005 the launch of the worldwide outbound package tour services. These services were intended to operate across 25 cities in India and were expected to achieve a revenue of Rs. 1000 million with a net profit of Rs. 200 million in its first year. SEBI alleges that this announcement was made for the sole purpose of misleading the investors. This finding is reversed by the Tribunal based on an agreement between the Company and M/s Gem Tours and Travels Private Limited to establish a subsidiary company called Mega Holidays Ltd. to handle the tour services. The Tribunal also noted the bank statement supporting the Company s transaction with M/s Gem Tours and Travels Private Limited. Tribunal has reversed the findings of SEBI on the basis of its own inferences drawn from the documents on record. The decision of the Tribunal is fact-based and does not give rise to any question of law for invoking the jurisdiction of the Supreme Court under Section 15Z. For this reason, we are not inclined to interfere with the finding of fact, which must rest with the conclusions drawn by the Tribunal. Second announcement dated 20.04.2005 is concerned, it relates to the allegation of announcing the commencement of business in foreign exchange with the launch of Mega Forex Brand as alleged that the Company made false statements such as that it is expected to grab 5-10% of the market share in the forex market, which is at 5-6 billion dollars in a span of one or two years. Here again, the Tribunal concluded that the application for a license to deal with foreign exchange which is alleged to have been made in September 2005 was only a revised application. The revised application is said to have been made in as a reply to the queries of the Reserve Bank of India on their original application, which was in fact made on 14.04.2005, that is even before the announcement. The Tribunal, therefore, was of the opinion that the announcement is not imaginary but is based on specific steps taken before the date of announcement, lending credence to the said activity. the conclusion is drawn by the Tribunal, being factual, not giving rise to any question of law, the jurisdiction of this Court under Section 15Z cannot be invoked. For this reason, we affirm the finding of the Tribunal and there is no occasion for this court to interfere with the decision of the Tribunal. The issue is answered against the appellant. Whether the company has violated Regulations 3(a), (b), (c) and (d) and Regulation 4(1), 4(2)(k) and 4(2) (r) of the SEBI (PFUTP) Regulations, 2003 by manipulating the share prices and accounts? - The Tribunal in its appellate jurisdiction came to the conclusion that the connectivity could not be established and that the conclusions drawn by the Board were insufficient - The findings are based on the Tribunal s inferences drawn from the material available on record. The conclusions drawn by the Tribunal do not give rise to any question of law warranting interference of this court under Section 15Z of the Act. This issue is answered against the appellant. Whether there is a right to cross-examine the author of a letter if the SEBI seeks to rely on that letter, adverse to the company? - There is a right of disclosure of the relevant material. However, such a right is not absolute and is subject to other considerations as indicated under paragraph 62(v) of the judgment above referred. In this judgment, there is no specific discussion on the issue of a right to cross-examination but the broad principles laid down therein are sufficient guidance for the Tribunal to follow. There is no need for us to elaborate on this point any further. Coming back to the facts of the present case, we have noticed that the Tribunal has arrived at its conclusions based on independent facts concerning (a) the allegations under Regulation 4 relating to the issuance of misleading advertisements dated 07.04.2005 and 20.04.2005 as well as (b) allegations relating to manipulation of scrip prices and profits to lure investors. As indicated earlier, the Tribunal concluded that the allegations could be proved. As we are not interfering in the findings of fact arrived at by the Tribunal the Company s claim for cross-examining would pale into insignificance. This question presents itself merely as an academic issue. We are also of the opinion that, there was no necessity for the Tribunal to lay down as an inviolable principle that there is a right of cross-examination in all cases. In fact, the conclusion of the Tribunal based on evidence on record did not require such a finding. We, therefore, set aside the findings of the Tribunal to this extent while upholding its decision on all other grounds. We would also leave the question of law relating to the right of cross-examination open and to be decided in an appropriate case by this Court.

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• Insolvency & Bankruptcy

• 2022 (3) TMI 1225
  Maintainability of application - guarantee with regard to facility agreement was given - facility agreement was subsequently renewed and extended - Application under Section 7 filed on the basis of the subsequent facility dated 14.12.2017 - whether the Appellant guarantee shall continue to the subsequent facility? - HELD THAT:- On reading of the guarantee executed on 10.10.2016 by the Appellant and the facility agreement executed on 14.12.2017, no error is found in the view taken by the Adjudicating Authority that the guarantee executed by the Appellant shall continue even for the facility agreement dated 14.12.2017. No error has been committed by the Adjudicating Authority in the impugned order by admitting the Application under Section 7. Learned Counsel for the Appellant submits that there is variation of the contract, therefore, the guarantee could not enure with regard to the subsequent contract - on going through facility agreement and guarantee deed, it is found that the guarantee continues and also apply to subsequent renewal of the facility agreement. There are no substance in the arguments of the Learned Counsel for the Appellant - appeal dismissed.

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• 2022 (3) TMI 1224
  Maintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its dues - Financial Creditors - existence of debt and dispute or not - HELD THAT:- From the daily order dated 17.03.2022, it is clear that the Counsel for the Corporate Debtor has submitted that the One Time Settlement proposal submitted by the Corporate Debtor has not been accepted by the Financial Creditor. The counsel for the Corporate Debtor has therefore admitted the debt and default - Mere plain reading of the provision under section 7 of IBC shows that in order to initiate CIRP under Section 7 the applicant is required to establish that there is a financial debt and that a default has been committed in respect of that financial debt. The documents submitted by the Financial Creditor and the Corporate Debtor clearly substantiate the Financial Creditor s claim that the Corporate Debtor has indebted and defaulted the repayment of loan amount. Upon appreciation of the documents placed on record to substantiate the claim, this Tribunal admits this petition and initiates CIRP on the Corporate Debtor with immediate effect - Application admitted - moratorium declared.

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• 2022 (3) TMI 1223
  Maintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its dues - Operational Creditors - existence of debt and dispute or not - HELD THAT:- In view of the correspondence between the Operational Creditor and the Corporate Debtor, the outstanding liability has been clearly admitted by the Corporate Debtor and there is no plausible defence available to the Corporate Debtor. The Corporate Debtor has committed default in making payment of admitted operational debt and in spite of repeated requests and demands for more than 4 years now. They have not been able to clear their liability may be due to financial crises or otherwise, but the fact remains that the default has occurred in repayment of operational debt. The petition is otherwise complete in all respects. The application filed by the Operational Creditor under Section 9 of the Insolvency Bankruptcy Code, 2016 for initiating Corporate Insolvency Resolution Process against the Corporate Debtor, is hereby admitted - moratorium declared.

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• 2022 (3) TMI 1222
  Maintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its dues - Operational Creditors - existence of debt and dispute or not - HELD THAT:- The Corporate Debtor in their letter dated 10.01.2018 has categorically mentioned that the goods supplied by JSPL against back to back arrangement were of extremely substandard Quality. Further, their consent to pay the outstanding of JSPL was based on the condition that the goods to be supplied to them would be of agreed specification and quality - Further, the Operational Creditor in their reply dated 29.01.2018 stated that they will cancel the back to back arrangements and shall make claims against JSPL and they also assured that the Corporate Debtor will have no liability in this regards. The defence is not spurious or plainly frivolous or vexatious. The dispute very much existed between the parties way before the demand notice sent by the Operational Creditor i.e., 06.08.2019 - Petition dismissed.

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• 2022 (3) TMI 1221
  CIRP - Failure to supply the requisite information to RP - Seeking directions upon the suspended Directors and the staffs/management personnel of the Corporate Debtor to extend all cooperation and provide all information with regard to the assets, books and records relating to the projects under-taken by the Corporate Debtor - HELD THAT:- Without going into controversy as to what documents have been given or not given so far by the suspended Directors to the erstwhile RP, or the Liquidator, it is directed that in addition to the above email, the Liquidator shall immediately send further and final list of documents, if any required from the suspended members of the Board of Directors, within one week. The suspended members of the Board of Directors are directed to hand over and provide all the information mentioned in the said emails if not already sent within two weeks. There should not be any lapse on the part of the suspended Directors because any further delay will be taken as causing an intentional delay in the process of liquidation and would lead to serious consequences. However, if anything which is supposed to be in their possession but is not available, they will give an understandable justification therefore - application disposed off.

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• 2022 (3) TMI 1220
  Maintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its dues - Operational Creditors - existence of debt and dispute or not - HELD THAT:- There does not seem to any defence available to the Corporate Debtor for its default in payment of operational debt. This petition, therefore, deserves to be admitted. The application filed by the Operational Creditor under Section 9 of the Insolvency Bankruptcy Code, 2016 for initiating Corporate Insolvency Resolution Process against the Corporate Debtor, is hereby admitted - Moratorium declared.

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• 2022 (3) TMI 1219
  Dissolution of the Applicant Company - Section 59 of the IBC, 2016, R/w. IBBI (Voluntary Liquidation Process) Regulations, 2017 - HELD THAT:- The liquidator has produced the report of Income Tax Department dated 07.12.2020 stating that no outstanding taxes as per the records available in this office - It is further deposed that necessary compliances of Section 59 and other relevant provisions of the IBC, 2016 r/w. Regulations have been made within 12 months from the date of commencement of the liquidation proceedings. The Application is duly supported by the affidavit of the Liquidator. The Liquidator has distributed all the proceeds to the shareholders and has closed the Account. Further, in terms of Regulation 38 of the IBBI Regulations, the liquidator has submitted the Final Report to the IBBI through email on 23.02.2021 and ROC in Form GNL-2 on 19.02.2021. In view of the satisfaction accorded by the Liquidator by way of the present Application, duly accompanied by her affidavit, the said Applicant Company is hereby dissolved with effect from the date of the present order - petition allowed.

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• 2022 (3) TMI 1218
  Maintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its dues - Operational Creditors - monetary amount involved in the appeal - whether the claimed amount falls under the enhanced threshold limit of Rupees One Crore or the earlier threshold limit i.e., prior to the notification of the Ministry of Corporate Affairs (Government of India) dated 24.03.2020 of Rupees One Lakh? - HELD THAT:- The Hon ble NCLAT, New Delhi in a recent decision JUMBO PAPER PRODUCTS VERSUS HANSRAJ AGROFRESH PVT. LTD. [ 2021 (10) TMI 1279 - NATIONAL COMPANY LAW APPELLATE TRIBUNAL, NEW DELHI ] has held that the threshold limit to be considered for the application filed after 24.03.2020 will be Rs. One Crore. This threshold limit will be applicable for the application filed under section 7 or 9 on or after 24.03.2020 even if the debt is of a date earlier than 24.03.2020. This decision of Hon ble NCLAT is squarely applicable to the facts of the present case. The present petition is filed by the Operational Creditor on 18.02.2021 for the default amount of Rs. 30,95,734/-, which is after the date of said notification - the present application is not maintainable since the default amount is less than the threshold limit prescribed under Section 4 of the IBC, 2016. Petition dismissed.

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• 2022 (3) TMI 1217
  Seeking withdrawal of petition - settlement arrived at between the parties prior to the constitution of Committee of Creditors of the Corporate Debtor - HELD THAT:- In the present case it is not disputed that CoC has not been constituted so far. The Hon ble Apex Court in SWISS RIBBONS PVT. LTD. AND ANR. VERSUS UNION OF INDIA AND ORS. [ 2019 (1) TMI 1508 - SUPREME COURT ] has held that at any stage, before a Committee of Creditors is constituted, a party can approach National Company Law Tribunal (NCLT) directly and that the Tribunal may, in exercise of its inherent powers under Rule 11 of NCLT Rules, allow or disallow an application for withdrawal or settlement. It is true that the procedure for preferring an application under Section 12A of the IBC is contained in Regulation 30A of the Corporate Insolvency Resolution Process Regulations, 2016. In the interest of justice, the Rule 11 of NCLT Rules, 2016 can be invoked in the instant case for withdrawal of petition - application allowed.

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• Service Tax

• 2022 (3) TMI 1216
  Levy of additional taxes in order to get the interest which is legally due - claim of refund was rejected on the ground of time bar and principles of unjust enrichment - Section 11BB of the Central Excise Act, 1944 - HELD THAT:- Section 11BB of the Central Excise Act, 1944 which is extracted in the impugned Order-in-Appeal at page 5, makes it abundantly clear that the interest shall be paid to the assessee if refund is not granted within three months from the date of receipt of application for refund under Section 11B(1) ibid. This means that the interest under Section 11BB ibid. is automatic, which triggers when no refund is granted within three months of the date of application seeking refund. This Bench in its order in the first round of litigation in V PETER VERSUS COMMISSIONER OF CENTRAL TAX AND CENTRAL EXCISE, THIRUVANTHAPURAM [ 2020 (2) TMI 46 - CESTAT BANGALORE] which has also admittedly attained finality with the Revenue accepting the same. This Bench had clearly observed that there was a letter dated 25/11/2005 filed by the appellant stating that the service tax was being remitted under protest, which was sufficient to take the appellant s case within the time embargo placed under Section 11B ibid. There was also a clear finding by this Bench that the appellant had not collected the service tax and hence, question of unjust enrichment would not be applicable. It is as per the above Order-in-Appeal that the appellant became entitled to refund since it was held in the said Order-in-Appeal that the appellant was not liable to pay service tax as commission agent for buying and selling of raw cashew and the export of cashew kernel. By not specifically granting interest under Section 11BB ibid. the adjudicating authority has clearly ignored both directions of this Bench, for which the Revenue has to answer, since, both the above orders have become final. Not following the order of a higher appellante authority amounts to judicial impropriety, especially when such order of a higher appellate authority has become final. In fact, the Ld. Commissioner (A) while passing the impugned order should have specifically directed for granting interest as well as indicated by me in the above paragraph, but that having not done, therefore, to this extent the impugned order invites interference. The appellant shall be entitled to the interest under Section 11BB ibid. from the date he got relief and became entitled to in his first appeal in the first round of litigation - Appeal allowed - decided in favor of appellant.

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• 2022 (3) TMI 1215
  CENVAT Credit - rendering both taxable as well as exempted services - cutting of hot rolled / cold rolled coils into sheets on job work basis - non-maintenance of separate records - invocation of rule 6 of CCR - HELD THAT:- Admittedly, it is not the case of the Revenue that no tax/duty is paid. From the perusal of the impugned Order-in-Appeal as well as Order-in-Original, it is found that the authorities below have not made any efforts to analyse the services provided by the appellant vis- -vis Rule 2(e), to buttress their contention that what the appellant was doing would or would not fall under the definitions of Rule 2(e). Just because the appellant is not paying the tax/duty, that by itself would not be termed as exempted services . The statute has clearly defined exempted services to mean those which are exempted from the whole of service tax which would include those services on which no service tax is leviable under Section 66 of the Finance Act and until or unless the above conditions are satisfied, anything or everything cannot brought within the purview of exempted services. When the appellant claims right from the beginning that insofar as job work issue was concerned, the applicable duty/tax was paid by the principal manufacturer, no attempt was made to disprove the same by the revenue, they simply went on the premeditated misconception that the job work on which the appellant was not paying taxes, was an exempt service. This is without any basis which cannot be sustained. Scope of Rule 6 therefore is to be of limited applicability in such a scenario, as held by the Learned larger Bench of CESTAT in the case of STERLITE INDUSTRIES (I) LTD. VERSUS COMMISSIONER OF CENTRAL EXCISE, PUNE [ 2004 (12) TMI 108 - CESTAT, MUMBAI] , which order was later-on approved by the Hon ble Mumbai High Court, COMMISSIONER VERSUS STERLITE INDUSTRIES (I) LTD. [ 2008 (8) TMI 783 - BOMBAY HIGH COURT] . This very decision has been followed in a number of cases by various benches and hence, this issue does not require any further deliberations. The demands raised are contrary to law and hence, the same are set aside, being unsustainable - appeal allowed - decided in favor of appellant.

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• 2022 (3) TMI 1214
  Non-payment of service tax - Goods Transport Agency Service - issuance of consignment note or not - Revenue is of the view that appellant has availed the services of transport of goods but have not paid service tax being recipient of the service - period 20/02/2005 to March 2006 - HELD THAT:- In the appellant own case DODDANAVAR BROTHERS VERSUS C.C.,C.E. S. T-BELGAUM [ 2020 (1) TMI 590 - CESTAT BANGALORE] where it was held that If we see the definition of Goods Transport Agency , it clearly shows that the services must be provided by a person in relation to transport of goods by road and issues consignment note, by whatever name called whereas in the present case, we find that no consignment note was issued. In the case of South Eastern Coalfields Ltd. [ 2016 (8) TMI 677 - CESTAT NEW DELHI ], after considering the definition of Goods Transport Agency as provided in Section 65(50b) and after considering the various decisions given by the Tribunal, has allowed the appeal of the assessee by holding that the tax liability under Goods Transport Agency service cannot be sustained. The demand of service tax is not sustainable against the appellant - appeal allowed - decided in favor of appellant.

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• 2022 (3) TMI 1206
  Levy of service tax - Business Support services - services to distributors/producers in the nature of infrastructure support services - revenue sharing arrangement - Circular dated 13.12.2011 - section 65(104c) of the Finance Act - HELD THAT:- No case is made out to interfere with the impugned Order passed by the Customs, Excise and Service Tax Appellate Tribunal - The CESTAT has taken an absolutely correct view, to which we agree. Hence, the Civil Appeal stands dismissed.

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• CST, VAT & Sales Tax

• 2022 (3) TMI 1213
  Levy of penalty u/s 54 (1) (19) of UP VAT Act - no finding recorded by the authorities including the Tribunal that the revisionist, falsely or fraudulently claims an amount as input tax credit - HELD THAT:- The penalty proceedings have been initiated against the revisionist on the purchases made from various dealers as purchases were not verifiable for some reasons or the other and while passing the assessment order, the input tax credit was rejected therefore the penalty under Section 54 (1) (19) was initiated. On a pointed query to the counsels appearing on behalf of parties as to whether any revision against the aforesaid second appeals were preferred before this Court and what is the outcome of the same, the counsels were not aware of that and prayed that the matter may be remanded to the Tribunal so that same fact can be verified by the Tribunal. The matter is remanded to the Tribunal. The order of the Tribunal is modified to the extent that orders of penalty have been affirmed on the basis of purchases made may be verified and the Tribunal may record a specific finding as contemplated under Section 54 (1) (19) of UP VAT Act for confirming the imposition of penalty. The revisions are disposed of.

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• Indian Laws

• 2022 (3) TMI 1212
  Dishonor of Cheque - amicable settlement of dispute between the parties - compounding of offences - section 138 and 147 of NI Act - HELD THAT:- Having gone through the material placed on record, it has emerged that the petitioner has been convicted by the concerned Criminal Court for the offence punishable under Section 138 of the N.I. Act. However, now, the parties have amicably settled the dispute and, therefore, the parties have executed settlement agreement/ declaration as stated above stating that if the order of conviction passed against the petitioner is quashed and set aside, the respondent no.2 has no objection. When the parties have settled the dispute amicably, compounding of the offence is required to be permitted. However at this stage, it is required to be noted that as per the decision rendered by the Hon ble Supreme Court, suitable amount is required to be deposited by the applicant with the Gujarat State Legal Services Authority, more particularly when the complainant has shown willingness to accept amount as ordered by the learned trial court by way of settlement. Application allowed.

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