TMI Tax Updates - e-Newsletter
April 14, 2022

Case Laws in this Newsletter:

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

Articles

1. RECENT DEVELOPMENTS IN GST

   By: Dr. Sanjiv Agarwal

News

1. Expert Committee on Longevity Finance recommends setting up of Longevity Hub at GIFT-IFSC

2. Cabinet approves Bilateral Memorandum of Understanding between Securities and Exchange Board of India and Manitoba Securities Commission, Canada

Notifications

FEMA

1. S.O. 1802 (E) - dated 12-4-2022 - FEMA

Foreign Exchange Management (Non-debt Instruments) (Amendment) Rules, 2022

GST - States

2. 04/2022-State Tax - dated 8-4-2022 - Maharashtra SGST

Seeks to amend notification no. 14/2019-State Tax to implement special composition scheme for Brick Kilns, as recommended by 45 GSTC

3. 03/2022-State Tax - dated 8-4-2022 - Maharashtra SGST

Seeks to amend notification no. 10/2019-State Tax to implement special composition scheme for Brick Kilns, as recommended by 45 GSTC

4. 02/2022—State Tax (Rate) - dated 8-4-2022 - Maharashtra SGST

Seeks to provide for a concessional rate on intra state supply of bricks conditional to not availing the ITC, as recommended by 45 GSTC

5. 01/2022—State Tax (Rate) - dated 8-4-2022 - Maharashtra SGST

Seeks to amend notification No. 1/2017-State Tax (Rate) dated the 29th June, 2017

6. S.O. 25/P.A.5/2017/S.11/2022 - dated 25-3-2022 - Punjab SGST

Amendment in Notification No. S.O.141/P.A.5/2017/S.11/2018, dated the 18th September, 2018

7. S.O. 24/P.A.5/2017/S.11/2022 - dated 25-3-2022 - Punjab SGST

Amendment in Notification No. S.O.18/P.A.5/2017/S.11/2017, dated 30th June, 2017

8. S.O. 23/P.A.5/2017/S.9/2022 - dated 25-3-2022 - Punjab SGST

Amendment in Notification No. S.O.21/P.A.5/2017/S.9/ 2017, dated the 30th June 2017

9. S.O. 21/P.A.5/2017/Ss. 9, 11, 15, 16 and 148/2022 - dated 25-3-2022 - Punjab SGST

Amendment in Notification No. S.O 17/P.A.5/2017/Ss.9,11,15 and 16/2017, dated the 30th June, 2017

Highlights / Catch Notes

GST

• Court Urges Focus on Main Tax Fraud Beneficiaries, Not Just Intermediaries, in Bail Cases Involving Fake ITC Claims.

  Case-Laws - HC : Seeking grant of bail - availment of fraudulent ITC - sham subsidiaries - it is observed that more and more such cases are brought to the fore where the mere pawns who have been used as a part of larger conspiracy of tax fraud have been brought under the dragnet by the prosecution. It is perhaps time that the prosecution will do well to follow the trial upstream and bring the “upstream” parties who are the ultimate beneficiaries who are the gainers in these evil machinations. - HC
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• GST Act: Indefeasible Right to Utilize Pre-2017 Credit Despite Transition Issues with TRAN-1 Filing.

  Case-Laws - HC : Transitional Credit - TRAN-1 - As a matter of fact, the provisions of GST Act also does not provide for lapsing of the credit, which could not be successfully transitioned under the new regime while filing form correctly in TRAN-1. If the credit, which was availed during the regime that existed prior to 01.07.2017, it gives the indefeasible right to utilize such credit, even to those assessees, who were not under the taxable regime under the old Act, have been allowed to transition credit, as they were liable to pay tax. - HC
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• Court Orders Review of CENVAT Account for Unutilized Credit as of June 30, 2017; Potential Refund or Transition Allowed.

  Case-Laws - HC : Transitional Credit - This Writ Petition is disposed off by directing the jurisdictional officer to examine the petitioner's CENVAT account or VAT returns and ascertain whether any such credit was lying un-utilized as on 30.06.2017 and if such credit existed in the CENVAT account or VAT returns of the petitioner, the amount shall be either refunded back by way of credit in the Electronic Cash Register of the petitioner or allowed to be transitioned notwithstanding the fact that the petitioner may have failed to file TRAN-1 in time. - HC
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Income Tax

• High Court Upholds Exemption: Scholarships Not in Violation of Section 13(1)(b) of Income Tax Act.

  Case-Laws - HC : Exemption u/s 11 - assessee has paid most of the scholarship amount to the students of a particular religious community which is a clear violation of Section 13(1)(b) - Just because advertisement was published in Urdu language and that too in one newspaper, it cannot be presumed that it was targeted at the students belonging to a particular community only. In fact, a similar finding of CIT(A) in the assessment year 2010-11 was accepted by the revenue and was not even challenged before the Tribunal. - Benefit of exemption cannot be denied - HC
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• Court Sets Aside Reopening of Tax Assessment Due to Improper Approval Beyond Four-Year Limit u/s 151(1.

  Case-Laws - HC : Reopening of assessment u/s 147 - reopening as based on audit objection - notice beyond four years - since four years had expired from the end of the relevant assessment year, as provided under Section 151(1) of the Act, it is only the Principal Chief Commissioner or Chief Commissioner or Principal Commissioner or Commissioner who could have accorded the approval and not the Additional Commissioner of Income Tax. On this ground alone, we will have to set aside the notice dated 31.03.2021 issued under Section 148 of the Act, which is impugned in this petition - HC
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• Tax Authorities' 20% Expenditure Disallowance Overturned Due to Unjustifiable Allocation Before Project Office Setup in India.

  Case-Laws - AT : Disallowance to the extent of 20% of the expenditure relating it to period prior to the setting of PO in India - when it is not possible to verify if the expenditure were incurred after the establishment of project office or before the establishment of project office, then there is no justification to proportionately appropriate 20% of the expenditure to prior period expenditure. The same being merely whimsical and sustaining it the Ld. FAA has also erred therefore in regard to these grounds the order of ld. Tax Authorities below cannot be sustained and the grounds are allowed. - AT
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• Assessing Officer's Non-Compliance with CIT(A) Order u/s 220(2) Raises Concerns of Judicial Indiscipline.

  Case-Laws - AT : AO has passed the impugned order under section 220(2) without giving effect to the order of the CIT(A). It appears that the Assessing Officer has deliberately not passed any order to give effect to the order of the CIT(A) despite the fact that the assessee had already filed a petition under section 154 of the Income-tax Act to rectify the mistakes. Once the Assessing Officer has not challenged the order of the CIT(A) dated 25/10/2012, then the Assessing Officer is bound to follow the said order in letter and spirit. The non passing of the giving effect order amounts disobedience and judicial indiscipline on the part of the Assessing Officer which is a serious matter to be considered by the appropriate authority - AT
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• Loan Waiver for Capital Assets Not Taxable u/s 28(iv) or Section 41(1); Principal Amount Excluded from Income.

  Case-Laws - AT : Income from waiver of loan - income changeable to tax or not? - brought to tax under section 28(iv) of the Act or under section 41(1) - it is clear that in the case where capital assets are acquired by obtaining a loan, and subsequently, the loan amount is waived by the other party, the principal amount of loan waived by the other party cannot be brought to tax under section 28(iv) of the Act or under section 41(1) of the Act. - AT
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• Assessee Eligible for Additional Depreciation Due to Increased Production Capacity After Machinery Installation, Supported by Expert Certificates.

  Case-Laws - AT : Disallowance of additional depreciation - the fact remains as per this proviso the assessee is only required to acquire and install the machines, which in this case has been rightly done so by the assessee and is duly supported by the certificate of the Chartered Engineer as well as of Chartered Accountant which proves that the assessee has purchased the machines and installed the same and this resulted in increase in installed capacity of production of the assessee and, therefore, assessee is eligible for claiming the additional depreciation. - AT
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• Tribunal Can Address New Grounds in Tax Cases u/s 254, Including Fresh Claims via Rectification Applications.

  Case-Laws - AT : Fresh claim before the Assessing Officer by way of a rectification application - there is no bar on the higher authorities and especially upon this Tribunal in exercising its power u/s 254 of the Income Tax Act to entertain or to deal not merely with additional ground which became available on account of change of circumstances or law, but with additional grounds which were available when the return was filed. - AT
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Customs

• Court Rules 2017 Drill Ship Import Exemption Invalid; Calls for Judicial Review Over Decision-Making Flaws.

  Case-Laws - HC : Validity of Show Cause notice and order in original - Maintainability of petition - Benefit of exemption - Essentiality Certificate - import of drill ship - The order-in-original dated 27th February, 2017 suffers from illegality as well as irrationality which constitute vices in the decision making process, attracting judicial review. Evaluation of facts by the Principal Commissioner, upon such review, leads to the conclusion that the facts taken as a whole did not logically warrant the conclusion he did reach, for which the said order is liable to be invalidated. - HC
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• Court Orders 7.5% Interest on Eight-Year Delay in Duty Drawback Brand Rate Decision; Not Petitioner's Fault.

  Case-Laws - HC : Seeking interest on belated payment of duty drawback - inordinate delay in determining the brand rate of duty drawback for over a period of 8 years - As the delay is not on account of the petitioner in failing to file any documents required for processing the duty drawback - the respondents to pay interest at 7.5% p.a. from the date of applications filed for fixation of brand rate on 16.09.2000 and 03.11.2000 respectively. - HC
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FEMA

• Amendment to FEMA Rules 2022: Streamlining Foreign Investment in Non-Debt Instruments for Better Compliance and Transactions.

  Notifications : Foreign Exchange Management (Non-debt Instruments) (Amendment) Rules, 2022 - Notification
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Indian Laws

• High Court Rules Trial Court Lacks Jurisdiction for Cheque Dishonor Case u/s 138 of the Negotiable Instruments Act.

  Case-Laws - HC : Dishonor of Cheque - jurisdiction of the court for proceedings initiated on a complaint under Section 138 of the Negotiable Instruments Act, 1881 - As admitted by the respondent herein, the complaint was filed before a court lacking territorial jurisdiction and as such, there is no option for this Court, but to conclude that the Trial Court cannot proceed with the complaint against the petitioner herein. - HC
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Service Tax

• Foreign Service Provider Not a 'Telegraph Authority'; No Service Tax Liability for Recipient on Telecommunication Services.

  Case-Laws - AT : Classification of services - he foreign service provider being not covered under the term ‘Telegraph Authority’, the service provided by them will not fall under the definition of ‘Telecommunication Service. - In the present case since the service provider is not a Telegraph Authority and the appellant being a service recipient cannot be fastened with service tax demand under Telecommunication Service. - AT
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Central Excise

• Cross-examination of Chemical Examiner required in ARH-C Crude Oil case due to conflicting test reports for fair decision.

  Case-Laws - AT : Classification of goods - ARH-C Crude Oil - Clearly, since the said report was in favour of Appellant, they had bona-fide belief that the matter in their favour. However, it is obligatory on the part of the Ld. Commissioner to have allowed cross examination of Chemical Examiner when he was to decide the matter against the Appellant - In case of contradictory test reports, the cross-examination of expert is required. - AT
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• Central Excise officer's power u/s 11(1) limited to adjusting only adjudicated or admitted unpaid dues, not un-adjudicated.

  Case-Laws - AT : Adjustment of interest amount from sanctioned rebate claim - such extra ordinary power to recover are only available for recovery of adjudicated dues, or admitted dues as per return, if the same are unpaid. Under such special power under Section 11(1), the Central Excise officer cannot recover the un-adjudicated dues, as has been done in the present case. - AT
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VAT

• Sales Tax Exemption for Works Contract Initially Granted, Revoked Twice, and Dismissed on Appeal After Nearly Four Years.

  Case-Laws - SC : Withdrawal of benefit of tax exemption - works contract - It is quite clear that the appellant cannot pitch its case higher than at the limit under Order dated 25.11.1994 referred to in paragraph-14. Therefore, exemption of sales tax is contemplated for a period of two years. However, it further provides that it cannot be for more than five years or beyond the date the net worth of the company becomes positive whichever is earlier. Therefore, the maximum period in any case is 5 years. In the case of the appellant, the appellant enjoyed the benefit of the exemption till it was withdrawn on 21.11 2006. The said order in turn was withdrawn on 01.10.2007. It is no doubt true that on 29.02.2008, the order dated 01.10.2007 came to be withdrawn. The writ petition was filed by the appellant. It would appear that for a period of nearly 4 years, the appellant enjoyed the benefit of exemption in all. - Appeal dismissed - SC
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• Tax Recovery Measures Must Respect Legal Remedies for Taxpayers Under GVAT Act, 2003; Uphold Due Process and Fairness.

  Case-Laws - HC : The Administrative directions for fulfilling recovery targets for the collection of revenue should not be at the expense of foreclosing the remedies which are available to assessees for challenging the correctness of a demand. The sanctity of the rule of law must be preserved. The remedies which are legitimately open in law to an assessee to challenge a demand cannot be allowed to be foreclosed by a hasty recourse to coercive powers. Assessing Officers and appellate authorities perform quasi-judicial functions under the GVAT Act, 2003. - HC
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Case Laws:

• GST

• 2022 (4) TMI 601
  Cancellation of GST registration - applicability of time limitation - HELD THAT:- The show cause notice, which is, dated 02.12.2019, gives no details as to the date and time on which the petitioner s authorized representative was to present himself for a personal hearing, before the adjudicating authority. This is apart from the fact that Mr Rai says that neither the show cause notice dated 02.12.2019, nor the subsequent order cancelling the petitioner s GST registration was received by the petitioner - the record shows that the order cancelling the petitioner s GST registration was passed, on 11.12.2019. A close perusal of the order dated 11.12.2019, whereby the petitioner s registration was cancelled, shows [as also submitted by Mr Rai] that, in fact, there was no demand outstanding qua the petitioner - the impugned order dated 26.10.2021, passed by the appellate authority, and the order cancelling the petitioner s GST registration dated 11.12.2019, are set aside. The petitioner s GST registration will be restored, subject to the respondents - Petition disposed off.

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• 2022 (4) TMI 600
  Blocking of petitioner s account - It is alleged that in view of sub-rule (3) of Rule 86A of the Central Goods and Services Tax Rules, 2017, petitioner s account was required to be unblocked automatically - HELD THAT:- Notice. Let reply be positively filed by the respondents within a period of two weeks from today.

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• 2022 (4) TMI 599
  Seeking grant of bail - availment of fraudulent ITC - sham subsidiaries - fake bills without the actual supply of goods - Sections 132(1)(C) and 132(1)(b) of the Central Goods and Services Tax Act, 2017 - HELD THAT:- Bail, as it has been held in a catena of decisions, is not to be withheld as a punishment. Bail cannot be refused as an indirect method of punishing the accused person before he is convicted. Furthermore, it has to be borne in mind that there is as such no justification for classifying offences into different categories such as economic offences and for refusing bail on the ground that the offence involved belongs to a particular category. It cannot, therefore, be said that bail should invariably be refused in cases involving serious economic offences. It is not in the interest of justice that the Petitioner should be in jail for an indefinite period - No doubt, the offence alleged against the Petitioner is a serious one in terms of alleged huge loss to the State exchequer, that, by itself, however, should not deter this Court from enlarging the Petitioner on bail when there is no serious contention of the Respondent that the Petitioner, if released on bail, would interfere with the trial or tamper with evidence. Having regard to the entire facts and circumstances of the case, especially the fact that the bread earning son of a family has been in custody for over a year now I do not find any justification for detaining the Petitioner in custody for any longer. As a side note, it is observed that more and more such cases are brought to the fore where the mere pawns who have been used as a part of larger conspiracy of tax fraud have been brought under the dragnet by the prosecution. It is perhaps time that the prosecution will do well to follow the trial upstream and bring the upstream parties who are the ultimate beneficiaries who are the gainers in these evil machinations. Thus, it is directed that the Petitioner be released on bail by the court in seisin over the matter, subject to conditions imposed - the instant bail application is allowed.

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• 2022 (4) TMI 598
  Seeking direction to respondent to consider the petitioner s rectified manual TRAN-1 filed along with the representation dated 18.06.2020 - crediting the ITC on stock of goods into the Electronic cash/Credit ledger of the petitioner - Section 140 of TNGST Act, 2017 - HELD THAT:- The petitioner has been regularly corresponding with the respondents and with the Help Desk of the GST web-portal. The Help Desk of the GST web-portal responded to the petitioner on 18.10.2018 and has informed the petitioner that the issue was resolved and the problem persist the petitioner should raise a web-ticket at http://selfservice.gstsystem.in/ or call at 0120-4888999 - A further communication of the Help Desk also indicates that the respondents have agreed to help the petitioner in this regard. The petitioner has also sent an e-mail dated 26.11.2018, wherein the petitioner has given the particulars and that the petitioner was unable to transition the credit. There are several other communications, which indicate that the petitioner was in continuous touch with the respondents to ensure that the credit, which was attempted to be transitioned by filing Form in TRAN-1, was successful. As a matter of fact, the provisions of GST Act also does not provide for lapsing of the credit, which could not be successfully transitioned under the new regime while filing form correctly in TRAN-1. If the credit, which was availed during the regime that existed prior to 01.07.2017, it gives the indefeasible right to utilize such credit, even to those assessees, who were not under the taxable regime under the old Act, have been allowed to transition credit, as they were liable to pay tax. The respondents are directed to allow the input tax credit, after a scrutiny and verification by a competent officer that such credit could be transitioned but for wrong declaration in Form TRAN-1. The concerned jurisdictional officer is directed to examine the records and then come to an independent conclusion as to whether the petitioner was indeed entitled to transition credit by filing TRAN-1, in terms of Section 140 of the said Act r/w the Rules thereof but from the technical mistakes committed by the petitioner. If the credit was available to be transitioned, it cannot be denied. The writ petition is allowed subject to the condition that the credit, which was sought to be transitioned by the petitioner by filing a defective Form in GST TRAN-1 contains the correct details - petition allowed.

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• 2022 (4) TMI 597
  Transitional Credit - Calling for production of records - seeking permission to amend/revise the Form GST TRAN-1 manually or online, by including the omitted amount CENVAT credit of eligible duties or grant refund of said duties - HELD THAT:- Input Tax Credit on capital goods, Service Tax or Inputs availed under the provisions of the Central Excise Act, 1944, Finance Act, 1994 and Value Added Tax Act, 2006 which have been subsumed into the respective GST enactment can be allowed to be carried forward for being adjusted towards tax liability, if indeed such credit was lying un-utilized in the CENVAT account or VAT returns prior to the implementation of GST. Such amount cannot be denied for being utilized for discharging the tax liability under the respective GST enactments. This Writ Petition is disposed off by directing the jurisdictional officer to examine the petitioner s CENVAT account or VAT returns and ascertain whether any such credit was lying un-utilized as on 30.06.2017 and if such credit existed in the CENVAT account or VAT returns of the petitioner, the amount shall be either refunded back by way of credit in the Electronic Cash Register of the petitioner or allowed to be transitioned notwithstanding the fact that the petitioner may have failed to file TRAN-1 in time.

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• Income Tax

• 2022 (4) TMI 596
  Validity of order u/s 148A(d) - fit case for issuance of notice under Section 148 - jurisdiction of High Court under Article 226 to pursue the issue raised - petitioner states that the impugned order is a non-speaking order which does not deal with the contentions raised by the Petitioner in reply to the impugned Show Cause Notice - HELD THAT:- Though it is the petitioner s case that the impugned order is erroneous on facts, yet this Court is of the opinion that the petitioner would have ample opportunity during the course of proceedings before different statutory forums to show that the finding of fact arrived at was erroneous. Moreover, at this stage, no assessment order has been passed and it has only been observed that it is a fit case for issuance of notice under Section 148. Supreme Court in Commissioner of Income Tax and Ors. Vs. Chhabil Das Agarwal [ 2013 (8) TMI 458 - SUPREME COURT] has held that as the Income Tax Act, 1961 provides complete machinery for assessment/reassessment of tax, assessee is not permitted to abandon that machinery and invoke jurisdiction of High Court under Article 226. Consequently, the present case does not fall under the exceptional grounds on which a writ petition is maintainable at the interim stage in tax matters. [See: Ghanashyam Mishra And Sons Private Limited Vs. Edelweiss Assetre Construction Company Limited, [ 2021 (4) TMI 613 - SUPREME COURT] and M/S Radha Krishan Industries vs. State of Himachal Pradesh and Ors,. [ 2021 (4) TMI 837 - SUPREME COURT] ]. The present writ petition along with pending application stands dismissed with liberty to the petitioner to raise all its grounds before the Assessing Officer and the subordinate forums.

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• 2022 (4) TMI 595
  Exemption u/s 11 - assessee has paid most of the scholarship amount to the students of a particular religious community which is a clear violation of Section 13(1)(b) - ITAT Allowed appeal of assessee - HELD THAT:- Both, the Commissioner Income Tax (Appeal) and Tribunal, have given a concurrent finding of fact that the benefit of scholarship to the poor and needy students was not confined to students of a particular community and a perusal of the list submitted by the assessee showed that the benefit had been granted to students from all communities without any discrimination. Just because advertisement was published in Urdu language and that too in one newspaper, it cannot be presumed that it was targeted at the students belonging to a particular community only. In fact, a similar finding of CIT(A) in the assessment year 2010-11 was accepted by the revenue and was not even challenged before the Tribunal. Undoubtedly, the principle of res-judicata and estoppel are not applicable in taxation matters. However, it has been held that a departure from a finding during the past years would result in a contradictory finding (Commissioner of Income Tax vs. Sridev Enterprises [ 1991 (1) TMI 52 - KARNATAKA HIGH COURT] ) - No substantial question of law.

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• 2022 (4) TMI 594
  Reopening of assessment u/s 147 - reopening as based on audit objection - notice beyond four years - deduction claimed under section 35AC and 80G - valid sanction obtained under section 151 or not?- - HELD THAT:- The statement in the reasons for reopening it is evident from the above facts that the assessee had not truly and fully disclosed material facts necessary for his assessment for the year under consideration thereby necessitating reopening under section 147 of the Act is clearly made only as an attempt to take the case out of restrictions imposed by the proviso to section 147 of the Act. Reopening of the assessment is also at the behest of audit party and therefore, reopening is misconceived, incorrect and bad in law. Sanction obtained under section 151 - Sub-Section 1 of Section 151 of the Act provides that no notice shall be issued under Section 148 by an Assessing Officer, after the expiry of a period of four years from the end of the relevant assessment year, unless the Principal Chief Commissioner or Chief Commissioner or Principal Commissioner or Commissioner is satisfied, on the reasons recorded by the Assessing Officer, that it is a ft case for the issue of such notice. Admittedly in this case, four years from the end of the relevant assessment year A.Y. 2015-16 has expired before the issuance of notice and the approval also has been obtained from the Additional Commissioner of Income Tax and not Principal Commissioner of Income Tax. In the affidavit-in-reply fled through Yashraj Nain, affirmed on 25.03.2022, these facts have not been disputed but according to respondents, the approval granted by the Additional Commissioner of Income Tax was a valid approval. Even for a moment, we agree with the view expressed by respondents, still it applies to only cases where the limitation was expiring on 31st March 2020. In the case at hand, the assessment year is 2015-16 and, therefore, the six years limitation will expire only on 31st March 2022. Certainly, therefore, the Relaxation Act provisions will not be applicable. In any event, the time to issue notice may have been extended but that would not amount to amending the provisions of Section 151 of the Act. In our view, since four years had expired from the end of the relevant assessment year, as provided under Section 151(1) of the Act, it is only the Principal Chief Commissioner or Chief Commissioner or Principal Commissioner or Commissioner who could have accorded the approval and not the Additional Commissioner of Income Tax. On this ground alone, we will have to set aside the notice dated 31.03.2021 issued under Section 148 of the Act, which is impugned in this petition - Appeal of assessee allowed.

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• 2022 (4) TMI 593
  Addition u/s 69A - cash deposits made in the bank account during the demonetization period - HELD THAT:- We find from the order of the Ld. AO that he has not disputed the books of accounts of the assessee. We also find from the paper book submitted by the assessee that the requirements like membership of the depositor, date of deposit, amount received, depositor PAN, AADHAR and other particulars are provided by the assessee before the Ld. AO which was not disputed by the Ld. AO. We also find no merit in the orders of the Ld.AO that section 69A can be invoked. In the instant case, the assessee has recorded the cash in its books of account, explained the details of deposits, provided the credentials of the depositors to the AO. AO merely because of two depositors namely Mr. B. Kanakaraju and Mr. G. Santosh Kumar denied to have opened any account with the assessee, it cannot be a ground to be declared the deposits as bogus. AO has not provided any opportunity to the assessee to cross-examine these two persons by the assessee. AO erred in observing that the deposits received from C. Venkata Rao and Smt. Chaganti Lakshmi are by way of cheques but has wrongly noted that the deposits have been received by cash by the assessee. AO is also not correct in declaring Rs. 500/- and Rs. 1000/- SBN notes as illegal from 8/11/2016 because section 2(1)(a) of The Specified Bank Notes (Cessation of Liabilities) Act, 2017 states that appointed day means the 31st day of December, 2016. Further, section 5 of The Specified Bank Notes (Cessation of Liabilities) Act, 2017 also states that from the appointed day, no person shall, knowingly or voluntarily, hold, transfer or receive any specified bank note. So it can be inferred from the said Act that the amounts are considered to be legally tendered till 31/12/2016. AO also failed to observe that in the absence of an alternative, when there is only one option available to the assessee ie., to deposit the specified bank notes with a bank, and accordingly the assessee has deposited Rs. 3,22,80,000/- into the bank. These cash deposits which is the aggregate of opening balance of Rs. 2,96,34,776/- as on 8/11/2016 and the amount of cash deposits received from 8/11/2016 to 2/12/2016 amounting to Rs. 3,22,80,000/- is in accordance with law. In view of the above discussions, we find no infirmity in the order of the Ld. CIT(A) and therefore no interference is required. - Decided in favour of assessee.

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• 2022 (4) TMI 592
  Addition u/s 68 - unexplained deposits made in bank accounts - HELD THAT:- As assessee after referring various acknowledgement of e-filing has furnished complete details to substantiate the credit entry in the bank account of assessee and that such evidence was not considered by the ld. CIT(A)/NFAC. We find merit in the submission of the ld. AR of the assessee that the assessee has furnished sufficient documentary evidences to substantiate its contention with regard to credit entries in the bank account of the assessee. AO also passed the assessment order and made huge addition of entire credit found in various banks accounts. We find that the ld. CIT(A)/NFAC ignored the vital piece of evidence, therefore, keeping in view the relevancy of the evidences, the appeal of the assessee is restored back to the file of the ld. CIT(A)/NFAC to adjudicate all the grounds of appeal raised by the assessee afresh by passing a speaking order after considering the entire evidences. The assessee is also directed to make proper compliance and to furnish necessary details and evidences if so desired. Assessee appeal allowed for statistical purposes.

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• 2022 (4) TMI 591
  Addition u/s 69C - unexplained payment of Customs Duty - As per CIT since the cash deposits in the bank account are much more than the cash sales the payment of Customs Duty in cash remained unexplained and accordingly, the addition made by the AO was sustained - HELD THAT:- CIT(Appeals) misunderstood the facts and it is the finding that the assessee made Customs Duty in cash which is contrary to the record. The documents placed before us in the form of bank book, the loan confirmation, the bank statement of the lender clearly show that the assessee has taken loan of Rs. 13 lakhs on 04.04.2016, assessee also deposited cash sales into the bank account from 04.04.2016 to 08.04.2016 amounting to Rs. 14 lakhs and finally the Customs Duty of Rs. 25,03,813/- was made on 08.04.2016 by way of Demand Draft (DD). All these facts goes to show that the assessee has never paid Customs Duty in cash but it was paid by way of Demand Draft after obtaining loan of Rs. 13 lakhs and the balance is from out of cash sales made from 04.04.2016 to 08.04.2016. Thus no hesitation to delete the addition made by the Assessing Officer in respect of Customs Duty paid by the assessee which was treated as unexplained expenditure u/s 69C - Grounds raised by the assessee are allowed.

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• 2022 (4) TMI 590
  Unexplained investment in land u/s 69 - Survey under Section 133A - Reliance on statement recored in proceedings under Section 131(1A) - statement recorded on oath of Shri Natwarlal Haribhai Patel states that the assessee paid Rs. 45,00,000/- with document value plus Rs. 0.50 lakhs as stamp duty and registration charges - As submitted assessee has denied/retracted the statement made during the proceedings under Section 131(1A) - HELD THAT:- The statements given by the parties were never cross-examined by the assessee at any point of time. The assessee in letter addressed to the AO has given a categorical intention of the Banakhat as the same is intended for Shri Bhupendra Trivedi to obtain VISA and cancellation thereafter as per the agreement dated 19.09.2009. The notarised Banakhat was not actual document which was signed by the assessee as per the contentions of the Ld. A.R. The statement made during the proceedings u/s 131(1A) was also retracted by the assessee as the assessee was not in a proper mind to give his statement as per contentions of the Ld. A.R. After taking all these contentions of the Ld. A.R./assessee, and after perusing the documents, it is seen that the consideration per bigha amounting to Rs. 41,00,000/- was never the intention of the assessee and the same was not paid by the assessee as observed by the Assessing Officer. The correct or the original consideration amount was properly placed before the AO. These documents were never taken into consideration by the Assessing Officer as well as by the CIT(A). Merely on the basis of statement of the assessee, which was later on retracted, the Assessing Officer has made an addition which is not a correct method of making any addition. Short term capital gain - addition u/s 50C - Additional statement that no co-owners were examined in the present case by the AO - HELD THAT:- There is no evidence for adapting exorbitant price in respect of per bigha/per sq. mtr. In fact, section 50C of the Act did not entitle any value consideration in respect of the said transaction which was never finalised. As regards Short Term Capital Gain of Rs. 46,000/-, the Ld. A.R. submitted that the same is presumptive basis and, therefore, should have not been added. In respect of A.Y. 2011-12 the contentions of the assessee that no co-owners were examined by the Assessing Officer appears to be correct and thus, the Assessing Officer without taking cognisance of the evidences put up before him has made addition under Section 50C of the Act. Thus, ground no.1 is allowed. Regarding Ground no.2 relating to Short Term Capital Gain, the same is on presumptive basis and, therefore, ground no.2 is allowed

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• 2022 (4) TMI 589
  Penalty u/s 271(1)(c) - defective notice u/s 274 - non tickingoff any of limbs in notice - non striking of irrelevant portion in notice -addition of undisclosed income on account of on-money paid to Shri Mahendra B Chavda on purchase of land - HELD THAT:- None of the limbs has been ticked by the assessing officer. That is, assessing officer has not ticked any of the limbs, therefore it is not clear whether assessing officer has initiated the penalty on account of furnishing inaccurate particulars of income or concealment of particulars of income. Thus, from the above notice for initiation of penalty under section 271(1)(c ) of the Act, we see that there is no fix charge whether assessee has concealed the particulars of income or furnished inaccurate particulars of income. It is by now well settled that while issuing a notice under section 271(1)(c) of the Act, the Assessing Officer is required to specify as to what is the default on the part of the assessee, as to whether the case is one of furnishing inaccurate particulars, or whether it is a case of concealment of income, or both. As stated above, no clear finding was given by the assessing officer regarding the invocation of the limb in the penalty notice. We note that Hon`ble Supreme Court in the case of T Ashok Pai [ 2007 (5) TMI 199 - SUPREME COURT] held that concealment of income and furnishing of inaccurate particulars of income carry different connotations. From the facts of the present case, it is abundantly clear that Assessing Officer has not fixed the charge on the assessee. Notice under section 271(1)(c) of the Act, issued by the assessing officer, does not speak about any specific charge for which the penalty on the assessee is to be levied. It is not clear as to whether the assessee is being penalized for the concealment of income or for the furnishing of inaccurate particulars of income.Assessing Officer did not strike off the irrelevant portion in the notice, therefore it is not clear for which particular default the assessee is being penalized. Considering these facts, and the precedents applicable to these facts, we are of the view that penalty should not be imposed on the assessee. Accordingly, we delete the penalty. - Decided in favour of assessee.

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• 2022 (4) TMI 588
  Rejection of books of accounts - estimation of business income - CIT directed the AO to estimate the income @ 3% of stock put to sale - HELD THAT:- With regard to rejection of books of accounts by the AO, since the assessee has been provided various opportunities but has not provided the required documents by AO, as noted by the AO in the assessment order, we are inclined to uphold the order of AO on this ground. Estimation of income - cost of goods put to sale - We find that the issue is covered in favour of the assessee, as submitted by the Ld. AR, wherein the Hyderabad Bench of the Tribunal in the case of M/s. Balaji Wines vs. ITO [ 2018 (10) TMI 1944 - ITAT HYDERABAD] Tribunal directed the AO to estimate the net profit @ 3% of the cost of goods put to sale.

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• 2022 (4) TMI 587
  Disallowing being commission paid treating the same as pre-project expenditure - HELD THAT:- As the agreement dated 25.03.2002 with the said service provider M/s. Ultro Technologies (India) Pvt. Ltd. has not been filed with the paper book while agreement dated 01.01.2002 with GAIL Ltd. has been placed on record . However, the same has no reference of any intermediary or agency being involved in grant of the work order. Therefore, the agreement dated 25.03.2002 was relevant piece of evidence to understand what was the nature of services and for which period of those services the commission was paid to M/s. Ultro Technologies (India) Pvt. Ltd.. During hearing the Bench has sought the agreement however, the Ld. Counsel for the assessee stated at Bar that as the agreement pertains to such of far of period of 2002, the same is not available and cannot be produced before the Bench. That being so the findings of Ld. AO or Ld. First Appellate Authority that the expenses were pre project expenditure cannot be interfered. Assessee has claimed that the it engaged M/s. Ultro Technologies India Private Limited to help it in procuring and executing the order but it is strange that the agreement with GAIL Ltd. was executed on 01.01.2002 while the debit note for commission has been raised by Ultro Technologies (India) Pvt. Ltd, in terms of agreement dated 25.03.2002. So, the onus was on the assessee to establish what were the agreed terms and conditions or services which were provided by the agent during the term of execution of the project but the same is not established. Thus, the law relied is distinguishable on matter on record and there is no substance in the ground 1 to differ with the findings of Ld. Tax Authorities below. The same is determined against the appellant. Disallowance to the extent of 20% of the expenditure relating it to period prior to the setting of PO in India - addition of Tour, Travelling and Conveyance expenses on ad-hoc basis and treating the same as pre-project expenditure - HELD THAT:- This addition of travel and conveyance expenses there appears to be no justification to estimate 20% of the expenses being related to pre-operative period. FAA has observed that assessee has not given any substantive evidence to refute or reject the estimation made by the Ld. AO while confirming the disallowance. While the ld. AO observed in his assessment order that the complete details of Tour, Travelling Conveyance expenses are not available. Therefore, when it is not possible to verify if the expenditure were incurred after the establishment of project office or before the establishment of project office, then there is no justification to proportionately appropriate 20% of the expenditure to prior period expenditure. The same being merely whimsical and sustaining it the Ld. FAA has also erred therefore in regard to these grounds the order of ld. Tax Authorities below cannot be sustained and the grounds are allowed. Not treating the training fee as under the definition of technical service fee as taxable under sub-clause (B] of clause (b] of Section 115A(1] of the Act and taxing the same as business receipts of the appellant - HELD THAT:- As assessee claims this ground was raised before the Ld. AO who failed to determine while passing the assessment order and Ld. First Appellate Authority has invoked the provisions of Section 44 DA of the Act which had come into effect prospectively from 21.03.2003 only therefore, for the relevant assessment year 2003-04 the same was not applicable. Consequently this ground deserves to be allowed for statistical purposes only with the direction to the Ld. AO to consider the claim of assessee with regard to exemption of training fee income and to that extent the ground is allowed and issue is restored to the file of the Ld. AO. Appeal of assessee is partly allowed.

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• 2022 (4) TMI 586
  Assessment u/s. 153A - Whether assessment pertaining to AY 2014-15 was abated as per section 153A? - HELD THAT:- It is noted that only on the basis of retracted statements, the AO has made the addition. From a perusal of the assessment order, it is noted that there is no other incriminating material seized during search. Other than the retracted bald statement of assessee s father addition has been made by AO [which has been retracted within few days wherein assessee s father/assessee has alleged coercion/duress of obtaining it. It is noted that other than the statement of his father which has been obtained under threat/coercion/duress [ which has been retracted within few days] the AO has made the addition as undisclosed income the assessee s LTCG - However we find that other than the retracted statement there was no iota of evidence/material to substantiate the impugned additions. CIT(A) has given a finding of fact that other than the assessee s father s statement regarding the LTCG of assessee, there was no incriminating material found during search qua the assessee qua the AY 2014-15. In such a scenario, no addition was legally sustainable as held by the Hon ble Delhi High court in Kabul Chawla [ 2015 (9) TMI 80 - DELHI HIGH COURT] Thus unless there is incriminating material qua each of the A Y s in which additions are sought to be made, pursuant to search and seizure operation, the assumption of jurisdiction under Section 153A of the Act would be vitiated in law for an unabated assessment. - Decided in favour of assessee.

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• 2022 (4) TMI 585
  Rectification of mistake u/s 154 - Disallowance u/s 14A r.w.r. 8D - Assessee was having its own interest free funds for making the investment - whether section 14A cannot be applied if assessee s interest free funds are more than its investments yielding tax free income? - HELD THAT:- Issue of disallowance under section 14A in respect of indirect common interest expenditure as well as indirect common administrative expenditure is a debatable issue and does not fall in the ambit of an error apparent on record which could be rectified under section 154 of the Act. The Tribunal, in the earlier order has discussed various aspects and facts which are required to be considered to take a decision on the issue of disallowance under section 14A r.w.r. 8D of the Income-tax Act. Since the jurisdiction of the Assessing Officer to pass an order under section 154 to withdraw the relief granted under section 14A is held to be barred, therefore, both the issues involved in the cross appeals stand disposed of. Even otherwise, when the Revenue has not disputed the interest free funds with the assessee to invest in the shares and securities yielding tax free income, then no disallowance is called for under section 14A read with rule 8D(2)(ii). Accordingly, the appeal filed by the assessee is allowed and appeal filed by the Revenue for the assessment year 2009-10 is dismissed. Validity of reopening of the assessment after four years from the end of the assessment year - Claim of interest expenditure under section 40(a)(ia) for want of TDS - HELD THAT:- As decided in own case[ 2021 (3) TMI 1357 - ITAT MUMBAI] specific tangible information came into the possession of Ld. AO which revealed possible escapement of income in the hands of the assessee. Nothing more, in our opinion, was required at this stage. Undisputedly, once the case was reopened, the other issues of underassessment or escapement of income could also be examined by Ld. AO. AR has also pleaded that objections filed by the assessee were not disposed-off. However, the said plea has also no substance since the assessee, in response to notice u/.s 148, vide letter dated 04/09/2017, merely submitted that it had fully truly disclosed all the particulars required for the assessment at the time of filing of return of income and at the time of various hearings for assessment u/s 143(3) whereas it is notable that case has been reopened on the basis of subsequent receipt of tangible information. Therefore, we concur with the view of Ld. CIT(A), in this regard and dismiss ground no.1 raised by the assessee. Disallowance u/s 40(a)(ia) - assessee was not able to explain the reason for non-deduction of tax at source with proper evidences - HELD THAT:- As decided in own case [ 2021 (3) TMI 1357 - ITAT MUMBAI] Tribunal has set aside this issue to the record of the Assessing Officer for verification and examination of the relevant evidence to be produced by the assessee to show that no TDS was required to be deducted or alternatively to prove the applicability of Second Proviso to section 40(a)(ia). Following the earlier decision of this Tribunal, we set aside this issue to the record of the Assessing Officer on same terms and directions. Applicability of provisions of section 115JB to the assessee bank - HELD THAT:- As provisions of section 115JB, as it stood prior to its amendment by virtue of Finance Act, 2012, would not be applicable to a banking company governed by provisions of Banking Regulation Act, 1949. In view of the above, this ground of appeal of the assessee is allowed and it is held that the provisions of section 115JB are not applicable to the assessee for this year and accordingly Ground No.4 is allowed. Charging of interest under section 220(2) - Dismissal of appeal of the assessee on the technical ground that the order passed under section 220(2) is not an appealable order - HELD THAT:- DR has not disputed this mistake and discrepancy in the computation made by the Assessing Officer while passing the giving effect order in pursuance to the order of the CIT(A). CIT(A) also granted part relief in respect of interest under section 244A of the Income-tax Act which shall have an effect on the demand of tax and consequential charging of interest under section 220(2) of the Income-tax Act. Therefore, a substantial relief was granted by the CIT(A) while passing the order dated 25/12/2012. But the Assessing Officer AO has passed the impugned order under section 220(2) without giving effect to the order of the CIT(A). It appears that the Assessing Officer has deliberately not passed any order to give effect to the order of the CIT(A) despite the fact that the assessee had already filed a petition under section 154 of the Income-tax Act to rectify the mistakes. Once the Assessing Officer has not challenged the order of the CIT(A) dated 25/10/2012, then the Assessing Officer is bound to follow the said order in letter and spirit. The non passing of the giving effect order amounts disobedience and judicial indiscipline on the part of the Assessing Officer which is a serious matter to be considered by the appropriate authority - Assessing Officer has acted in a highly arbitrary manner while passing the impugned order under section 220(2) for charging the interest without first determining the tax liability of the assessee in accordance with the issues settled in appeal. Accordingly, in the interest of justice, we set aside the orders of the authorities below and remand the issue to the record of the Assessing Officer to readjudicate the same after giving effect to the order of the CIT(A) dated 25/10/2012. Assessee s appeal is allowed, for statistical purpose.

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• 2022 (4) TMI 584
  Unexplained investment in purchase of property from Arvind Naik and Anusuya Naik - HELD THAT:- In this case, the CIT(Appeals) has not brought out on record that the source of investment are same as referred in the order for AY 2007-08. Further there was registration of the impugned property for Rs. 2.35 crores. AO brought on record that the total sale consideration was Rs. 4 crores. There is no discussed on this issue by the CIT(Appeals). Hence it is appropriate to remit the entire issue to the CIT(Appeals) for fresh decision in accordance with law, after calling for a remand report from the AO. Addition on account of interest on cash loan - addition was made by the AO on the basis of scribblings in the seized material towards payment of interest - CIT(A) deleted the addition by observing that copies of seized material were not supplied to the assessee and also the assessee refused carrying out of loan transaction - HELD THAT:- It is settled proposition of law in income tax cases that income tax liability is to be ascertained on the basis of material available on record, surrounding circumstances, human conduct, preponderance of probabilities and nature of linked material and evidence available before the AO. The proceedings before the income tax authorities have been described as quasi-judicial proceedings in character. More so, it was held in the case of Dhakeswari Cotton Mills Ltd. [ 1954 (10) TMI 12 - SUPREME COURT] that assessment proceedings are purely administrative and the assessing office is not a court. As such, strict rule of evidence is not applicable in the income tax proceedings and proceedings before him are not judicial proceedings, though they are deemed to be as such for limited purposes. The AO has, no doubt, to hear evidence on such evidence made consisting of material which will be wholly ineligible in a court of law. In the present case, there is a valid seized material wherein there is entry showing payment of Rs. 15.60 lakhs. The assessee in spite of repeated opportunities simply denied the transaction and did not discharge the onus of explaining the seized material. In such circumstances, the AO having no option, made addition. In our opinion, as per section 292C of the Act, it is to be presumed that the seized material belonged to the assessee and the entries in the seized material is to be considered as correct to that effect and addition to be made, since the assessee failed to discharge the burden cast upon him. Accordingly, we sustain the addition made by the AO and the order of the CIT(Appeals) on this issue is reversed. Addition of non-refundable deposit from Godrej Properties - CIT(Appeals) deleted the addition on the reason that this amount has been shown as income under the head compensation - HELD THAT:- AO has brought on record that this amount was not offered to tax in the assessment year. Contrary to this, the CIT(A) has observed that this amount has gone into the computation of income under the head compensation receipt and change of head is only a typographical error. However, we find that this was not brought out before the AO in spite of giving repeated opportunities to the assessee. Accordingly, we remit this issue to the file of CIT(Appeals) with a direction to call for a remand report from the AO and decide the issue afresh. Undisclosed investment in purchase of portion of the property at Kanyana Village - CIT(Appeals) noted that the total amount as per the agreement to sell for Kanyana village stated in the assessment order - HELD THAT:- Before us, the contention of the ld. DR is that this amount does not pertain to addition made under any other head and it specifically pertains to balance payment made towards remaining portion of property at Kanyana village. In our opinion, these facts are to be examined by the CIT(Appeals) after obtaining a remand report from the AO. Accordingly, this issue is remitted to the CIT(Appeals) for fresh decision. Addition being peak credits in unaccounted bank accounts - CIT(A) considering the daily cash balance statement observed that there was sufficient cash balances on all the days of the year and there was no cash deficit on any given day and hence deleted the addition - HELD THAT:- In our opinion, the plea of the ld. DR is fair as the assessee is required to prove that earlier withdrawals have been used for redeposit in bank account by furnishing the cash book and cash flow statement. Accordingly, we remit this issue to the CIT(Appeals) to decide the issue afresh after providing opportunity to both the parties. Addition of advance paid to Shantiniketan property - assessee in the sworn statement admitted to have paid advance paid to Prestige Shantiniketan property and since the same was not reflected in the balance sheet, the AO sought to tax the same as unexplained investment - HELD THAT:- CIT(Appeals) observed that the total amount is appearing in the balance sheet and there is no dispute about it. The difference was an estimation error by assessee. The list of payments and amounts mentioned in the agreement match. He therefore deleted the addition on the reason that payments have been made through banking channels. While doing so, he relied on the personal balance sheet produced by the assessee without confronting the same to the AO. Being so, in the interest of justice, we remit this issue to the CIT(Appeals) to call for a remand report from the AO and decide the issue afresh. Unexplained credit in the name of Shri Moideen Bawa - CIT(A) deleted the addition on the reason that there is no debit balance in the name of assessee appearing in the balance sheet of Mr. Bava and assessee has not disputed this fact - HELD THAT:- There is sufficient proof that advances made by Mr. Bava was on behalf of assessee. Had that been the case, the assets should have been reflected in the balance sheet of assessee on account of the above advances which has not been established by the assessee at any stage. Being so, the deletion of addition by the CIT(Appeals) is not justified. He should have called for remand report from the AO before totally deleting the addition. Accordingly, we remit this issue to the CIT(Appeals) to call for remand report from the AO and decide the issue afresh. Unexplained investment in purchase of property in the name of Mrs. A.K. Fouzia - CIT(Appeals) observed that the addition cannot be sustained for the reason that assessee is maintaining two balance sheets, one for business and other for personal assets and liabilities - HELD THAT:- The personal balance sheet is to be examined by the AO whether assessee has filed the same before the AO in earlier assessment year and in this assessment year also. However, this exercise has not been done by the CIT(Appeals). Accordingly, we remit this issue to the CIT(A) to call for a remand report from the AO and fresh decision. Unaccounted payment to P.K. Ponnuraj - addition was made by the AO based on seized material and the sworn statement of the accountant of the company being unaccounted purchase of iron ore - HELD THAT:- CIT(Appeals) observed that cash payments made to Ponnuraj are reflected in the statement along with the date. The statement is supported by receipt issued by Ponnuraj of the said money in cash. Further, Shri Kirmani, the Accountant in the Fiza group in the sworn statement admitted the fact that payment is towards purchase of iron ore and same does not appear in the balance sheet of the assessee. The details in the seized documents are explanatory enough to establish that the payment has been indeed made. Therefore, the CIT(A) confirmed the addition. We do not find any infirmity in the order of the CIT(Appeals) and confirm the same. Expenditure incurred out of undisclosed income - seized material shows incurring of expenditure towards donation paid out of undisclosed income. The assessee is not able to show any material that this payment was made out of disclosed sources. Accordingly, the addition is sustained. Undisclosed purchase of property at Bayar Kanyana village - AO made the addition as undisclosed purchase of property, based on the documents impounded from the premises of M/s. Mumtaz Traders - HELD THAT:- CIT(Appeals) on perusal of sale deeds and the impounded material was of the opinion that the total land recorded is at Rs. 10,52,750 which matches with the amounts in the sale deed. The impounded material mentions the Sy.No. and the village for which the payments are made and these are recording of unaccounted money and cannot be brushed aside in view of the fact that there is clear mention of the fats leading to the purchase of property. The total purchase value is Rs. 21,22,014 of which is Rs. 10,52,750 is already accounted. The assessee could not bring any evidence to the contrary. He therefore sustained the addition of Rs. 10,69,264. In our opinion, whether the amount of Rs. 10,52,750 has been recorded already or not has to be examined with reference to material available on record, after calling for a remand report from the AO. Accordingly, we remit this issue to the CIT(Appeals) for fresh decision. Investment from unexplained sources on account of additional capital - AO added these amounts being additional capital shown in individual balance sheet and in the balance of Mangalore Lime Marine Industries where assessee is a partner respectively - HELD THAT:- The assessee filed the balance sheets at the fag end of assessment. However it was not verified by the AO or the CIT(Appeals) in proper perspective. Accordingly, we set aside the order of the CIT(Appeals) on this issue and remit the issue to the CIT(Appeals) to decide the issue afresh after calling for comments from the AO.

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• 2022 (4) TMI 583
  Income from waiver of loan - income changeable to tax or not? - brought to tax under section 28(iv) of the Act or under section 41(1) - income was claimed as exempt from tax and same was shown as a capital receipts - AO treated the said income as the value of benefit or perquisite arising from business u/s 28(iv) - HELD THAT:- In the instant case, the assessee has not claimed any deduction on account of acquisition of capital asset as the same has been reflected in the balance sheet. Remission of principal amount of loan so obtained from related parties had not been claimed as expenditure or trading liability in any of the earlier previous years so far as the waiver of the same cannot fall into the provisions of section 41(1) - the provisions of section 28(iv) applies to the value of benefit or perquisite whether convertible into money or not, arising from business, but it does not apply to benefit received in cash or money, as held in the case of Mahindra Mahindra Ltd. [ 2003 (1) TMI 71 - BOMBAY HIGH COURT] waiver of principal amount of loan also does not come under the definition of income as contained under section 2(24). In the light of the above decision of Hon ble Bombay High Court in the case of Mahindra Mahindra Ltd. (supra), it is clear that in the case where capital assets are acquired by obtaining a loan, and subsequently, the loan amount is waived by the other party, the principal amount of loan waived by the other party cannot be brought to tax under section 28(iv) of the Act or under section 41(1) of the Act. In the present case, the money was received by the assessee in the course of carrying on business. Although it was treated as unsecured loan from related parties under the head long term borrowings , and on its waiver the parties have not claimed the same. The assessee itself as treated it as its own money and taken to Profit Loss account. There is no explanation as to why the assessee has taken it to Profit Loss account even it was somebody else s money. At this stage, it is appropriate to refer to the decision of Aries Advertising (P.) Ltd. [ 2002 (2) TMI 84 - MADRAS HIGH COURT] and Solid Containers Ltd. [ 2008 (8) TMI 156 - BOMBAY HIGH COURT] As following the decision of Hon ble Bombay High Court in the case of Solid Containers Ltd. (supra) where the principle enunciated by the Hon ble Supreme Court in the case of T.V. Sundaram Iyengar Sons Ltd. [ 1996 (9) TMI 1 - SUPREME COURT] has been applied, we held that the principal amount of loan, which is taken for the purpose of business or trading activity, on its waiver by the creditor, would constitute income chargeable to tax under the Act. However, if the loan is utilized for the purpose of acquiring any capital asset, the same on its waiver, would not constitute income changeable to tax as held by Hon ble Bombay High Court in the case of Mahindra Mahindra Ltd. (supra) and Hon ble Delhi High Court in the case of Tosha International Ltd. . [ 2008 (9) TMI 31 - HIGH COURT DELHI] either under section 41(1) or 28(iv) or 2(24) of the Act - Decided against revenue.

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• 2022 (4) TMI 582
  Disallowance of warranty expenses - HELD THAT:- As decided in own case [ 2018 (3) TMI 525 - ITAT KOLKATA] treatment given by the assessee from year to year with regard to treatment of provision for non-moving inventory in the return of income, we hold that the Ld. CIT(A) had rightly deleted the disallowance made in this regard by the ld. AO. We, therefore, taking consistent view and respectfully following the decision of this Tribunal, find no reason to interfere in the finding of the ld. CIT(A) deleting the alleged disallowance of warranty expenses made by the AO . Disallowance of additional depreciation - As during the year assessee s production has not increased as claimed by the assessee - HELD THAT:- For claiming the additional depreciation, the assessee has to prove that the new machines have been purchased, put to use and the capacity of production is increased. The actual production is not at all mandatory for claiming the additional depreciation. Provisions of Section 32(1)(iia) of the Act states that, in the case of any new machinery or plant (other than ships and aircraft), which has been acquired and installed after the 31st day of March, 2002, by an assessee engaged in the business of manufacture or production of any article or thing, a further sum equal to 15% of the actual cost of such machinery or plant shall be allowed as deduction under clause (ii). Further, there are provisos to this Clause ii , but they are not relevant for the instant issue. So, the fact remains as per this proviso the assessee is only required to acquire and install the machines, which in this case has been rightly done so by the assessee and is duly supported by the certificate of the Chartered Engineer as well as of Chartered Accountant which proves that the assessee has purchased the machines and installed the same and this resulted in increase in installed capacity of production of the assessee and, therefore, assessee is eligible for claiming the additional depreciation. We, therefore, under the given facts and circumstances of the case, are of the considered view that the assessee has rightly claimed the additional depreciation - Decided in favour of assessee.

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• 2022 (4) TMI 581
  TDS u/s 195 - non-deduction of TDS on purchase of being designs being held as fee for technical u/s 40(a)(i) - assessee has not furnished the proof of payment made to non-resident - assessee submitted that he had purchased designs and therefore no TDS was required to be deducted. The foreign party had not carried out any activity in India and accordingly, the same receipts is not taxable in the hands of the foreign party in India - AO concluded that assessee himself stated that the services rendered by the non-resident are in the nature of included services and held that in the present case the assessee had failed to prove that the payment was made and services were received outside India - HELD THAT:- As it is observed that assessee has always maintained before Ld. AO as well as Ld. CIT(A) that payments made are for purchase of designs and hence do not qualify as fee for included services , but both the Ld. AO as well as Ld. CIT(A) have reiterated that assessee has himself stated that services rendered by the non-resident are in the nature of fee for included services .However, from the submissions of assessee, no such concession has been noticed. CIT(A) in the order has noted that the order of Ld. CIT(A)-1 dated 24/12/2014 for AY 2009-10, on which reliance has been placed by the assessee in support of his contention that the relief has been granted on similar facts by Ld. CIT(A)-1, is distinguishable on facts. However, on perusal of the order, it seems that the facts are quite identical with the present facts and in our view, the Ld. CIT(A) may require a closer look at the order before distinguishing the same CIT(A) has distinguished the order by simply stating that in the case of previous CIT(A)-1 order, the payee M/s Grada Textiles GmbH of Germany is an established market leader whereas in the present case, payee is not a well know entity. In our view, the Ld. CIT(A) has not brought out clearly how the earlier order on which reliance is being placed by the assessee is distinguishable on facts. Therefore, in respect of Ground No.1, we are restoring the case to the file of CIT(A) to again analyse the facts of the case in light of the above observations and pass the order accordingly. Disallowance of provident fund expenses - AO treated the same as income of the assessee(employer) as per the provisions of section 2(24)(x) r.w.s. 36(1)(va) - HELD THAT:- Issue decided against assessee as relying on GUJARAT STATE ROAD TRANSPORT CORPORATION [ 2014 (1) TMI 502 - GUJARAT HIGH COURT] as held that tribunal has erred in deleting respective disallowances being employees contribution to PF Account / ESI Account made by the AO as, as such, such sums were not credited by the respective assessee to the employees accounts in the relevant fund or funds (in the present case Provident Fund and/or ESI Fund on or before the due date as per the explanation to section 36(1)(va) of the Act i.e. date by which the concerned assessee was required as an employer to credit employees contribution to the employees account in the Provident Fund under the Provident Fund Act and/or in the ESI Fund under the ESI Act. Decided against assessee. Disallowance of scholarship expenses - AO observed that assessee has made payment on account of scholarship fee of Anurag Ramavatar Agrawal, a related party and disallowed the expenditure on the ground that there is no evidence that the expenditure has nexus with the business of the assessee - HELD THAT:- Assessee has not been able to establish the business expediency for incurring expenses on the education / scholarship expenses on Shri Anurag Agarwal, who is the son of Director s brother. The Ld. AO as well as Ld. CIT(A) noted that the assessee has been consistently claiming the education/ scholarship expense on Shri Anurag Agarwal, one of the related parties for this year and past years as well, but these expenses are not related to the business of the assessee. The assessee has not been able to establish how the business of the assessee has been benefitting by incurring these expenses. The assessee has submitted that Shri Anurag Agarwal has been working part time with the Company, but no other details have been furnished which would substantiate the genuineness of claim of the assessee. In our considered view, therefore, we hold that Ld. CIT(A) has not erred in facts and in law in disallowing the above expenses on scholarship of Shri Anurag Agarwal.- Decided against assessee.

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• 2022 (4) TMI 580
  Disallowance of certain expenses on an ad-hoc basis - Whether AO failed to point out any basis which could justify the respective disallowance so made by him? - HELD THAT:- Disallowance of certain expenses on an ad-hoc basis by the Assessing Officer is merely backed by general observations and not on the basis of any material which would support the same. Admittedly, an assessee remains under a statutory obligation to substantiate that his claim for deduction of expenses falls within the four corners of Sec. 37(1) On a perusal of the assessment order, we find that there is no whisper as regards any such material and/or basis which would justify the disallowance of the expenses so carried out by the A.O - ad-hoc disallowance of expenses by the A.O is not backed by any supporting material but is merely guided by general observations on his part. We are unable to comprehend as to on what basis part of the expenses had been disallowed by the A.O, while for the remaining part has been allowed. Apart from that, we find there is no whisper in the body of the assessment order about any such specific expenses which as per the AO could not be verified, or, were not supported by bills or vouchers. In our considered view, such disallowance of expenses on an ad-hoc basis, i.e, de hors any supporting material can by no means be permitted. We find substantial force in the claim of the ld. A.R that devoid of any specific infirmity qua the assessee s claim for deduction of the aforesaid expenditure by the lower authorities, the disallowance of a part of the same in a most arbitrary and a whimsical manner, i.e, on an ad- hoc basis could by no means be held to be justified. We are unable to concur with the disallowance of the expenses in question on an ad hoc basis by the A.O. We, thus, not finding favor with the view taken by the lower authorities set-aside the order of the CIT(A), and vacate the disallowance - Decided in favour of assessee

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• 2022 (4) TMI 579
  Disallowance of interest expenses made u/s. 40A(2)(a) - disallowance of interest from 3% to 2% i.e. accepted 16% interest paid to unsecured loan against 18% paid by appellant since past so many years - assessee had claimed deduction of interest expenses @ 18% on the old unsecured loans that were raised by it from its related parties - HELD THAT:- AO, while adopting the bank lending rate had lost sight of the fact that the loans from the bank would have required providing of security, incurring of certain hidden charges, as well as satisfaction of number of other formalities; unlike the raising of unsecured loans by the assessee from its related parties. Backed by our aforesaid observations, we are unable to find favour with the incomparable basis that had been adopted by the Assessing Officer for triggering the provisions of section 40A(2)(a) of the Act. Apart from that, we find, that as brought to our notice by the Ld. AR, the assessee in the immediately preceding year i.e. A.Y. 2013-14 had paid interest on the unsecured loans in question @ 18% and the same had been accepted by the Assessing Officer vide his order passed u/s. 143(3) for the said year. We are of a strong conviction that not only the basis adopted by the Assessing Officer for triggering the provision of section 40A(2)(a) of the Act is fallacious, but the same also militates against the fact that the interest paid by the assessee on the said unsecured loans @ 18% had been accepted by the department while framing the regular assessment in its case for the immediately preceding year i.e. A.Y. 2013-14. We, thus, in terms of our aforesaid deliberations, are unable to persuade ourselves to concur with the view taken by the lower authorities. Accordingly, we set-aside the order of the CIT(Appeals) and vacate the disallowance u/s. 40A(2)(a) of the Act to the extent the same had been sustained by him. Appeal of assessee allowed.

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• 2022 (4) TMI 578
  Disallowance u/s. 69C on account of purchase of raw material and stores - two purchases transactions could not be substantiated by it in the course of proceedings before the lower authorities - HELD THAT:- Now when it was claimed by the assessee that it had purchased goods prior to the date of survey on 29.03.2011 and had though entered the same in the stock register, but inadvertently omitted to record the same in the purchase account, then, the onus was cast upon it to substantiate its aforesaid claim on the basis of irrefutable documentary evidence. As observed by us herein above, the assessee despite specific directions by the AO to produce the stock register wherein the receipt of goods in question were entered by him, had however, failed to do the needful. We concur with the view taken by the lower authorities that the assessee in the grab of its claim of having made purchases had in fact tried to neutralize the amount of undisclosed income that was surrendered by it in the course of the survey proceedings - we find no infirmity in the view taken by the CIT(Appeals) who had on the basis of well-reasoned order sustained the addition made by the Assessing Officer. We, thus, in terms of our aforesaid observations uphold the order of the CIT(Appeals) qua sustaining of the addition made by the Assessing Officer. - Decided against assessee.

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• 2022 (4) TMI 577
  Nature of receipt - Subsidy received by the assessee as Industrial Promotion Assistance (IPA) from the state Govt, under West Bengal Industrial Promotion (Assistance to Industrial Units) Scheme - Capital Receipt or Revenue Receipt - claim of the assessee was rejected by the Ld. AO as well as the Ld. CIT(A) on the ground that the same cannot be claimed by the assessee in the rectification petition u/s 154 since the same was not claimed in the return of income filed by the assessee - HELD THAT:- Hon ble Supreme Court in the case of Balaji Alloys [ 2016 (4) TMI 1161 - SC ORDER] and the decision of CIT vs Rasoi Limited [ 2011 (5) TMI 23 - CALCUTTA HIGH COURT] , the sales tax subsidy received by the assessee from the Govt. of West Bengal under a scheme of industrial promotion was a capital receipt. Also the said issue has already been decided by the Tribunal in the own case of the assessee [ 2020 (10) TMI 1322 - ITAT KOLKATA] as tax subsidy is to be treated as capital receipt. Fresh claim before the Assessing Officer by way of a rectification application - The taxation of a capital receipt which did not constitute income of the assessee, in our view would constitute a mistake apparent on record - The Hon ble Delhi High Court [ 2016 (3) TMI 977 - DELHI HIGH COURT] has referred to in this respect to the decision of CIT vs Shelly Products and another [ 2003 (5) TMI 4 - SUPREME COURT] . The Hon ble Delhi High Court has also referred to CBDT Circular No. 14(XL-35) of 1955 dated 11.04.1955, wherein, the CBDT has directed that the officers of the department must not take advantage of ignorance of an assessee as to his rights and that it is one of their duties to assist a tax payer in every reasonable way, particularly, in the matter of claiming and securing relief s and that they should take the initiative in guiding a tax payer where proceedings or other particulars before them indicate that some refund or relief is due to him. Thus in the light of Article 265 of the Constitution of India and in the light of various decisions of the Hon ble Supreme Court and other High Courts of the country, in our view, the lower authorities failed to exercise jurisdiction vested in them under the jurisdiction of section 154 of the Act. Even otherwise the bar, if any, relating to entertain a fresh claim is on the Assessing Officer. However, there is no bar on the higher authorities and especially upon this Tribunal in exercising its power u/s 254 of the Income Tax Act to entertain or to deal not merely with additional ground which became available on account of change of circumstances or law, but with additional grounds which were available when the return was filed. Reliance in this respect can be placed on the decision of the Hon ble Bombay High Court in the case of CIT vs Pruthvi Brokers and Shareholders Pvt. Ltd. [ 2012 (7) TMI 158 - BOMBAY HIGH COURT] . Further, reliance in this respect can be placed on the decision of Hon ble Supreme Court in the case of National Thermal Power Company Ltd [ 1996 (12) TMI 7 - SUPREME COURT] and the full bench of the Hon ble Bombay High Court in the case of Ahmedabad Electricity Co. Ltd. [ 1992 (4) TMI 29 - BOMBAY HIGH COURT] We allow the appeal and direct the Assessing Officer to exclude the income from sales tax subsidy received from Govt. of West Bengal which has been inadvertently offered by the assessee for taxation and grant the appropriate relief / refund of the assessee. Appeal of assessee allowed.

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• 2022 (4) TMI 576
  TDS u/s 194C - disallowance under section 40 (a) (ia) for non-deduction of TDS on reimbursement of Transport charges and CFS charges paid - as per revenue when the assessee has made the payment on behalf of its customers to CFS agents, then the assessee shall deduct TDS on said payments - HELD THAT:- In this case, the assessee is a Custom House Agent has made payment to CFS Agents on behalf of its customers and claimed that payment is in the nature of reimbursement of expenses and thus, outside the scope of Sec.194C of the Act. We do not find merits in the arguments of the assessee, because as per Sec.194C of the Act, it is abundantly clear that a person, who makes payment is required to deduct TDS and thus, we are of the considered view that there is no merit in the arguments of the assessee that payments made to CFS Agents, is outside the scope of Sec.194C . We further noted that the very same issue is covered by the decision of ITAT, Chennai, in the case of M/s.Prahari Agency Pvt. Ltd. [ 2021 (11) TMI 82 - ITAT CHENNAI] wherein, the Tribunal had considered identical issue of payment made by custom house agent to CFS agents and held that provisions of Sec.194C of the Act, is applicable when the Custom House Agent makes payment to CFS Agents. We are of the considered view that payment made by the assessee to CFS Agents is covered u/s.194C of the Act and thus, for non-deduction of TDS on such payments, the AO has rightly disallowed expenses u/s.40(a)(ia) Scope of amendment made by the Finance Act, 2010 to the provisions of Sec.194C - assessee claimed that if at all, payment is required to be disallowed, then only 30% of expenses needs to be disallowed, but not the total amount paid by the assessee without deduction of TDS - We find that the provisions of Sec.40(a)(ia) of the Act, has been amended from time to time to give relaxation to the assessee for not complying with TDS provisions. The said amendments have been considered by various Courts, including the Hon ble Supreme Court in the case of CIT v. Calcutta Export Co. [ 2018 (5) TMI 356 - SUPREME COURT] and held that amendment made by the Finance Act, 2010 to provisions of Sec.40(a)(ia) of the Act, is curative in nature and should be given retrospective operation from the date of insertion of the provision i.e. w.e.f. AY 2005-06. Since, provisions of Sec.40(a)(ia) of the Act, has been amended so as to disallow 30% of any sum payable on which tax is deductible at source under Chapter-XVIIB and such tax has not been deducted or after deduction, has not been paid on or before the due date specified in sub-sec.(1) of sec.139 of the Act, and such amendment is held to be retrospective in nature and applicable from AY 2005-06. Therefore, we are of the considered view that only 30% of expenses incurred by the assessee without TDS should be disallowed u/s.40(a)(ia) of the Act. Hence, we direct the AO to restrict the disallowance of payment made to CFS Agents without deduction of TDS @30% of such payments. Decided partly in favour of assessee.

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• 2022 (4) TMI 553
  Validity of reopening of assessment u/s 147 - Reopening as relying on opinion rendered by the audit party - non independent application of mind by AO - Borrowed satisfaction - HELD THAT:- The reason to believe that income has escaped assessment, cannot be based on borrowed information. The Apex Court in Indian Eastern Newspaper Society Vs. Commissioner of Income Tax [ 1979 (8) TMI 1 - SUPREME COURT] held that opinion of internal audit of Income Tax Department can not be regarded as information within the meaning of Section 147(d) of the Act. In Hamilton Housewares (P) Ltd. [ 2019 (3) TMI 320 - BOMBAY HIGH COURT] this Court while quashing the notice issued u/s 148 of the Act reiterated settled position of law that the decision to reopen assessment must be on the basis of the belief found by the Assessing Officer. It must be open for the audit party to bring relevant aspect to the notice of the Assessing Officer. But thereafter it must be the independent decision of the Assessing Officer to reopen assessment upon formation of his belief that income chargeable to tax had escaped assessment. In the circumstances, in our view also notice issued u/s 148 of the Act, can not be sustained. - Decided in favour of assessee.

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• Customs

• 2022 (4) TMI 575
  Validity of Show Cause notice and order in original - Maintainability of petition - availability of alternative remedy of appeal - Requirement of judicial review on the process of decision making leading to the order-in-original - Benefit of exemption - Essentiality Certificate - import of drill ship - section 129A of the Customs Act - HELD THAT:- The writ petition was admitted without keeping the point of its entertainability, on the ground of non-exhaustion of the appellate remedy, open. Once the writ petition was admitted after considering and overruling the preliminary objection raised by Mr. Jetly, it stands to reason that the order dated 6th October, 2020 is a final order on the objection which has since attained finality by reason of no appeal being preferred thereagainst by the respondents. The objection now raised is hit by res judicata. It is well-settled that the principle of res judicata applies at different stages of the same proceedings. Thus, we have a case before us where the Court has by its order dated 6th October, 2020 admitted this writ petition. The stage of entertainment has been crossed with such order. What remains is the question of adjudication of the rival claims of the parties based on the authorities cited. Even though a writ petition may have been admitted and Rule Nisi issued perceiving that it involves a purely legal point which requires an adjudication on merits but at the time of final hearing it appears to the same Court that such legal point arising for determination would involve investigation of certain disputed questions of fact and which could well be agitated and appropriately decided by the statutory appellate forum, there is no reason as to why the writ petition can still not be disposed of by the Court expressing that the petitioner would have the liberty of raising all points in a statutory appeal against the order-in-original and obtain a determination both on factual and legal issues - It should, therefore, be the endeavor of the Court to decide the lis on factual issues on the basis of affidavit evidence, if possible; if not, the litigant could be relegated to the statutory forum that is available in judicious exercise of discretion. The Principal Commissioner confined his inquiry to the branches of the tree without taking the pains to find what was at its root. Clause 1.1.12(a) of the contract dated 19th September, 2013 by and between ONGC and AOL (referred to therein as operator and contractor respectively) required AOL to mobilize and deploy the drilling unit along with crew so as to commence the operations at the designated first drilling location nominated by the operator (ONGC) within a period of 180 days from the date of Letter of Award from the operator. The rig will be deployed by the operator anywhere in offshore Indian water. However, the 1st drilling location will be West Coast offshore Indian waters - the purpose of working out a drill ship in oil exploration areas is of a definite character. ONGC having exclusive control over the off-shore areas, Aban-ICE could not have been removed at the whims and fancies of AOL and deployed for petroleum exploration in areas not within the control of ONGC or beyond the agreed area. It indeed ought to have been the endeavor of the Principal Commissioner to unearth whether Aban-ICE was used for the substantive purpose, i.e., petroleum exploration, for which exemption of duty was envisaged by the said exemption notification or whether it was put to use for purposes alien to the contract dated 19th September, 2013. Also, it does not seem to have exercised the consideration of the Principal Commissioner as to whether the purpose intended to be served for claiming exemption was justified or not. The Principal Commissioner, it seems, was of the perception that since the Essentiality Certificate had a life of 6 (six) months, it could not have been amended and no addition thereto could be effected after expiry of its life - the DGH in issuing the Essentiality Certificate does not perform a quasi-judicial function. We have not been shown any statutory rule following which the Essentiality Certificate has to be issued; on the contrary, such certificate is issued in exercise of administrative function and based on policy or expediency. It was, therefore, open to the DGH to issue the NOC. To amount to suppression of a material fact there has to be something more than a mere non-disclosure. The objection of Mr. Jetly that AOL had willfully suppressed the fact that Aban-ICE is being utilized for other blocks, which are not covered under the specific contract dated 22nd December 2008 for which it was imported, does not commend to be sound - The order-in-original dated 27th February, 2017 suffers from illegality as well as irrationality which constitute vices in the decision making process, attracting judicial review. Evaluation of facts by the Principal Commissioner, upon such review, leads to the conclusion that the facts taken as a whole did not logically warrant the conclusion he did reach, for which the said order is liable to be invalidated. Petition allowed.

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• 2022 (4) TMI 574
  Seeking interest on belated payment of duty drawback - inordinate delay in determining the brand rate of duty drawback for over a period of 8 years - HELD THAT:- The provisions of the Customs and Central Excise Duties Drawback Rules, 1995, makes it clear that wherever an application is filed for fixation of brand rate duty drawback, such application should be disposed of within a period of 60 days. As the delay is not on account of the petitioner in failing to file any documents required for processing the duty drawback, there is no justification in the stand of the Department by stating that the amount has been immediately paid within a period of one month from the date of fixation of the duty drawback on 31.07.2008 and 04.07.2008 respectively. Though payments have been made, there is an enormous delay in sanctioning the duty drawback to the petitioner on the exports made during 2000 under various shipping bills. The Writ Petitions are allowed by quashing the impugned order/communication and directing the respondents to pay interest at 7.5% p.a. from the date of applications filed for fixation of brand rate on 16.09.2000 and 03.11.2000 respectively. The rate of interest at 7.5% p.a. has been fixed considering the fact that the rate of interest has varied during this period substantially. The respondents are directed to pay the quantified amount and pay the interest to the petitioner within a period of three months from the date of receipt of a copy of this order. Petition allowed.

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• 2022 (4) TMI 573
  Defreezing/unblocking of PPF account of petitioner - Revenue is seeking to recover government dues from the petitioner s account - HELD THAT:- Clearly, respondent no.1 did not intend to put on hold i.e., freeze the petitioner s Public Provident Fund (PPF) account, which, as is evident from the prayers made in the writ petition, is different from the account, which is, referred to in respondent no.1 s letter dated 21.09.2021. Respondent no.2-bank will take note of this aspect, and lift the hold on the petitioner s PPF account - the writ petition is disposed of.

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• Insolvency & Bankruptcy

• 2022 (4) TMI 572
  Maintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its dues - Operational Creditors - existence of debt and dispute or not - privity of contract between Operational Creditor and Corporate Debtor - whether the Adjudicating Authority was justified in admitting the Application filed by the Operational Creditor under Section 9 of the Code? - HELD THAT:- The material on record evidences that the Corporate Debtor deposited TDS of Rs. 4,12,000/- which is the TDS on the entire amount of the Invoice of Rs. 2,06,00,000/-. It is not disputed that the Operational Creditor deposited the GST of Rs. 37,08,000/- on the entire amount of the Invoice in favour of the Corporate Debtor and the benefit of the said amount as input amount has been taken by the Corporate Debtor . A perusal of the Invoices evidences that the Tax Invoice was raised in favour of the Corporate Debtor and not on M/s. Cox Kings. It is significant to mention that the part payment was also made by the Corporate Debtor and not by M/s. Cox Kings. This Tribunal is of the considered view that the privity of contract is between the Operational Creditor and the Corporate Debtor and therefore the amount which is in default is due and payable . In so far as Pre-Existence of Dispute warranting rejection of Application of triggering of CIRP under Section 9 of the Code is concerned, a bare perusal of the material on record filed by the Corporate Debtor does not evidence any dispute which is not spurious or illusory and requires investigation. There is no hesitation in holding that the Appellant has hired the services of the Respondent for executing the event and owes an obligation to pay for the same, thereby bringing it within the fold of Operational Debt and therefore the first Respondent holds the status of an Operational Creditor qua the Appellant - there is no infirmity in the Order of the Adjudicating Authority in holding that there is an Operational Debt in respect of the default which is alleged and is therefore payable in law. The finding is perfectly justified in the facts and circumstances of the case - appeal dismissed.

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• 2022 (4) TMI 571
  Maintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its dues - Financial Creditors - existence of debt and dispute or not - application barred by time limitation or not - service of demand notice - genuineness of the Mortgage Deed and charging of higher interest by the Corporate Debtor. Barred by time Limitation in terms of Limitation Act, 1963 - HELD THAT:- The letter which was issued by the Corporate Debtor to the Financial Creditor clearly highlights the existence of Debt due and Corporate Debtor s willingness to settle the same. There are clear contradictions in what the Corporate Debtor has contended before this bench and what it has communicated to the Financial Creditor - It is clear from the records that the Corporate Debtor has time and again acknowledged the debt which was due and payable to the Financial Creditor - this bench finds no merit in the contentions of the Corporate Debtor w.r.t. the petition being barred by limitation in terms of the Limitation Act, 1963. Non-issuance of Demand Notice - HELD THAT:- The present application has been filed under Section 7 of the I B Code. Issuance of Demand Notice being one of the pre-requisites to file an application is a requirement under Section 9 of the I B Code and not under Section 7 - this bench finds no merit in the contentions of the Corporate Debtor w.r.t. the petition being non-maintainable due to non-issuance of Demand Notice for the alleged default/claim. Genuineness of the Mortgage Deed and charging of higher interest by the Corporate Debtor - HELD THAT:- It can be clearly seen that it is not in the spirit of the I B Code for this bench to determine the whether the Mortgage Deed entered into was genuine or that higher interest was charged by the Corporate Debtor. It is the role of the Resolution Professional to determine the validity of these claims made by the Corporate Debtor - there are no merit in the contentions of the Corporate Debtor w.r.t. the petition being non-maintainable due to the Mortgage Deed entered into not being genuine or higher interest being charged by the Corporate Debtor as opposed to what was agreed upon. Thus, it is clear that financial debt amounting to more than Rs. 1,00,00,000/- is due and payable by the Corporate Debtor to the Applicant. There is default by the Corporate Debtor in payment of debt amount. Therefore, we do not have any objection on record against the application filed for initiation of CIRP against the corporate debtor. Hence, the Application filed by the Financial Creditor is hereby admitted - the application is complete and has been filed under the proper form. The debt amount is more than Rupees One Crore and default of the Corporate Debtor has been established and the application deserves to be admitted. Application admitted - moratorium declared.

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• 2022 (4) TMI 570
  Seeking liquidation of the Corporate Debtor - Section 33(2) and 34(1) of Insolvency and Bankruptcy Code, 2016 - HELD THAT:- Since the COC in its commercial wisdom has decided to take the Corporate Debtor into liquidation, it is opined that the decision of COC should not be interfered. The present application seeking liquidation of the Corporate Debtor M/s. Eagle Corporation Private Limited, in the manner laid down in Chapter III of Part II of the Code is allowed. Application allowed.

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• 2022 (4) TMI 569
  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:- The fact of disbursement of a sum of Rs. 40 Lakhs is not in dispute. It is also not in dispute that a sum of Rs. 60 Lakhs had to be paid after thirty months from the date of execution of the agreement between the parties on 25.05.2015, in case the Corporate Debtor failed to discharge its obligations thereunder. It is also noted that the Corporate Debtor has failed to provide the sale deed in terms of said agreement. A sum of Rs. 25 Lakhs has been acknowledged by the Financial Creditor to have been returned though the Corporate Debtor has claimed that a sum of Rs. 10 Lakhs have been paid back by the Corporate Debtor. However, no proof thereof has been brought on record to substantiate such claim - Be that as it may, even after taking into consideration said sum of Rs. 10 Lakhs, the amount claimed to be in default would remain more than Rs. 1 Lakh, considering both principal amount of Rs. 40 Lakhs given by the Financial Creditor or amount to be returned by the Corporate Debtor which was fixed at Rs. 60 Lakhs. Thus, this claim of the Corporate Debtor does not help the cause of the Corporate Debtor in any manner. In the reply the Corporate Debtor has not disputed the validity of the agreement dated 25.05.2015 and has merely taken pleas which is of commercial solvency of the Corporate Debtor or pressure tactic adopted by the Financial Creditor to extract maximum money, which are not relevant considerations as an application filed U/s. 7 of IBC, 2016 can be admitted once there is a debt which is due and payable and there occurred a default in repayment thereof. These conditions are satisfied in the present case. Application admitted - moratorium declared.

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• 2022 (4) TMI 568
  Maintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its dues - Personal Guarantors to Corporate Debtors - existence of debt and dispute or not - HELD THAT:- From the report of the Resolution Professional there does not appear any request for issuance of any direction for the purpose of conducting negotiations between the Financial Creditor and the Personal Guarantor for arriving at the repayment plan - On 22.03.2022, the Hon ble Tribunal observed that on 20.01.2022, the Tribunal has granted three weeks time to the Personal Guarantor for filing his reply, if any, for the report of the RP, failing which, his right to file a reply stands forfeited. In spite of the above order, the Respondent has not chosen to file reply and in the result his right for filing the reply is forfeited. Hence, based on the reasons recorded in the report submitted by the Resolution Professional, the application i.e., CP (IB) No. 76/BB/2021 filed under Section 95 of IBC, 2016 is hereby admitted under Section 100 of the IBC, 2016. The Insolvency Resolution Process is initiated against the Respondent/Personal Guarantor and moratorium is declared in place of interim moratorium, which begins with the date of admission of the application and shall cease to have effect at the end of the period of 180 days, as provided under Sec 101 of IBC, 2016. Petition admitted - moratorium declared.

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• 2022 (4) TMI 567
  Maintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its dues - Operational Creditors - existence of debt and due payable to operational creditors, or not - Service of demand notice - HELD THAT:- It is not in dispute that the Corporate Debtor had received Demand Notice dated 04.04.2019 (Annexure-6). It is also not in dispute that the Corporate Debtor replied the same (Annexure-8). The Corporate Debtor in para-5 of its reply to demand notice stated that final outstanding amount payable to the Operational Creditor as on 12.04.2019 is Rs. 17,38,397/- . This notice reply does not speak about any pre-existing dispute relating to deficiency of service as has been raised as a defence in additional affidavit in reply by the Corporate Debtor. Such defence being after thought cannot be considered - Moreover, there is absolutely no material evidence produced by the Corporate Debtor on record to substantiate its defence relating to deficiency of service, etc. - the defence is rejected. Existence of debt and due payable to operational creditors, or not - HELD THAT:- In reply to the Demand Notice, the Corporate Debtor admitted that on 12.04.2019 an amount of Rs. 17,38,397/- was due and payable by the Corporate Debtor to the Operational Creditor towards the transport charges. In para-8 of the additional affidavit in reply, the Corporate Debtor contended that it has offered the Operational Creditor a sum of Rs. 12,38,397/- towards full and final settlement. If according to the Corporate Debtor, nothing was due and payable by it to the Operational Creditor then for what it has offered above amount towards settlement? The Corporate Debtor has no reply. It appears from evidence on record that there may be dispute about the actual amount due and payable by the Corporate Debtor to the Operational Creditor but one fact is proved from the evidence on record that the Corporate Debtor has to pay a sum of Rupees more than One Lakh (as per threshold limit of Rs. 1,00,000/- under Section-4 of the IBC, prior to the Notification dated 24.03.2020) to the Operational Creditor and the Corporate Debtor has committed default in paying the sum in spite of receipt of Demand Notice. This Application is defect free. Application admitted - moratorium declared.

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• 2022 (4) TMI 566
  Revival of petition - initiation of CIRP - Corporate Debtor failed to make repayment of its dues - Operational Creditors - existence of debt and dispute or not - HELD THAT:- It is stated that since CIRP against the Corporate debtor in IB-08 of 2019 has been withdrawn, the applicant has been left with no remedy with regards to its claim against the corporate debtor. After withdrawal of the CIR proceeding against the corporate debtor in that matter, the present applicant was left with no alternative, but to file the present application, as vide order dated 13.04.2021, this applicant was also allowed to present its claim before the Ld. IRP appointed with C.P.(IB)-2992/ND/2019. No doubt, the detailed order was not passed, but in the interest of justice the application must be allowed and the matter has to be returned to its original position. Although, vide notification dated 24.03.2020, the threshold limit has been increased to 1 crores, but it is matter of fact that the present CP/IB/08/ND/2019 was filed way back on 26.12.2018 and order was passed on 13.04.2021, therefore, the threshold limit should not come in the way of the present applicant as by virtue of Rule 11 of NCLT Rules 2016, only the revival of the present petition has been sought. Further, it is also the matter of fact that this petition was not withdrawn in view of any settlement rather the order was passed by this Tribunal, whereby the applicant herein was directed to present its claim before the IRP. Once the CIR proceedings stood initiated in the other matter and taking into consideration the fact that two consequent orders qua initiation of CIR proceedings cannot be passed against the same Corporate Debtor - certainly the present petition is required to be revived, after withdrawal of the said CIRP proceedings under Section 12A of the Code. This Tribunal is of the view that the applicant herein is entitled to revival of the petition, accordingly, it is ordered that the petition be brought back to its original number - Let the matter be fixed for filing of rejoinder and arguments for 21.04.2022.

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• Service Tax

• 2022 (4) TMI 565
  Levy of Service Tax - reimbursement of electricity charges received from the service recipient M/s Gujarat Gas Company Ltd. - appellant is acting as pure agent - HELD THAT:- An identical issue involving under the identical contract has been decided by this Tribunal in the case of PRAGATI CNG, SHREE UMIYA ENTERPRISE VERSUS C.C.E. S.T. -SURAT-I [ 2021 (11) TMI 660 - CESTAT AHMEDABAD] by relying the decision of Tribunal in the case of VV BROTHERS VERSUS C.C.E. S.T. - SURAT-I [ 2020 (1) TMI 986 - CESTAT AHMEDABAD] where it was held that the electricity charges which is reimbursed on actual basis in terms of the contract is not includible in the gross value of service provided by the appellant to Gujarat Gas Company Limited. Thus, the issue involved herein has been settled inasmuch as the electricity charges reimbursed to the service provider by the service recipient not includible in gross value of service. Following the ratio of the above judgment, the demand is not sustainable - appeal allowed - decided in favor of appellant.

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• 2022 (4) TMI 564
  Classification of services - business of development and export of Software and Information Technology enabled support service and other auxiliary and support services - Manpower Recruitment or Supply Agency Service - Telecommunication Service - HELD THAT:- As regards the demand on Manpower Recruitment or Supply Agency Service, in the appellant s own case HONEYWELL TECHNOLOGY SOLUTIONS LAB PVT. LTD. VERSUS COMMISSIONER OF SERVICE TAX BANGALORE SERVICE TAX- I [ 2020 (9) TMI 7 - CESTAT BANGALORE] , this Tribunal held that arrangement for availing the services of executive appointed in the appellant s company by the foreign vendor does not amount to Manpower Recruitment or Supply Agency Service. Accordingly, the demand was dropped - the demand under Manpower Recruitment or Supply Agency Service is not sustainable and hence, the same is set aside. Telecommunication Service - HELD THAT:- It is undisputed fact that the service provider is located outside India in respect of service received from M/s. AT T and Genysis through data link / leased circuit. As per the definition of Telecommunication Service in Section 65(105)(zzzx) of the Finance Act, 1994, the taxable service means any service provided or to be provided to any person by the Telegraph Authority in relation to Telecommunication Service , In the present case, the service provider is located outside India. He cannot be treated as Telegraph Authority as Telegraph Authority has to be recognised by an authority of law prevailing in India, therefore, service provider cannot be treated as Telegraph Authority. Accordingly, the condition of the definition is not satisfied - In the facts of the present case, service is provided by a foreign entity will not fall under the definition of Telecommunication Service . Therefore, the appellant is not liable to pay service under Reverse Charge Mechanism. This identical issue has been considered by this Tribunal in the case of TCS E-SERVE LTD. VERSUS COMMISSIONER OF SERVICE TAX, MUMBAI [ 2014 (6) TMI 655 - CESTAT MUMBAI] has held that Only leased circuit services rendered by a telegraph authority is taxable and since the foreign vendor is not such an authority, the question of levy of Service Tax from the recipient of the service under reverse charge basis does not arise - in the present case, the issue is absolutely identical and the Tribunal held that the foreign service provider being not covered under the term Telegraph Authority , the service provided by them will not fall under the definition of Telecommunication Service. In the present case since the service provider is not a Telegraph Authority and the appellant being a service recipient cannot be fastened with service tax demand under Telecommunication Service. Accordingly, the demand on Telecommunication Service is also not sustainable and the same is set aside. Appeal allowed - decided in favor of appellant.

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• 2022 (4) TMI 563
  Reverse charge mechanism - input services being hiring of motor vehicle, supply of manpower services and legal services - service tax on commission was paid, but delayed payment done - excess availment of CENVAT credit - appellant is a State designated agency for implementation of projects under National e-Governance Plan - non-speaking order or not - suppression of facts or not - extended period of limitation - levy of penalty u/s 78 of FA - HELD THAT:- The appellant has contended that the amount of Rs. 14,36,098/-, which was payable under reverse charge mechanism have been paid and the details mentioned in ST-3 return filed by the appellant from time to time for the period. Such payments were made vide various challans as mentioned in the ST-3 return. Copies of the challans were also enclosed before the Commissioner (Appeals) alongwith copy of the return - learned Commissioner (Appeals) has not cared to verify the payments of taxes already made for which facts were led before the Commissioner (Appeals), and summarily rejected the contention observing that on the one hand the assessee is contesting the allegations and simultaneously they have deposited the amount with challan. It is further observed that no supporting / evidences were submitted by the appellant facilitating the Adjudicating Authority to verify the correctness of their claim. There is total dereliction of duty in passing a reasoned order in accordance with law, as the appellant submitted that they have already paid the duty. It was the duty of the Commissioner (Appeals) to get verified such claims. Under no circumstances, such claim of the appellant can be rejected summarily by a non-speaking order. Extended period of limitation - the only allegation in the show cause notice is that the show cause notice is issued pursuant to AG audit - suppression of facts or not - HELD THAT:- The allegation in the show cause notice is not sufficient for invocation of extended period of limitation, as admittedly, the appellant has maintained regular books of accounts which are audited by auditor nominated by the AG of State. Further, the appellant is registered assessee and filed their returns regularly and deposited the taxes as admitted by them. Accordingly, in the facts and circumstances of the case, the extended period of limitation is not invocable and accordingly the demand for the period April, 2012 to March, 2015 is set aside on this ground. CENVAT Credit - HELD THAT:- The amount of Rs. 42,467/- and Rs. 1,49,752/- are not contested as stated by the learned Counsel at the time of hearing and further states that the said amounts has already been deposited. Further, it is found that the Commissioner (Appeals) has not recorded and not given any finding with respect to the ground of taking of excess credit of Rs. 3,27,503/-, which has been explained by the appellant, that the same was due to cenvat credit taken short, which was noticed later on in the month of September, 2014 when audit was finalised. In view of the cogent explanation given by the assessee, this ground is also allowed in favour of the appellant and the demand of cenvat credit is set aside. Levy of penalty u/s 78 of FA - HELD THAT:- There is no contumacious conduct of fraud or suppression of facts by the appellant, the penalty imposed under Section 78(1) Rs. 3,69,970/- or (Rs. 3,27,503/- + Rs. 42,467/-) is set aside - Further penalty of Rs. 1,49,752/- under section 78 is also set aside. Appeal allowed - decided in favor of appellant.

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• Central Excise

• 2022 (4) TMI 562
  Classification of goods - ARH-C Crude Oil - Classifiable under Chapter sub-heading 27090000 or under Chapter heading 27101990 of the Central Excise Tariff Act, 1985 - HELD THAT:- In the present matter the test reports of product given by Dr. G.P. Sharma is in favour of the Revenue and test reports of product given by Dr. T.A. Sreenivasa Rao were against the Revenue. It is also found that during the personal hearing before the Adjudicating authority the counsel for the Appellant submits that since the matter has been examined in depth by the DGCEI and they have got another test report from other private reputed private laboratory, there may not be any further point to cross examine the Chemical Examiners from his point of view. However, if the adjudicating authority thinks otherwise, the Chemical examiner may be called for cross examination. Clearly, since the said report was in favour of Appellant, they had bona-fide belief that the matter in their favour. However, it is obligatory on the part of the Ld. Commissioner to have allowed cross examination of Chemical Examiner when he was to decide the matter against the Appellant - In case of contradictory test reports, the cross-examination of expert is required. The matter is remanded to the adjudicating authority to decide the matter afresh after affording an opportunity of cross-examination to the appellant of said experts as well as after affording an opportunity of hearing to the appellant - Appeal allowed by way of remand.

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• 2022 (4) TMI 561
  CENVAT Credit - input service - sales commission - denial on account of nexus - HELD THAT:- The sales commission is directly attributable to sales of the products. Any activity which amounts to sale of the products is deemed to be sales promotion activity in the normal trade parlance. The commission paid on sales of the products/services with an intention to boost of the Company. The commission paid on sales becomes part of sales promotion resulting in increased manufacturing activity. The sales commission has a direct nexus with the sales, which in turn is related to the manufacture of the products. If there is no sale, there would not be any need to manufacture the products. Be that so as it may, to increase the manufacturing activity an encouragement is being given by way of sales commission for achieving increased sales. Hon ble High Court of Punjab Haryana in the case of COMMISSIONER OF CENTRAL EXCISE, LUDHIANA VERSUS AMBIKA OVERSEAS [ 2011 (7) TMI 980 - PUNJAB HARYANA HIGH COURT] , had clearly held that the sale and manufacture are directed inter-related and the commission paid on sales needs to be accounted for as services related to sales promotion. Division Bench of this Tribunal in the case of M/S ESSAR STEEL INDIA LTD. VERSUS COMMISSIONER OF C. EX. SERVICE TAX, SURAT-I [ 2016 (4) TMI 232 - CESTAT AHMEDABAD] , wherein the Tribunal, after discussing all the previous cases and Rules of interpretation, have held that the Explanation inserted in Rule 2 (l) of Cenvat Credit Rules, 2004 vide Notification No.2/2016-CE (N.T.) dated 03.02.2016 is declaratory in nature and is applicable retrospectively. The impugned order cannot be sustained and is, therefore, set aside - Appeal allowed - decided in favor of appellant.

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• 2022 (4) TMI 560
  Interest on delayed refund of excise duty - calculation of payment of interest - to be calculated for a period of 35 days i.e. period after expiry of three months from the date of communication of the order of the Tribunal dated 22.10.2020, till the date of refund i.e. 24.03.2021 or from the date of making deposit as was claimed by the Appellant throughout the adjudication as well the appellate proceedings? - rate of interest - HELD THAT:- It is found from the facts of the case that it is not in dispute that the Appellant had deposited the amounts as refunded during investigation proceedings which was later on set aside by this Tribunal in part leading to the captioned refund of duty. The Coordinate Bench of the Tribunal in the case of M/S. PARLE AGRO PVT. LTD. VERSUS COMMISSIONER, CENTRAL GOODS SERVICE TAX, NOIDA (VICE-VERSA) [ 2021 (5) TMI 870 - CESTAT ALLAHABAD] has held that interest shall be granted to the appellant @12% instead of @6% from the date of deposit till the date of payment. Thus, the Appellant is entitled to interest @ 12% from the date of deposit till the date of receipt of such refund - the lower authorities are directed to compute the eligible interest and pay the same within four weeks from the date of communication of this order - appeal allowed - decided in favor of appellant.

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• 2022 (4) TMI 559
  Adjustment of interest amount from sanctioned rebate claim - Price Variation Clause - interest payable in respect of duties paid in terms of supplementary invoice, which were raised due to price variation clause - HELD THAT:- he appellant has given cogent explanation regarding the delay in filing the appeal before the Commissioner (Appeals). Accordingly, the delay in filing the appeal before the Commissioner (Appeals) is condoned by this Tribunal. I further find that the Adjudicating Authority have adjusted the amount of Rs. 8,12,603/- towards interest, which are not adjudicated dues. The power of adjustment out of the amount of refund / rebate or any other sum payable to the assessee is contained in Section 11(a) of the Central Excise Act, which provides - in respect of any duty or any other sum of any kind payable to the Central Government under any of the provisions of this Act or the rules thereunder, the Officer empowered to levy such duty or require to the payment of such sums, may deduct the amount so payable, from any money owing to the person from whom such sums may be recoverable or due, which may be in his hands or under his disposal or control or may be in the hands or under disposal or control of such other officer. From a plain reading of the provisions of Section 11(1), it is found that the Central Excise Officer is empowered to adjust only the unpaid adjudicated dues. As Section 11(1) also empowers the Central Excise Officer to recover the dues, even by way of attachment and sale of excisable goods, and if the same are not recovered, is also empower to prepare a certificate duly signed by him specifying the amount due from the person liable to pay, and send it to the Collector who on receipt of such certificate, shall proceed to recover the amount specified in the certificate as if it were an arrear of land Revenue - such extra ordinary power to recover are only available for recovery of adjudicated dues, or admitted dues as per return, if the same are unpaid. Under such special power under Section 11(1), the Central Excise officer cannot recover the un-adjudicated dues, as has been done in the present case. The amount adjusted Rs. 8,12,603/-, being by way of un-adjudicated dues of interest, is bad - Appeal allowed - decided in favor of appellant.

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• CST, VAT & Sales Tax

• 2022 (4) TMI 558
  Withdrawal of benefit of tax exemption - works contract - benefit granted in the process of revival of the industry - whether the benefit granted under Sick Industrial Companies Act, 1985, can be withdrawn by the subsequent Government Order? - principle of promissory estoppel. As per Hrishikesh Roy, J. HELD THAT:- Even though the 2004 Government Order, and the BIFR Sanctioned Scheme of 2005 were enacted in furtherance of 1994 Government Order, both these documents do not specify the time line for tax exemptions prescribed in the 1994 government order. Recently this Court in the case of STATE OF GUJARAT VERSUS ARCELOR MITTAL NIPPON STEEL INDIA LIMITED [ 2022 (1) TMI 1013 - SUPREME COURT] has held that exemption provisions and notifications are to be strictly interpreted in accordance with legislative intent without any addition or subtraction. In the present matter, the 2004 government order granting tax exemptions should be read as a whole and in absence of any time line being prescribed, such a time line in our opinion, cannot be imported from the 1994 government order - Furthermore, Sales tax in the State of Kerala is chargeable under Section 5 of the KGST Act which makes it obligatory upon the State to realize the tax in respect of sales transaction. Section 10 deals with the power of exemption and sub-Section (3) thereof confers the power to have the order of exemption varied or modified , in the manner specified. The benefit of exemption to tax must therefore be traceable to powers conferred under the KGST Act and such benefits could not have been granted in terms of the BIFR Scheme dated 17.01.2005 giving effect to the Government Order issued on 20.3.2004. In the 2006 Government Order withdrawing the benefits, the government has specifically adverted to Section 10 of KGST Act and as such the non-mentioning of the provisions of Section 10(1) of the KGST Act in the 2004 Government Order, would not assist the appellant in any significant measure. The present dispute pertinently is only with regard to the exemption relatable to sales tax/works contract tax and it is nobody s case that past arrears of sales tax/works contract tax payable by the sick units, were completely waived. Factoring this, the writ court as well as the Division Bench opined that sub-clause (1)(b) of 2004 Government Order relating to waiver of tax in the State is of such wide amplitude that the same must be seen as uncertain and vague. Also importantly, such exemption cannot continue indefinitely and particularly not beyond the point at which the revival of the sick unit is seen - Section 10(1)(ii) of the KGST Act enables the State to grant exemption from sales tax only with respect to any specific class of persons in regard to the whole or any part of their turnover and since the 2004 Government Order benefitted only a single unit i.e. the appellant, it is difficult to accept that the solitary industrial unit which was being revived under the BIFR Scheme, would form a class by itself. Therefore, contention to the contrary by the appellant is considered and rejected with the reasoning that the exemption by 2004 Government Order was not made applicable to all sick industrial units of the state, engaged in the like activities of bleaching, dyeing etc. The equitable principle of promissory estoppel cannot be invoked for enforcing promises in the teeth of the provisions of law. Having concluded that the Government Order (20.03.2004), granting Sales Tax/ Works Contract Tax exemption was ultra vires the Section 10(1) of the KGST Act, the promise, in furtherance of Government Order, in the form of BIFR Scheme dated 17.01.2005 being unlawful, cannot be enforced on equitable consideration - As per K.M. JOSEPH, J. There is merit in the contention of the appellant that the exemption granted initially, dated 20.03.2004, was not one which is premised under Section 10 of the Act. The exemption was granted in terms of the scheme under Section 19 of the Act. This is an exemption which was given under statutory provisions. In other words, consent being forthcoming from the state, a scheme being sanctioned under section 19 providing for financial assistance in the form of tax exemption, inter alia, the Government became obliged to honour its consent and the dictate of the statute - It will be inequitable to the company and against public interest also, as it frustrates the object of law to allow a scheme to be sanctioned inducing all parties to proceed on the basis that a company would be redeemed from its financial dire-straits and the crucial financial assistance indispensable to the said process is not forthcoming from the State. The expression class of persons in Section 10 of the State Act, no doubt, acts as a limitation on the power of the state in exercise of its power. It also is an indication of the extent of the power. Then the question would arise as to whether a class of persons includes a single person. To break it down, whether the words persons is capable of comprehending a single person. Would the plural include the singular? - The High Court has proceeded on the basis that the power under Section 10(1) can be exercised in favour of only a class of persons and not qua an individual unit like the appellant. It has also proceeded on the basis that had the exemption been made applicable to all sick industrial units which is in the activity of bleaching etc, there would have been force in the contention that the appellant would form a class by itself. The sick company, which falls to be dealt with under Section 17(3) read with Section 18 and finally Section 19, is clearly distinct from the generality of sick companies both under the definition of a sick company and even those which are covered by Section 17(1) and 17(2) of the Act. It is quite clear that the appellant cannot pitch its case higher than at the limit under Order dated 25.11.1994 referred to in paragraph-14. Therefore, exemption of sales tax is contemplated for a period of two years. However, it further provides that it cannot be for more than five years or beyond the date the net worth of the company becomes positive whichever is earlier. Therefore, the maximum period in any case is 5 years. In the case of the appellant, the appellant enjoyed the benefit of the exemption till it was withdrawn on 21.11 2006. The said order in turn was withdrawn on 01.10.2007. It is no doubt true that on 29.02.2008, the order dated 01.10.2007 came to be withdrawn. The writ petition was filed by the appellant. It would appear that for a period of nearly 4 years, the appellant enjoyed the benefit of exemption in all. Appeal dismissed.

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• 2022 (4) TMI 557
  Attachment of bank accounts of petitioner - escapement of turnover - framing of opinion - Section 44 of the GVAT Act, 2003 - HELD THAT:- In the absence of any debtor creditor relationship, the department could not have asked the bank to debit the accounts of the writ applicant company and credit a particular amount as specified in the notices to the treasury of the State Government. Ordinarily, when appeals are pending before the first appellate authority or the Tribunal, as the case may be, with an application seeking stay towards recovery of the tax, then, in such circumstances, the department should not proceed to take coercive steps for the recovery of the amount incurred by the dealer under the GVAT Act. This statement of ours should not be construed as an absolute proposition of law, but, the department is expected to at least wait for the final outcome of the appeals on their own merits, more particularly, when the appeals are already admitted. The Administrative directions for fulfilling recovery targets for the collection of revenue should not be at the expense of foreclosing the remedies which are available to assessees for challenging the correctness of a demand. The sanctity of the rule of law must be preserved. The remedies which are legitimately open in law to an assessee to challenge a demand cannot be allowed to be foreclosed by a hasty recourse to coercive powers. Assessing Officers and appellate authorities perform quasi-judicial functions under the GVAT Act, 2003. The impugned notices are hereby quashed and set aside - application allowed.

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• Indian Laws

• 2022 (4) TMI 556
  Dishonor of Cheque - cause of action - whether the dishonour of the cheques could have only given a cause of action to register an FIR for an offence u/s. 420 IPC or whether the cause of action was only for the filing of an offence u/s. 138 of the Negotiable Instruments Act? - HELD THAT:- When a Special Law has been enacted to deal specifically to deal with cases of dishonour of a cheque, if in such a case the complainant who was suffered the loss on account of the dishonour of the cheques is also permitted to register an offence under the IPC, it would go to negate the very purpose for which the special law has been enacted. In such cases, experience is shown that the accused files an FIR against the complainant for offence under section 406, 420 or 379 of IPC for either theft or criminal breach of trust with regard to the cheques that have been entrusted to the complainant or for an outright act of cheating. It is a well settled principle of law that the general law will not prevail over the Special Law as enshrined in the maxim generalia specialibus non derogant. This Court takes great umbrage to the conduct of the senior counsel who has cast aspersions on the neutrality of the Court without adequate cause. However, the Court refuses to recuse itself and condemns the conduct and the words used by the senior counsel in the strongest possible terms. The Court was cut short by Mr. Mrigendra Singh before it could complete its observation that in the State of Madhya Pradesh, in comparison to other States, the situation is far better and the tendency of burking the crime rate is far lesser. The Senior Advocate in question is an Office Bearer of the Bar Council - The action taken will be a moment of truth, not just for the institutions of the Bar and the Bench, but to the people of this state with regard to the extent to which the Bar Council is willing to go in order to bring in line the erring members in the profession. An investiture of honour on a member of the Bar by designating him as a Senior Advocate is not for his vast knowledge, erudition, articulation and legal acumen alone, but it is an occasion where the court has acknowledged the Counsel s poise, patience and most importantly, his extreme grace, reflected in his conduct as a counsel. It is unbecoming of a person who dons silk to address the court in such a manner as has happened today only because he feels that the court does not agree with his submissions. Petition allowed.

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• 2022 (4) TMI 555
  Dishonor of Cheque - jurisdiction of the court for proceedings initiated on a complaint under Section 138 of the Negotiable Instruments Act, 1881 - HELD THAT:- The law as it stands today as regard jurisdiction is that, trial of a case under Section 138 of the Act shall only be by a court within whose local jurisdiction a cheque is delivered for collection through an account, the branch of the bank where the payee or holder in due course, as the case may be, maintains the account is situated. As admitted by the respondent herein, the complaint was filed before a court lacking territorial jurisdiction and as such, there is no option for this Court, but to conclude that the Trial Court cannot proceed with the complaint against the petitioner herein. The cited cases referred by the learned counsel for the respondent would have no persuasive value before this Court as the provisions of the statute stares in the face of the matter in issue before this Court and as such, with due respect, the same cannot be taken into account in these proceedings. The consequential result is that the proceedings therein has to be set aside. Petition allowed.

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• 2022 (4) TMI 554
  Dishonor of Cheque - funds insufficient - existence of liability on the part of petitioner or not - enhancement in the fine amount - Whether this Court can exercise the revisional jurisdiction in coming to the conclusion that the Trial Court has committed an error in appreciating the material on record and the Appellate Court has committed an error in dismissing the appeal filed by the petitioner and allowing the revision petition filed by the respondent? - HELD THAT:- The Appellate Court while confirming the order of the Trial Court though discussed in detail, not accepted the defence theory of the petitioner and in paragraph No. 17 comes to the conclusion that the accused has issued a cheque in favour of the complainant for returning of the advance amount. It was presented by the complainant through his advocate and it was returned for insufficient funds and inspite of demand notice, he has failed to pay the amount. The Appellate Court in paragraph No. 18 of the judgment comes to the conclusion that the learned Magistrate has appreciated both oral and documentary evidence on record in proper, legal manner and reached to the correct conclusion and there is no illegality or irregularity. But, both the Courts failed to take note of the fact that D.W.1 in his cross-examination says that he made the payment of Rs. 1,00,000/- in favour of the counsel for the complainant and the advocate kept the amount in his scooter and without returning the cheque, he ran away from the spot and he also admits the shara in Ex.D.1. No complaint is filed against the counsel for the complainant when he has received Rs. 1,00,000/- and he ran away from the spot. It is only a oral evidence and no material is placed for having paid the amount to the learned counsel for the complainant to the tune of Rs. 1,00,000/-. It is important to note that in the cross-examination of D.W.1, a suggestion was made by the counsel for the complainant that he sold the quarry worth of Rs. 1,50,000/- and out of Rs. 1,50,000/-, he retained the royalty amount of Rs. 50,000/- and paid the amount of Rs. 1,00,000/- on 05.05.2006 in terms of endorsement made in Ex.D.1 and the said suggestion is denied. There is an endorsement with regard to having made the payment of Rs. 1,00,000/-. It has to be noted that it is the transaction of the year 2005 and the Trial Court while awarding penalty amount is concerned, only awarded the cheque amount. It is already pointed out that for having paid Rs. 1,00,000/- is not given any deduction since the payment is subsequent to the issuance of the subject matter of the cheque and the Appellate Court also failed to take note of this aspect. When such being the material available on record, the Appellate Court committed an error in entertaining the revision petition and enhancing the fine amount to Rs. 5,25,000/-. But, there are no ground to acquit the petitioner as contended by the learned counsel for the petitioner and the very contention that both the Courts have committed an error also cannot be accepted. Though the petitioner contend that an amount of Rs. 2,50,000/- was paid in favour of one Muthu, the same has not been proved by examining Muthu and hence there are no merit in the revision petition filed by the revision petitioner with regard to conviction and sentence against the Trial Court judgment. But, there is a force in the contention of the learned counsel for the petitioner with regard to Crl.R.P. No. 02/2013 is concerned, wherein the Revision Court enhanced the fine amount to Rs. 5,25,000/- and it requires interference of this Court since the Appellate Court has not taken note of the payment of Rs. 1,00,000/- as discussed. The judgment of conviction passed by the Trial Court is upheld and the enhancement of fine amount by the Appellate Court is hereby set aside - petition dismissed.

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