Newsletter: Where Service Meets Reader Approval.
TMI Tax Updates - e-Newsletter
April 20, 2020
Case Laws in this Newsletter:
GST
Income Tax
Corporate Laws
Insolvency & Bankruptcy
Central Excise
CST, VAT & Sales Tax
Indian Laws
Articles
News
Notifications
GST - States
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40/GST-2 - dated
16-4-2020
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Haryana SGST
Notification to extend due date for furnishing FORM GSTR-3B for supply made in the month of May, 2020 under the HGST Act, 2017
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39/GST-2 - dated
16-4-2020
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Haryana SGST
Notification to extend due date of furnishing FORM GST CMP-08 for the quarter ending March, 2020 till 07.07.2020 and filing FORM GSTR-4 for FY 2020-21 till 15.07.2020 under the HGST Act, 2017.
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38/GST-2 - dated
16-4-2020
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Haryana SGST
Notification to provide relief by conditional waiver of late fee for delay in furnishing outward statement in FORM GSTR-1 for tax periods of February, 2020 to April, 2020 under the HGST Act, 2017.
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37/GST-2 - dated
16-4-2020
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Haryana SGST
Notification to provide relief by conditional waiver of late fee for delay in furnishing returns in FORM GSTR-3B for tax periods of February, 2020 to April, 2020 under the HGST Act, 2017
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36/GST-2 - dated
16-4-2020
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Haryana SGST
Notification to provide relief by conditional lowering of interest rate for tax periods of February, 2020 to April, 2020 under the HGST Act, 2017.
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12/2020-State Tax - dated
30-3-2020
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Maharashtra SGST
Seeks to waive off the requirement for furnishing FORM GSTR-1 for 2019-20 for taxpayers who could not opt for availing the option of special composition scheme under Notification No.2/2019-State Tax (Rate).
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11/2020-State Tax - dated
30-3-2020
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Maharashtra SGST
Seeks to provide special procedure for corporate debtors undergoing the corporate insolvency resolution process under the Insolvency and Bankruptcy Code, 2016.
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F.12(46)FD/Tax/2017-Pt.-V-166 - dated
7-4-2020
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Rajasthan SGST
Seeks to amend Notification No. F.12(46)FD/Tax/ 2017-Pt-III-05, dated the 23rd April, 2019
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F.12(46)FD/Tax/2017-Pt.-V-165 - dated
7-4-2020
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Rajasthan SGST
Seeks to amend Notification No. F.12(46) FD/Tax/2017-Pt.-IV-159, dated the 23rd January, 2018
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F.12(46)FD/Tax/2017-Pt.-V-163 - dated
7-4-2020
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Rajasthan SGST
Seeks to amend Notification No. F.12(56)FD/Tax/2017-Pt-I-39, dated the 29th June, 2017
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F.12(46)FD/Tax/2017-Pt.-V-162 - dated
7-4-2020
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Rajasthan SGST
Rajasthan Goods and Services Tax (Fourth Amendment) Rules, 2020.
IBC
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IBBI/2020-21/GN/REG060 - dated
20-4-2020
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IBC
Insolvency and Bankruptcy Board of India (Liquidation Process) (Second Amendment) Regulations, 2020
SEBI
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SEBI/LAD-NRO/GN/2020/10 - dated
17-4-2020
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SEBI
Securities and Exchange Board of India (Regulatory Sandbox) (Amendment) Regulations, 2020
Circulars / Instructions / Orders
Highlights / Catch Notes
Income Tax
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Deduction u/s 10-A read with Section 80IA(10) - ITAT allowed the deduction - When huge and voluminous material is produced by the other side, it is only the Original Authority would have to decide the issue at the first instance. It is not proper for the Tribunal to indulge in such an exercise. - HC
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Following orders of the higher appellate authorities to decide the issue - if a bench of a Tribunal on identical facts is allowed to come to a conclusion directly opposed to the conclusion reached by another bench of the Tribunal on an earlier occasion, that will be destructive of the institutional integrity itself.
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Penalty u/s. 271(1)(c) - Penalty cannot attract simply when there is an addition/disallowance is made. There is no concealment of income or furnishing of inaccurate particulars in making claim u/s. 14A - no penalty is attracted on disallowance made u/s. 14A - AT
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Exemption u/s 11 withdrawn - Anonymous donation - assessee trust has failed to substantiate the donation so received through any credible and verifiable evidence in terms of complete name and address of the donors and purpose of the donation and therefore, the provisions of Section 13(7) r/w 115BBC have been rightly invoked - AT
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Scope of limited scrutiny u/s 143 - prior approval and the permission of the PCIT is lacking in the instant case. There was no satisfaction about the merits of the issue which necessitated complete scrutiny in the instant case. - AT
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Expenditure allowable u/s 37 (1) - disallowance ‘Scholarship Expenses’ - incurred wholly and exclusively for the purpose of the profession of the appellant or not - the appellant is a well known Supreme Court Lawyer. The agreement with Exeter College, the University of Oxford, exhibited hereinabove, is self-explanatory. - Claim of expenses allowed - AT
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Penalty u/s 271(1)(c) - Defective notice u/s 274 - in the assessment order, AO has made it clear that penalty proceedings are initiated separately for furnishing inaccurate particulars of income, therefore the AO has already indicated that why the penalty proceedings are initiated. - Though the notice u/s 274 has been found as valid, the penalty levied on the estimation of income deleted - AT
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TP Adjustment - Upward adjustment of guarantee fee charges - BHPL itself has not claimed it as a deduction from any income and guarantee charges accordingly has been offered to taxation. The amount paid as guarantee charges has already suffered disallowance while filling return of income itself. Hence, again addition the same to total income results in double taxation. - AT
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Addition made u/s 69 - unexplained investment - Shortage of rough diamonds means either same were sold outside India of which are available for investment or it has been used in manufacturing of polished diamonds. Therefore, same are covered either by disclosure hence, telescoping of the same is allowable against excess polished diamonds sales - AT
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Addition u/s 68 - Once addition is made in the hands of the investor company for this reason that the source could not be explained by the investor company, it cannot be said that the amount of same investment is belonging to the investee company and addition cannot be made again in the hands of the investee company. - AT
Indian Laws
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Dishonor of Cheque - insufficiency of funds - Section 138 of the NI Act - Considering the fact that the cheque was issued in the year 1999 and having regard to the other facts and circumstances of the case, sentence of imprisonment imposed upon the appellant is set aside - SC
IBC
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Initiation of CIRP - Section 65 of the IBC - NCLAT dismissed the appeal on the ground that an objection for admitting application should be raised before NCLT first - The plea of collusion could not have been raised for the first time in the appeal before the NCLAT or before this Court in this appeal. Thus, we relegate the appellant to the remedy before the Adjudicating Authority. - SC
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Recovery of monies due to the corporate debtor under liquidation - Respondent is directed to make the payment of the said amount o within six weeks from the date of the pronouncement of this order, failing which 12% interest per annum shall be charged from the Respondent on delayed payments till the realization of the whole of amount.
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Approval of Resolution Plan - The Resolution Plan does not appear to have taken care of interest of all stakeholders including Operational Creditors and the decision of the COC also does not reflect that it has taken into account the fact that the Corporate Debtor needs to be kept as a going concern and that there is need to maximise the value of the assets and that the interest of all the stakeholders including Operational Creditor has to be taken care of.
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Initiation of CIRP - - Merely because the 'Corporate Debtor' has disputed the claim by showing that there is certain counter claim, it cannot be held that there is pre-existence of dispute.
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Maintainability of application - initiation of CIRP - IBC, 2016 is not intended to be substitute to a recovery forum. - The Petitioner failed to point out the claim in question is un-disputed and it filed with an intention to recover the alleged dues rather to justify to initiate CIRP in respect of Corporate Debtor - Petition dismissed.
Central Excise
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Clandestine removal - production capacity of machines - When the position of law is abundantly clear that such examination of the machine can be undertaken at some other place, the Department should have agreed to do so. Having not done so, the Department now cannot take shelter of the order passed by the Tribunal, which is not tenable in law - HC
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Remission of duty - samples which were destroyed in the factory itself - Where the goods are not cleared out of the factory premises but were drawn for testing within the factory and in fact were consumed within the factory during the process of testing, the question of demanding any duty on those samples does not arise. - AT
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Extended period of limitation - CENVAT Credit - exempt goods - the appellant will have to succeed on limitation since the Revenue has not made out a case for invoking the extended period of limitation - demand set aside - AT
VAT
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Reduction of input tax credit (ITC) - If unlimited time period is available to the Revenue for assessment/re-assessment/revision in any case based on a decision rendered in the case of any other dealer the same would lead to an irreparable situation and, in such circumstances, it renders Section 84A manifestly arbitrary and unreasonable - Section 84A of the VAT Act is liable to be struck down even on the ground of being manifestly arbitrary, excessive, oppressive and unreasonable. - HC
Case Laws:
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GST
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2020 (4) TMI 551
Release of detained goods - section 129 of GST Act - While issuing notice, this Court directed that the vehicle as well as the goods be released, upon payment of the tax, in terms of the impugned notice - HELD THAT:- The writ applicant availed the benefit of the interm-order passed by this Court and got the vehicle, along with the goods released on payment of the tax amount. The proceedings, as on date, are at the stage of show cause notice, under Section 129 of the Central Goods and Services Act, 2017. The proceedings shall go ahead in accordance with law. It shall be open for the writ applicant to point out the recent pronouncement of this Court in the case of SYNERGY FERTICHEM PVT. LTD VERSUS STATE OF GUJARAT [ 2019 (12) TMI 1213 - GUJARAT HIGH COURT] . It is now for the applicant to make good his case that the show cause notice, issued in GST-MOV- 6, deserves to be discharged - Application disposed off.
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Income Tax
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2020 (4) TMI 550
Club membership expenditure - capital expenditure OR revenue expenditure - HELD THAT:- Tribunal followed the decision in case of FRAMATONE CONNECTOR OEN LTD. VS. DCIT [ 2006 (7) TMI 180 - KERALA HIGH COURT ] and held the same to be a capital expenditure. However, the Tribunal failed to take into account the fact that its order passed in CIT AND ANOTHER VS. INFOSYS TECHNOLOGIES LTD. [ 2013 (2) TMI 629 - KARNATAKA HIGH COURT ] by which it had held that the club membership expenditure was in the nature of revenue expenditure was upheld by division bench of this court vide dated 21.10.2011, which was binding on the Tribunal. The Tribunal also failed to appreciate that the order of the Commissioner of Income Tax (Appeals), by which it has held the expenditure to be revenue expenditure in previous years was not challenged by the revenue. Therefore, the first substantial question of law is held in the negative and in favour of the Revenue. Disallowance u/s 14A - HELD THAT:- In CIT VS. ESSAR TELE HOLDINGS LTD. [ 2018 (2) TMI 115 - SUPREME COURT ] the Supreme Court has held that sub-Section (2) and (3) are prospective nature and have to be utilized for computing expenditure for the assessment year 2007-08 and onwards. In the absence of any mechanism to compute the disallowance as expenditure incurred for earning exempt income, the Tribunal grossly erred in setting aside the order of the CIT (Appeals). Therefore, the second substantial question of law is answered in the negative and in favour of the assessee. CIT (Appeals) without any evidence on record, treated the adhoc disallowance of ₹ 10,000/- out of the expenditure incurred for entertainment, business, meals, gifts fees for association etc. and in disallowing ₹ 5,000/- on estimation basis. The Supreme Court in the case of WALCHAND [ 1967 (3) TMI 2 - SUPREME COURT ] has held that the Tribunal has to record the satisfaction that the expenditure was laid out or expendid wholly and exclusively for the purpose of business of the assessee and there is no reason why the full amount should not have been allowed. In the instant case, no such satisfaction has been recorded by the authorities. Therefore, the third substantial question of law is also answered in favour of the assessee. Deduction u/s 80HHC - Whether service charges could not be deducted as profits of business means profits of business reduced by 90% of any sum referred to in clauses (iiia), (iiib), (iiic), (iiid) and (iiie) of Section 28 or of any receipts by way of brokerage, commission, interest, rent, charges or any other receipt of a similar nature included in such profits - HELD THAT:- In COMMISSIONER OF INCOME TAX VS. PFIZER LTD. [ 2010 (6) TMI 433 - BOMBAY HIGH COURT ] it has been held that Explanation (baa) in terms does not refer to export turnover. Therefore, before a receipt is liable to be excluded to the extent of 90% it must be a receipt of a nature similar to brokerage, commission, interest, rent or charges. The finding in this regard recorded by the Tribunal is factually incorrect. Therefore, the service charges are liable to be excluded from profits of business for the purposes of computing deduction under Section 80HHC. Accordingly, the fourth and fifth substantial questions of law is also answered in favor of the assessee and against the revenue.
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2020 (4) TMI 549
Stay of demand - Submission of additional memorandum of grounds in support of their Exts.P4 and P5 - HELD THAT:- The petitioner may file an additional memorandum of grounds in support of Ext.P-4 appeal as well as Ext.P-5 stay application before the 2nd respondent appellate authority, without much delay preferably within a period of 10 days from the date notified for receiving a certified copy of this judgment. In case such additional memorandum of grounds is duly filed by the petitioner as aforestated, then the 2nd respondent appellate authority shall treat those additional grounds as part and continuation of the appeal and stay application already filed. Thereafter, the 2nd respondent after affording reasonable opportunity of being heard to the petitioner on the matters raised in Ext.P-5 stay application, may pass orders on the stay application without much delay, preferably within a period of 6 weeks from the date of filing of the aforestated additional memorandum of grounds. It is only for the purpose of preservation of the subject matter of the lis, it is ordered that until orders are passed on Ext.P-5 stay application as aforedirected, further coercive steps for enforcement of the impugned order may be kept in abeyance. It is made clear that the aforesaid directions have been issued by this Court only for the purpose of preservation of the subject matter of the lis.
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2020 (4) TMI 548
Recovery proceedings - Stay of demand - payment insisted for granting stay - HELD THAT:- As decided in KODUR SERVICE CO-OPERATIVE BANK LIMITED [ 2019 (7) TMI 374 - KERALA HIGH COURT] insistence for payment of a portion of the amount demanded, as a condition for granting stay, need not be insisted in the case at hand and hence the Division Bench has ordered that it is for the appellate authority to take a decision on the statutory appeal at the earliest and that until final decision is rendered by the appellate authority in the statutory appeal, coercive steps for recovery and collection of the impugned tax is to be kept in abeyance in the light of the dictum laid down by the Full Bench of this Court in Mavilayi Service Co-operative Bank Ltd.'s case [ 2019 (3) TMI 1580 - KERALA HIGH COURT]. Taking note of the said orders issued by the abovesaid Division Bench of this Court, it is ordered that the 1st appellate authority shall ensure final disposal of Ext.P-2 appeal after affording reasonable opportunity of being heard to the petitioner without much delay and within a reasonable time limit that may be fixed appropriately by the said appellate authority. However, in the interest of justice it is ordered that until final orders are passed disposing of Ext.P-2 appeal, all coercive steps for the enforcement of the assessment order impugned in the abovesaid appeal shall be kept in abeyance.
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2020 (4) TMI 547
Addition of CENVAT receivable made u/s 145A - HELD THAT:- ADMIT following substantial question of law arises for consideration - Whether on the facts and in the circumstances of this case, the Income Tax Appellate Tribunal was justified in upholding the deletion of addition of CENVAT receivable on ₹ 2,98,57,398/- made under section 145A of the Income Tax Act, 1961? Disallowance u/s 14A read with rule 8D - assessee suo moto disallowed expenditure incurred for earning exempt income, on the ground that the assessee had not provided the fund flow statement - HELD THAT:- As assessee had suo motu disallowed the amount of ₹ 20,25,500/-, being the expenditure incurred for earning exempt income, which was 8.50% of such income, it is not possible to state that there is any infirmity in the impugned order passed by the Tribunal upholding the order of the Commissioner (Appeals) qua this ground of appeal. Proposed question [B], therefore, does not give rise to any question of law. Disallowance of provision of doubtful debts u/s 36(1)(vii) - HELD THAT:- In the light of the fact that the Commissioner (Appeals) has merely applied the decision of the Supreme Court in the case of CIT v. Vijaya Bank [ 2010 (4) TMI 46 - SUPREME COURT ] to the facts of the present case and directed the Assessing Officer to ascertain the entitlement of the benefit of deduction under section 36(1)(vii) of the Act, no infirmity can be said to have been committed qua this ground of appeal so as to give rise to any question of law. Accordingly, this ground of appeal is also rejected.
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2020 (4) TMI 546
Deduction u/s 10-A read with Section 80IA(10) - ITAT allowed the deduction - Non-consideration of the evidence and the perversity in considering the other evidences led in by the revenue by Tribunal - appeal was partly allowed by holding that the assessee is entitled to an extent of 80% - HELD THAT:- It is not a case wherein a single piece of evidence or material is placed for consideration as additional document before the Tribunal. Substantial material have been produced before the Tribunal by the revenue and the assessee. On going through the entire material, in our considered view, it is not proper for the Tribunal to consider the entire material. When huge and voluminous material is produced by the other side, it is only the Original Authority would have to decide the issue at the first instance. It is not proper for the Tribunal to indulge in such an exercise. It is appropriate to remand the matter to the Assessing Officer for a fresh consideration. Matters stand remanded to the Assessing Officer for a fresh consideration in accordance with law. The Assessing Officer shall consider all the material that is already on record. None of the findings as recorded by the Tribunal will come in the way of the Assessing Officer to decide the matter. The substantial question of laws are accordingly answered.
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2020 (4) TMI 545
Unexplained investment - HELD THAT:- Despite the opportunities given by the AO and the Ld. CIT(Appeals) to the assessee and also before us, the assessee failed to bring any evidence showing the sources of investment made by the assessee in purchasing properties. As the assessee failed to explain the investment made by him and sources thereof more particularly from coaching classes, home tuitions and agricultural activities, no interference is required in the findings given by the Ld. CIT(Appeals) and the same is thereby upheld. Thus, ground No.1 raised in appeal by the assessee is dismissed. Reopening of assessment - assessee is against not passing a separate order to the objections taken by the assessee against the initiation of re-assessment - HELD THAT:- notice u/s.148 was issued on 15-03-2016 which was served on 16-03-2016. No reply was filed in response to notice u/s.148. It is not coming either from the assessment order or from any other material that assessee raised any objection to the initiation of re-assessment proceedings, which could have warranted the passing of a separate order by the AO before espousing the assessment on merits. It is further pertinent to note on a perusal of the grounds taken before the ld. CIT(A) that no such issue was taken up. The ld. AR has not invited our attention towards any material divulging the raising of objections before the AO against the initiation of re assessment proceedings. In such circumstances, there could have been no occasion for the AO to pass a separate order disposing the objections to the re-assessment. We, therefore, dismiss this ground of appeal. Addition being 15% of various expenses as the assessee failed to produce the supporting details like bills, vouchers etc. - HELD THAT:- Once the basic amount is added back as unexplained investment then the disallowance @15% made by the Assessing Officer and confirmed by the Ld. CIT(Appeals) is at higher side and therefore, we restrict the disallowance @5%. Thus, the assessee gets the relief patially. We order accordingly. Thus, ground raised in appeal by the assessee is partly allowed.
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2020 (4) TMI 544
Bogus purchase - CIT(A) restricting the disallowance @ 12.5% - HELD THAT:- Both the sides have failed to prove the case in their favour with necessary evidences. Although, assessee has filed certain basic evidences, but failed to file further evidences to conclusively prove purchases to the satisfactions of the AO. AO had also failed to take the investigation to a logical conclusion by carrying out necessary enquires, but he solely relied upon information received from investigation wing, which was further supported by information received from Maharashtra Sales Tax Department. In the case of CIT vs Simith P. Sheth [ 2013 (10) TMI 1028 - GUJARAT HIGH COURT] had considered a similar issue and held that at the time of estimation of profit from alleged bogus purchases no uniform yardsticks could be adopted, but it depends upon facts of each case. We are of the considered view that the CIT(A) has taken a fair view and estimated 12.50% gross profit on alleged bogus purchases to settle dispute between the parties and hence, we are inclined to uphold order of the ld. CIT(A) and dismiss appeal filed by the Revenue. - Decided against revenue.
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2020 (4) TMI 543
Following orders of the higher appellate authorities to decide the issue - Issues decided relying on assessee's own case and identical issues were decided by the Tribunal in the case of ICICI Prudential s case [ 2012 (11) TMI 13 - ITAT MUMBAI] - all grounds of appeal raised by the Revenue are covered in favour of the assessee - HELD THAT:- As decided in AGARWAL WAREHOUSING AND LEASING LTD. (NOW ADMANUM FINANCE LTD.) [ 2002 (7) TMI 86 - MADHYA PRADESH HIGH COURT] relying on KAMLAKSHI FINANCE CORPORATION case [ 1991 (9) TMI 72 - SUPREME COURT] principles of judicial discipline require that the orders of the higher appellate authorities should be followed unreservedly by the subordinate authorities. The mere fact that the order of the appellate authority is not acceptable to the Department - in itself an objectionable phrase and is the subject-matter of an appeal can furnish no ground for not following it unless its operation has been suspended by a competent court. If this healthy rule is not followed, the result will only be undue harassment to assessee and chaos in administration of tax laws. Hon ble Gujarat High Court in Sayaji Iron and Engineering Co. v. CIT [ 2001 (7) TMI 70 - GUJARAT HIGH COURT] reiterated that no Tribunal of fact has any right or jurisdiction to come to a conclusion entirely contrary to the one reached by another bench of the same Tribunal on the same facts, and if a bench of a Tribunal on identical facts is allowed to come to a conclusion directly opposed to the conclusion reached by another bench of the Tribunal on an earlier occasion, that will be destructive of the institutional integrity itself. We follow the decision of the Tribunal mentioned hereinbefore and dismiss all the grounds of appeal filed by the Revenue in its appeal.
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2020 (4) TMI 542
Penalty u/s. 271(1)(c) - assessee submitted a chart showing the details of quantum additions/disallowance either deleted by the Tribunal or set aside to the Assessing Officer and also not levying of penalty on identical addition/disallowance made by the Assessing Officer in earlier assessment years - HELD THAT:- Most of the additions/disallowance made by the AO were either deleted or set-aside by the Tribunal to the Assessing Officer. In some of the cases the AO himself not initiated penalty proceedings in earlier assessment years where similar additions/disallowance were made. CIT(A) has rightly appreciated the submissions of the assessee and taking note of the fact that additions/disallowances were either deleted or set aside, he held that there was no concealment of income or furnishing of inaccurate particulars by the assessee in making its claims and the penalty was levied on mere change of opinion and the Ld.CIT(A) has rightly deleted the penalty levied for all these three assessment years. AO levied penalty on the disallowance made u/s. 14A while computing income under normal provisions of the Act as well as under book profits computation. Penalty cannot attract simply when there is an addition/disallowance is made. There is no concealment of income or furnishing of inaccurate particulars in making claim u/s. 14A - no penalty is attracted on disallowance made u/s. 14A - Decided against revenue.
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2020 (4) TMI 541
Estimation of income - Bogus purchases - assessee has obtained bogus bills from entities listed in Sales Tax website and declared as hawala dealers by the Sales Tax Department, Mumbai - HELD THAT:- Assessee is importing chemicals as one of the line of business and repacks them according to the requirement of customers. - assessee is regularly purchasing packaging materials for the business which is in and around 4 to 5% of sales. AO has disallowed 4.7 lakhs this year. Assessee has declared considerable profit over the years and there is no need for the assessee to suppress any taxable income. Since the onus of proof lies on the assessee to bring on record the respective suppliers but since the suppliers of packaging material is very small and assessee could not submit any documents in support of purchases made from the suppliers. Since Ld. AR submitted that the packaging materials are delivered at the place of business. We cannot reject the contention of the assessee. Since the assessee could not substantiate the documentation for the purchases, we are inclined to disallow certain percentage of the purchases on the ground that assessee may not have carried on with the operation of repacking the chemicals without packaging material - disallow 10% of the packaging material as reasonable - Grounds raised by the assessee are partly allowed.
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2020 (4) TMI 540
Estimation of income - Bogus purchases - Assessee is one of the beneficiary of accommodation entries of bogus purchase bills issued by Hawala dealers - HELD THAT:- Both the sides have failed to prove the case in their favour with necessary evidences. Although, assessee has filed certain basic evidences, but failed to file further evidences to conclusively prove purchases to the satisfactions of the AO. AO had also failed to take the investigation to a logical conclusion by carrying out necessary enquires, but he solely relied upon information received from investigation wing, which was further supported by information received from Maharashtra Sales Tax Department. In the case of CIT vs Simith P. Sheth [ 2013 (10) TMI 1028 - GUJARAT HIGH COURT] had considered a similar issue and held that at the time of estimation of profit from alleged bogus purchases no uniform yardsticks could be adopted, but it depends upon facts of each case. Although, both authorities have taken different rate of profit for estimation of income from alleged bogus purchase, but no one could support said rate of gross profit with necessary evidences or any comparable cases. Assessee is into the business of trading in Ceramic Tiles and other products - we are of the considered view that the CIT(A) has taken a fair view and estimated 12.50% gross profit on alleged bogus purchases to settle dispute between the parties and hence, we are inclined to uphold order of the ld. CIT(A) and dismiss appeal filed by the Revenue. - Decided against revenue.
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2020 (4) TMI 539
Exemption u/s 11 - denial of registration u/s 12AA - it is not possible to ascertain the nature of objects for which the trust has been created and whether the same are charitable u/s. 2(15) or not and also its genuineness - HELD THAT:- As relying on BABU RAM EDUCATION SOCIETY [ 2017 (12) TMI 867 - ALLAHABAD HIGH COURT] we are inclined to remit this issue back to the file of CIT(E) to consider the information available on record to conclude whether the trust s objectives and activities are genuine and falling within the ambit of charitable with the information available on record. CIT(E) has to verify the trust deed and the objects vis- -vis the genuineness of the activities by enquiring about the facilities, if required verify the financials only to establish whether the activities are genuine. He is not expected to wear the shoes of AO. Therefore, in case of necessity, further relevant information may be called from the assessee and proper opportunity of being heard to the assessee may be granted. Accordingly, grounds raised by the assessee are allowed for statistical purposes.
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2020 (4) TMI 538
Correct head of income - Interest income assessment - under the head income from other sources OR business income - proof of necessary nexus with assessee's business - HELD THAT:- In the instant case, we find that FDR s were placed with PNB under its lien for providing necessary margins for the purposes of obtaining the bank guarantees which were required to be placed with the awarder of the contracts to the assessee and issued by the PNB. There exist a direct nexus between pledging of FDRs with bank and seeking bank guarantee for the purposes of assessee s business. Some of the FDRs were directly placed with Chief Engineer, PWD, Jaipur by way of security towards performance of contract obligations. Following the ratio laid down in case of M/s Choudhary Brothers [ 2018 (10) TMI 1226 - RAJASTHAN HIGH COURT] obtaining and pledging the FDR for the purposes of obtaining bank guarantee for the purposes of its business, the assessee has thus established the necessary nexus with his business and interest earned from such FDRs cannot be treated as income from other sources and would rather be treated an income earned from business. - Decided in favour of assessee.
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2020 (4) TMI 537
Addition on account of estimated net profit - assessee case was selected for scrutiny u/s 143(2) - AO rejected the books of accounts of assessee and estimated net profit @ 0.17% of the turnover - HELD THAT:- Assessee produced paper book no. S-6, which contains the excise returns of the production, details of input-output and work-in-progress. This was sent by speed post and a copy of the speed post receipt dated 13.12.2016 has been produced before ld CIT(A). Hence, these details were submitted before the AO by the assessee - contention of the AO that the information required by him, were not produced during the course of the assessment proceedings, are untenable and not supported by the facts, which are on record. Hence, AO was not correct in rejecting the books of accounts - we decline to interfere with the order of CIT(A) in deleting the aforesaid additions. His order on this issue is, therefore, upheld and the grounds of appeal of the Revenue are dismissed. Brought forward loss adjustment ignoring the section 14 - HELD THAT:- CIT(A) directed the AO to allow brought forward losses, as per the provisions of section 72 therefore we do not find any infirmity in the order of ld CIT(A) in directing the AO to allow brought forward losses, in accordance to law. Hence, we confirm the order of ld CIT(A). Appeal of the Revenue is dismissed.
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2020 (4) TMI 536
Grant of stay of outstanding demand - HELD THAT:- Out of total demand of ₹ 3,10,31,970, the assessee has already deposited a sum of ₹ 50,62,022. Considering the facts and circumstances of the case, the assessee is directed to deposit a further sum of ₹ 15,00,000/- on or before 28.02.2020 to which the ld AR has agreed on behalf of the assessee. Subject to the said deposit, the balance demand is stayed for a period of three months or disposal of appeal which is ever and the Department is directed not to take any coercive/recovery steps in this regard. The matter is directed to be listed for hearing on 16.03.2020 as stay granted matter.
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2020 (4) TMI 535
Exemption u/s 11 withdrawn - Anonymous donation - assessee trust has failed to substantiate the donation so received through any credible and verifiable evidence - HELD THAT:- Assessing Officer has recorded a finding that the assessee could not furnished complete address or identify the persons from whom the donations have been received, the receipt books appears to be fabricated without any address of the persons from whom the donations have been received and number of opportunities have been provided to the assessee-trust to furnish postal address and identification of the persons as well as the purpose of the donation and prima facie the list appears to have been prepared on the basis of voter list or any other records of the census department. Complete name of the Donors is not mentioned nor the details about their father and the address where they were residing were furnished - AO that all these donations have been received of same amount i.e. ₹ 5,000/- from innumerable people which we find practically improbable that each of the donors have donated equivalent amount not a rupee more nor a rupee less - assessee trust has failed to substantiate the donation so received through any credible and verifiable evidence in terms of complete name and address of the donors and purpose of the donation and therefore, the provisions of Section 13(7) r/w 115BBC have been rightly invoked by the Assessing officer and confirmed by the ld. CIT(A). In the result, we do not find any merit and justification in the grounds of appeal so taken by the assessee-trust. - Appeal of the assessee-trust is dismissed.
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2020 (4) TMI 534
Penalty levied u/s 271AAA - undisclosed income offered by the assessee during the course of assessment proceedings and unexplained cash found during the course of search - HELD THAT:- Undisclosed income was neither offered to tax during the course of search nor it was included in the Income Tax Return filed by the assessee. The addition was made while finalizing the assessment order. Thus assessee has not fulfilled any of the conditions enumerated above in Section 271AAA(2) of the Act. Addition for unexplained cash which was found during the course of search at the assessee s residence on 25.11.10, assessee could not give any plausible reply to satisfy the search team as well as the Ld. A.O during the course of assessment proceedings. Assessee has also not challenged this addition before the Tribunal. So as far as unexplained cash is concerned assessee failed to fall in Section 271AAA(2) of the Act. Assessee is liable to pay penalty u/s 271AAA of the Act @10% on the undisclosed income and unexplained cash .- Decided partly in favour of assessee.
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2020 (4) TMI 533
Undisclosed investments u/s 69 - cash loan given - Addition on the basis of said lose papers seized and statement recorded of the assessee during the course of search - CIT (A) also confirmed the fact that the three unsigned receipts are incriminating documents found in the search and seizure action u/s 132, which shows actual transactions have been taken place - HELD THAT:- On going through the entire factual position, we are unable to accept with the observation of the ld. CIT (A) who has confirmed the addition and at the same time accepting the fact that the receipts are unsigned and yet treating them as incriminating documents. Going through the statements of the assessee as well as the counter parties, affidavits, the receipts per se and also the observation of the ld. CIT (A) that the receipts are unsigned, we hereby hold that no addition is called for based on these documents and hence, the addition made by the Assessing Officer on this account is hereby directed to be deleted. - Appeal of the assessee is allowed.
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2020 (4) TMI 532
Stay of demand - total tax alongwith interest u/s. 220 is about 1100 crores therefore, the assessee should be directed to pay at least 50% of the outstanding demand - assessee submitted that stay should be granted to the assessee subject to the adjustment of the refund - HELD THAT:- Assessee has prima facie case for grant of stay subject to certain conditions. We, therefore, without commenting upon the merits of the case, stay the outstanding demand for a period of 6 months or disposal of the appeal whichever may expire earlier subject to payment of ₹ 200 cores by the assessee to the revenue within 30 days and direct the AO to adjust the refund of ₹ 193.34 crores arising to the assessee for A. Y. 2010-11 against outstanding demand for A.Y.2014-15. The request of the assessee for out of turn hearing is also accepted and the appeal is fixed for hearing on 16.04.2020 which was announced in the open court. The assessee is hereby directed to file the paper book in advance and not to seek any adjournment under any pretext failing which the stay granted to the assessee shall stand vacated automatically.
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2020 (4) TMI 531
Scope of limited scrutiny - Addition u/s 43CA - selection of the case for limited scrutiny under CASS were Real Estate business with high closing stock (verify whether assessee has adopted percentage completion method) - HELD THAT:- Assessing Officer can widen the scope of scrutiny even the case is selected for limited scrutiny under CASS, however, the condition precedent for such widening of the scope is that the Assessing Officer has to seek prior approval of the authorities mentioned. Such prior approval and the permission of the PCIT is lacking in the instant case. There was no satisfaction about the merits of the issue which necessitated complete scrutiny in the instant case. Hence, the assessment framed by the assessee on the issues which are not inconsonance of the instruction of CBDT are liable to be quashed. The addition u/s 43CA, since beyond the scope of the limited scrutiny is hereby ordered to be deleted. - Decided in favour of assessee.
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2020 (4) TMI 530
Reopening of assessment u/s 147 - assessee s objection to the reopening is not being disposed of by the Assessing Officer by a speaking order - HELD THAT:- When objections to the reopening are not disposed of by the Assessing Officer by a speaking order the same is fatal to the reassessment and it cannot be treated as procedural mistake which can be cured by remitting the matter to the AO to dispose of the objections. In the present case learned CIT(A) erred in asking the Assessing Officer in remand to dispose of the objection and accordingly has treated the same to be sufficient compliance of Hon'ble Apex Court decision GKN Driveshafts India Ltd. [ 2002 (11) TMI 7 - SUPREME COURT] . AO has passed assessment order without disposing of the objection of the assessee to reopening by a speaking order, the reassessment is bad in law. We hold that the assessment order passed is not legally sustainable. Accordingly, this issue is decided in favour of the assessee.
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2020 (4) TMI 529
Expenditure allowable u/s 37 (1) - disallowance Scholarship Expenses treating the same as not incurred wholly and exclusively for the purpose of the profession of the appellant - assessee is an advocate by profession and is a designated Senior Advocate of the Hon'ble Supreme Court of India and is deriving income from business or profession, income from house property, income from capital gain and income from other sources - HELD THAT:- It is an undisputed fact that the appellant is a well known Supreme Court Lawyer. The agreement with Exeter College, the University of Oxford, exhibited hereinabove, is self-explanatory. We find that on identical circumstances, the co-ordinate bench in assessee s own case for Assessment Year 2011-12 [ 2019 (8) TMI 731 - ITAT DELHI] had the occasion to consider a similar disallowance and came to the conclusion that such disallowance cannot be sustained and directed the Assessing Officer to delete the same. - Decided in favour of assessee.
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2020 (4) TMI 528
Reopening of assessment u/s 147 - no notice u/s. 143(2) of the Act was issued by the AO - addition u/s 68 for unexplained cash credit - HELD THAT:- Requirement of service of notice u/s. 143(2) of the Act in the present case was necessary and the admitted factual position is that no such notice was issued after the filing of return of income by the assessee in response to notice u/s. 148 - we are of the view that that the ratio laid down by the Hon ble Supreme Court in the case of Hotel Bluemoon [ 2010 (2) TMI 1 - SUPREME COURT] ) and Laxmandas Khandelwal [ 2019 (8) TMI 660 - SUPREME COURT] will apply to the present case. The consequene of non-issue of notice u/s. 143(2) of the Act is fatal to the validity of the order passed u/s. 148 of the Act. Since the aforesaid legal infirmity renders the order of assessment null and void, we are of the view that the order of assessment has to be annulled. - Decided in favour of assessee.
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2020 (4) TMI 527
Reopening of assessment - absence of any reason to believe that income had escaped assessment - no sufficient opportunity to the assessee for representing his case - HELD THAT:- A.O. has not given sufficient opportunity to the assessee for representing his case. There is a lack of enquiry by the A.O. Even in the remand report, the A.O. has not made any enquiry from the subscriber companies. Assessee has brought to our notice that there are two assessment orders of the same date. No satisfactory reply is furnished by the A.O. There is no substantial difference between the assessment orders. One of the assessment order is having office note. Therefore, action of the A.O. regarding not making enquiries on the material and also not providing sufficient opportunity to the assessee, we set aside the assessment order and restore the assessment to the file of the A.O to dispose of the objections made against the reasons for reopening by way of a separate speaking order. - Decided in favour of assessee for statistical purposes.
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2020 (4) TMI 526
Interest on borrowed fund were given as advance to sister companies - assessee reiterates that advances made to sister companies were for business purposes and not necessarily out of any specific borrowings - charging notional interest as indirect interest debited by on the assessee on these business advances - HELD THAT:- Advances to Gokaldas Images Infrastructure P. Ltd., (GIIPL) Loans are given out of borrowed funds and not own funds, which could not be controvert by Ld. AR even in the present year. Accordingly, we are not inclined to interfere with the findings of CIT(A)on the issue. Advances to Hinduja Realtors Pvt. Ltd. issue requires a fresh consideration by the Assessing Officer and therefore the Order of the CIT (A) is set aside. The assessee is directed to file the required documents to substantiate its case before the Assessing Officer. The Assessing Officer is directed to consider the same and decide the issue in accordance with law after affording the assessee an opportunity of being heard. Deduction under Section 10B of the Act without setting off of the loss, depreciation / Business pertaining to non-10B Units - HELD THAT:- We found that the CIT (Appeals) has relied on the jurisdictional High Court decision in YOKOGAWA INDIA LTD. [ 2011 (8) TMI 845 - KARNATAKA HIGH COURT] which was confirmed by the Hon'ble Supreme Court [ 2016 (12) TMI 881 - SUPREME COURT]. The learned Departmental Representative could not controvert the observations of the CIT (Appeals) with cogent evidence. Accordingly, we are not inclined to interfere with the order of CIT (A) on this disputed issue No TP adjustment is called for in this case.
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2020 (4) TMI 525
Penalty u/s 271(1)(c) - estimated income only due to proceeding u/s 132 - assessee has disclosed the commission income earned from accommodation entries provided by him which varies from transaction to transaction between @ 0.02% to 0.05% and assessee came forward voluntarily offered 0.02% as commission income - HELD THAT:- Assessee has completely gave the information which is agreeable to the AO and cooperated to complete the assessment with real income. Accordingly, AO made reasonable estimation on the profit. Penalty cannot be imposed when the income of the assessee is estimated. Defective notice u/s 274 - as per assessee notice issued by the AO is defective since AO has not brought of record the reason for levy of penalty - HELD THAT:- We notice that in the assessment order, AO has made it clear that penalty proceedings are initiated separately for furnishing inaccurate particulars of income, therefore the AO has already indicated that why the penalty proceedings are initiated. Therefore, we reject the contention of the assessee that notice is defective.
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2020 (4) TMI 524
Penalty levied u/s 271(1)(c) - addition made on account of profit margin on sale of Mixer Grinder - penalty leviable on addition made on estimation of income - HELD THAT:- AO estimated the profit @ ₹ 300/- per piece on sale of 1500 Mixer Grinder. Assessing Officer estimated the profit of ₹ 4,50,000/-. On appeal before the ld. CIT(A), the addition was upheld. However, on further appeal before the Tribunal, the addition was restricted to ₹ 3,37,500/- in [ 2016 (2) TMI 1274 - ITAT MUMBAI] - We have further noted that in reply to the show cause, the assessee stated that no penalty is leviable on addition made on estimation of income and relied upon the decision of Jodhpur Tribunal in ITO vs. Gurunanak Oil Agency [ 2013 (3) TMI 718 - ITAT JODHPUR]. The contention of assessee was not accepted by Assessing Officer. The Assessing Officer levied the penalty @ 100% of the tax sought to be evaded. The ld. CIT(A) affirmed the action of Assessing Officer. There is no dispute that addition on which penalty was initiated was based on estimation basis. The addition was further reduced by Tribunal by allowing administrative and other expenses and estimated the profit @ ₹ 225/- per piece/per Mixer Grinder. It is settled position that no penalty is leviable on adhoc/estimated addition. Hence, we direct the assessing officer to delete the entire penalty levied under section 271(1)(c) - Decided in favour of assessee.
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2020 (4) TMI 523
Penalty levied u/s 271(1)(c) - Defective notice - non specification of charge in notice - not intimated the specific charge of Concealment of income or Furnishing inaccurate particulars of income - addition @ 1% of commission on accommodation entries - HELD THAT:- AO found that there was total transaction during the year of ₹ 5.38 crore. AO made addition of 1% commission on the entire transaction. No further appeal was filed by assessee against the said addition in the quantum assessment. Penalty proceeding are separate and independent. Penalty under section 271(1)(c) is not automatic on the basis of additions made or part of the additions sustained in the appeal. In the assessment, the addition can be on the basis of presumption for making estimated addition. AO estimated the addition on account of commission income, on the basis of entire transaction during the year. The Assessing Officer levied the penalty @ 300% without specifying special reason for levying maximum penalty. CIT(A) restricted the penalty @ 100% of the tax sought to be evaded. In Gurunanak Oil Agency [ 2013 (3) TMI 718 - ITAT JODHPUR] held that when the addition are based on estimated basis, the penalty under section 271(1)(c) could not be imposed. Also in CIT vs. Dhillon Rice Mills [ 2000 (9) TMI 10 - PUNJAB AND HARYANA HIGH COURT] held that addition made on estimation basis would not automatically lead to conclusion that there was failure to return the correct income by mean of fraud or gross wilful neglect. No justification in levying the penalty under section 271(1)(c). - Decided in favour of assessee.
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2020 (4) TMI 522
MAT Computation - surplus on sale of shares received as gift to the book profit for taxation under section 115JB - HELD THAT:- As decided in own case [ 2016 (4) TMI 348 - ITAT AHMEDABAD] Ld.AO has rightly added the long term capital gain from sale of shares to the book profits u/s 115JB of the Act, and accordingly this grounds of appeal is decided against the assessee. TP Adjustment - upward adjustment of interest on loan to the AE to the income of the appellant company on account of determining the Arm s Length Price of International Transactions - HELD THAT:- Transactions under consideration is in the nature of quasi capital. Hence, there was no requirement charge an arm's length price. Keeping in mind all these factors, as also entirety of the case, we deem it fit and proper to delete the arms length price adjustment in respect of interest on loan to AE, which, according to the revenue authorities, should have charged on the loan granted to the AE s to bring back preferential shares capital in India. Upward adjustment of guarantee fee charges - determining the arm s length price of the international transactions - HELD THAT:- Corporate guarantee has been given for obtaining a loan from a bank which is used for redeeming assessee preference shares in the AE. BHPL has brought back moneys invested as preference shares + guarantee charges paid to the Bank. Hence, the ALP of that transaction equivalent to the guarantee commission expenses paid is not justified. BHPL not claimed guarantee charges paid as deduction against any taxable income. Chapter X Section 92 and 92Cconstitute anti-avoidance provisions which result in determination of ALP and adding back the ALP and the price recorded in the books of accounts to the total income to levy tax. In the instant case BHPL itself has not claimed it as a deduction from any income and guarantee charges accordingly has been offered to taxation. The amount paid as guarantee charges has already suffered disallowance while filling return of income itself. Hence, again addition the same to total income results in double taxation. TP Study report rejected without a speaking order. BHPL has filed Transfer Pricing Documentation and has undertaken T P Study on the basis of Interest Saver (IS) approach. In view of the foregoing, the upward adjustments on account of bank guarantee are therefore, deleted.
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2020 (4) TMI 521
Unexplained investment u/s 69 - unaccounted investment in rough diamonds by the assessee on the date of survey - HELD THAT:- There was no excess stock of rough diamonds found during survey. CIT (DR) has also not controverted these facts and findings as recorded by the CIT(A) and simply supported the AO`s observations. In alternate, where no physical stock was found at the time of survey, and there is shortage, then in such situation, at the most the profit can be estimated by the AO on account of unaccounted sales, if it is proved that there were unrecorded sales, which are also covered by declaration made by the assessee and shown in that returned income. The movement of rough diamonds might have been more because of the unrecorded sales declared by the assessee. The assessee has declared ₹ 5 crores and therefore, considering the Gross Profit @6.27%, the unaccounted turnover comes to ₹ 79,74,48,166/- of which profit is far less than declaration as made by the assessee. This view is also fortified by decision in the case of CIT v. President Industries [ 1999 (4) TMI 8 - GUJARAT HIGH COURT] wherein it was held that only percentage of profit could be considered for addition where shortage of stock. Therefore, considering the all the facts on record, circumstances of the case and the facts that the CIT(A) has carried out detailed verification and working as filed before him, we therefore, do not find any infirmity in the order of ld.CIT(A), accordingly, same is upheld. This grounds of appeal of revenue is therefore, dismissed. Unaccounted income from sale of polished diamonds on suppression of yield even though it was categorically analyzed in the body of assessment order that the assessee had suppressed its yield - HELD THAT:- We find that as per impounded Annexure B-47 Page No. 90 to 99 10 to 104, the yield till Ghat process comes to 69.86% and yield after Ghat process comes to 52.30% and therefore, the overall yield of rough diamonds polished diamonds was 36.24% as per notings of Page nos. of Annexure B S -47. AO has also stated that the yield till Ghat process is 69%. There is always, further loss of 50% after Ghat process and even the seized material shows such as loss at 49.45%, therefore, the yield shown by the assessee is about 35% which was very much reasonable. Hence, the addition made by the AO was rightly deleted by the Ld. CIT (A). Therefore, we do not find any infirmity in the order of CIT (A). In view of these facts and circumstances, this ground of appeal is therefore, dismissed. Unaccounted manufacturing expenses - As submitted that the disclosure of ₹ 5 crores was made by the assessee after considering the unaccounted expenses - HELD THAT:- The disclosure of ₹ 5 crores was net income offered by the assessee after considering all the expenses by the assessee and therefore, no addition is required to be made for unaccounted expenditure, when the unaccounted expenditure is less than ₹ 5 crores. The assessee has declared ₹ 5 crores and therefore, considering GP of 6.27%, the unrecorded turnover comes to ₹ 79, 74, 48, 166 and, therefore, manufacturing expenses are clearly deductible under section 37. In view of above facts and circumstances, we dismissed the appeal of the Revenue and allow the appeal of the assessee. Unaccounted income from unaccounted manufacturing of finished diamonds from rough diamond and sold outside Books - HELD THAT:- Whole sales cannot be added and only % of the profit can be added in view in the case of CIT v. President Industries [ 1999 (4) TMI 8 - GUJARAT HIGH COURT] and CIT Samir Synthetics [ 2008 (1) TMI 591 - GUJARAT HIGH COURT] unless there is no concrete evidence that the assessee has made investment outside the books before receipts of the sale consideration. The assessee has proved on the basis of seized paper only that to the AO wrongly made the addition that the assessee was having more stock then the rough diamonds stock issued to the lesser Department and so Ld.CIT(A) has rightly deleted by giving detailed findings - there was no excess stock of rough diamonds was found at the time of survey. Thus, no physical stock was found at the time of survey, hence, at the most the profit can be estimated by the AO for unaccounted sales which is covered by the declaration made by the assessee. The assessee has declared peak investment found of polished diamonds at the time of survey. No infirmity in the order of CIT (A), accordingly, same is upheld. Addition of undervaluation of closing stock - HELD THAT:- The assessee had disclosed ₹ 5 Crore as unaccounted income including excess stock of ₹ 98,82,364/- and set-off of excess finished stoke of ₹ 98,82,364/- has already been granted against the proposed addition of ₹ 98,41,832/-. CIT(A) has further granted set-off of ₹ 98,41,832/- on account of undervaluation of polished diamond by deleting the addition of undervaluation of polished diamond. The AO has also of the view that set off should be allowed. In view of this matter, this ground of appeal is therefore, dismissed. Undervaluation of closing stock - HELD THAT:- We find that the assessee has included the excess stock of polished diamonds in the disclosure of ₹ 5 crores and not shown separately in the Profit Loss Account but has shown the same in balance sheet at ₹ 12,26,39,769/- inclusive of excess stock of polished diamonds. Therefore, the findings recorded before the CIT(A) are appears to be correct. Hence, no interference is called for. Accordingly, this ground of appeal is therefore, dismissed. Stock register prepared by the assessee although the assessee was maintaining Lot Wise Registers which were impounded during survey for each of the manufacturing process - HELD THAT:- We find that there is no discrepancy between lot wise register impounded during the course of survey and stock register produced by the assessee as Ld. CIT (A) has deleted the addition based on the lot wise register. Accordingly, this ground is dismissed. Rejection of books of accounts u/s 145 - HELD THAT:- As during the course of survey, there was impounding of registers, the papers related to diamond manufacturing business, discrepancies in stock, and Appellant firm admitted additional income of ₹ 5 crores. The AO cited decision of Hon`ble Delhi High Court in the case of Action Electrical v. DCIT [ 2002 (7) TMI 64 - DELHI HIGH COURT] held that books of accounts cannot be relied to be complete and liable to be rejection, as the same does not give correctness and completeness to the accounts. In view of this matter, we do not find any infirmity in the order of CIT (A), accordingly, same is upheld. This ground of appeal is therefore, dismissed. Unaccounted manufacturing expenditure incurred u/s 69C - HELD THAT:- We find that this grounds of appeal is covered by Ground No. 3 of appeal of revenue, wherein we have held that the manufacturing expenditure is allowable as deduction in the light of judgements of Hon ble Gujarat High Court in the case of CIT v. Shilpa Dyeing and Printing Mills Pvt. Ltd. [ 2015 (7) TMI 691 - GUJARAT HIGH COURT] . Therefore, this grounds of appeal is allowed in the favour of the assessee. Addition made under section 69 - unexplained investment made in finished diamonds - HELD THAT:- When rough diamonds are found to be short, it did not mean that the polished diamonds were manufactured afterwards, but in fact, it means that either the polished diamonds have already been manufactured out of the shortage of rough diamonds or rough diamonds were sold which is available for investment in excess stock. Assessee is entitled to set off the addition against the balance declaration of ₹ 4,01,17,636/-. It is to be noted that the AO has given the set off ₹ 5 crores against all the additions, which has been withdrawn by the CIT(A) without giving notice of enhancement. No enhancement can be made without giving showcause notice as held by various court s , hence, on that count also this addition is required to be deleted - assessee is entitled to set off against declaration as allowed by the AO in assessment himself in assessment order - Shortage of rough diamonds means either same were sold outside India of which are available for investment or it has been used in manufacturing of polished diamonds. Therefore, same are covered either by disclosure hence, telescoping of the same is allowable against excess polished diamonds sales of ₹ 4.01 crores. Therefore, in any circumstances, no separate addition is sustainable in law.
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2020 (4) TMI 520
Revision u/s 263 - as per CIT contract allotted to the assessee was covered under the definition of Works Contract' and, therefore, the assessee was not entitled to deduction u/s 80IA(4) as was claimed and wrongly allowed - HELD THAT:- As decided in SIMPLEX SOM DATT BUILDERS J.V. VERSUS I.T.O WARD 33 (4) , KOLKATA [ 2013 (6) TMI 813 - ITAT KOLKATA] a perusal of the turnkey contract agreement entered into by the assessee with the irrigation department clearly showed that the construction of all the structure of whole of the canal system was to be as per the approved design, drawings of the Department etc. Survey is to be done as per the investigation and drawing criteria of the Irrigation Department. The assessee has to procure the material independently and those materials are to be conformed to the specifications provided. The assessee has also to make arrangement for storage of the materials. Tribunal held that such work carried out by the assessee would fall in the exclusion provided to the meaning of the work given in the explanation to section 194C and it would also be out of the scope of explanation to sub section (13) of section 80IA . The Koltaka Bench of the Tribunal in the case of Adhunik Infrasture (P) Ltd vs JCIT KOLKATA [ 2018 (6) TMI 89 - ITAT KOLKATA] held that deduction u/s 80IA(4) cannot be denied to an assessee merely because the assessee has been paid by the Government for development work. Neither the Ld. PCIT could even point out how the fact and nature of the projects carried out during the year under consideration were different from the projects earlier taken by the assessee which have already been held to be eligible for deduction u/s 80IA(4) being Infrastructure Facility Development Project, nor the Ld. PCIT could point out from the clauses of the agreement that they would not fall within the definition of infrastructure development project as provided u/s 80IA(4) . PCIT has exercised her jurisdiction u/s 263 totaling bye- passing and in contradiction of the findings given by the Tribunal in the own cases of the assessee for earlier assessment years - all the material was put before the Assessing Officer including the copies of the contracts - AO has duly taken note of the nature of contract entered into by the assessee and held that the same were infrastructure facilities development contracts and eligible for deduction u/s 80IA of the Act. Hence, it cannot be said that the order passed by the Assessing Officer was erroneous or prejudicial to the interest of Revenue on this issue. Deduction u/s 80IA on profits derived from the project of water supply - HELD THAT:- Assessee s claim for deduction under section 80IA was examined in all respects by the Assessing Officer during the course of assessment proceedings and duly allowed - assessee had been allowed deduction on the same pattern in the preceding and succeeding years lends credence to the allowance of the claim by the Assessing Officer in the impugned year also - CIT has no basis at all for stating that the profit earned on account of job work got done by subcontractors was a separate contract which was not eligible for deduction under section 80IA - What can be gathered from the findings of the learned Pr. CIT is that the assessee is eligible for deduction under section 80IA only on account of work/contract/project executed by it. We find that this understanding of the provisions of section 80IA is incorrect and has no judicial precedents at all and on account of the same we hold that there is no error in the order of the Assessing Officer on this count also and set aside the same for this reason. Receipts from the water supply project and Hamirpur bypass project in the ratio of 2.8:1, the expenses incurred on freight and carriage, fuel and wages and salary are comparatively higher in case of Hamirpur bypass project and the comparative details have not been examined by the Assessing Officer - HELD THAT:- The provisions of section 80IA(8)/80IA(10) are attracted only between transactions that take place between an eligible and non-eligible entity. learned Pr. CIT has not pointed out as to which among the two projects are eligible and which is not eligible. Having not pointed out the same we fail to understand how the learned Pr. CIT came to the conclusion that an error had occurred in the order vis-a-vis the applicability of the provisions of section 80IA(8)/80IA (10) of the Act and so we find that the learned Pr. CIT has failed to point any error in the order of the Assessing Officer in this regard. Further as stated above the issue had been examined during assessment proceedings as held above by us and therefore there was no error in the order of the Assessing Officer. - Assessee appeal allowed.
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2020 (4) TMI 519
Addition u/s 68 - premium portion of the share application money received by the Appellant during the year under appea l - Establishment of three ingredients i.e., the identity and creditworthiness of the creditor / investor and genuineness of the transaction - HELD THAT:- Assessee has submitted all necessary documents to establish the identity and creditworthiness of the investors and have also explained the genuineness of the transaction by providing explanation for share premium because apart from questioning the receipt of share premium, no question is raised by the revenue about genuineness and hence, the genuineness of this transaction is also established - there is no cash deposit in the bank accounts of the investor companies and therefore, in the absence of any corroborative material, it cannot be said that the money deposited in these bank accounts of these investor companies may be of the assessee company i.e. the investee company. In the present case, out of 19 companies, 18 companies have made available their balance sheet, audit report, director s report and bank statements and for the remaining one company M/s. Matajwala Investments and Infrastructure Pvt. Ltd., it is noted by learned CIT(A) that the directors of the assessee company and that company are common and addition of the same amount was made in the hands of that company on this basis that source of investment could not be explained by that company. Once addition is made in the hands of the investor company for this reason that the source could not be explained by the investor company, it cannot be said that the amount of same investment is belonging to the investee company and addition cannot be made again in the hands of the investee company. We, therefore, delete the entire addition made in the present case. - Decided in favour of assessee.
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2020 (4) TMI 518
Disallowance of computer software expenses - AO disallowed depreciation claim u/s 40(a)(ia) since the assessee had not deducted tax at source from the payments made for purchase of software - HELD THAT:- Since the assessee has itself disallowed the entire purchase cost of softwares, then making addition of ₹ 6.24 lakhs (which is included in the amount already disallowed by the assessee) again to the total income would amount to double disallowance which is not permitted under the Income Tax Act. Accordingly, we find merit in the submissions of learned Authorised Representative. As relying on case SMS DEMAG PVT. LTD. VERSUS DCIT [ 2010 (1) TMI 624 - ITAT, DELHI] , SKOL BREWERIES LTD. [ 2013 (1) TMI 623 - ITAT MUMBAI] and M/S MARK AUTO INDUSTRIES LTD. [ 2013 (1) TMI 448 - PUNJAB AND HARYANA HIGH COURT] depreciation is not subject to disallowance under Section 40(a)(ia) of the Act. Accordingly, we direct the Assessing Officer to delete the disallowance - Decided in favour of assessee.
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Corporate Laws
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2020 (4) TMI 517
Default in repayment of Fixed Deposit which got matured - HELD THAT:- It is not in dispute that the Respondent accepted deposit in the shape of FDR on 1.6.2013, 20.06.2013, 28.11.2013 and their maturity date was in 2016. It is also not in dispute that the Respondent company has not paid the maturity amount to the appellants on their due date inspite of various requests made by the appellants. It is also not in dispute that the Respondent did not appear before NCLT despite accepting notice, no reply was filed. The arguments of the Respondent that the Hon ble Supreme Court has directed that no coercive steps should be taken against the company or directors is concerned, no coercive steps have been taken by the appellants against the respondent company and its directors - if the respondent makes an attempt to get fresh deposits from the public then the company will not get at cheaper rate but at a higher rate because the depositor will only give deposit seeing the risk factor of his deposit. Appellants are entitled to a decree under their respective matured FDR - amount is decreed in favour of the respective appellant together with pendent lite and future interest @ 12.5% p.a. from the date of maturity of the respective FDR till receipt thereof - Respondent will pay ₹ 50000/- each to the above three appellants towards cost of litigation, costs etc. - Appeal allowed.
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Insolvency & Bankruptcy
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2020 (4) TMI 516
Initiation of CIRP - Section 65 of the IBC - NCLAT dismissed the appeal on the ground that an objection for admitting application should be raised before NCLT first - It was submitted by the learned counsel appearing for Respondent No.2 that allegation of collusion is unfounded and has no merit - HELD THAT:- Considering the provision of Section 65 of the IBC, it is necessary for the Adjudicating Authority in case such an allegation is raised to go into the same. In case, such an objection is raised or application is filed before the Adjudicating Authority, obviously, it has to be dealt with in accordance with law. The plea of collusion could not have been raised for the first time in the appeal before the NCLAT or before this Court in this appeal - we relegate the appellant to the remedy before the Adjudicating Authority.
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2020 (4) TMI 515
Maintainability of application - initiation of CIRP - Corporate debtor failed to make repayment of its debt - existence of debt and dispute or not - time limitation - HELD THAT:- In the present case, there is no acknowledge issued by Appellant/Corporate Debtor prior to expiry of 3 years or from the date of default. Therefore, the Application filed by the 1st Respondent before the Adjudicating Authority on 30.08.2018 is beyond the period of limitation. The Corporate Debtor is released from the rigor of Corporate Insolvency Resolution Process and action taken by IRP/RP and Committee of Creditor, if any, in view of the impugned order set aside - matter is remitted back to Adjudicating Authority to decide the fee and costs of Corporate Insolvency Resolution process payable to IRP/RP which shall be borne by the Bank of India - Appeal allowed.
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2020 (4) TMI 514
Recovery of monies due to the corporate debtor under liquidation - amount due and payable - interpretation of section 60(6) of IBC, 2016 - HELD THAT:- After liquidation of the Corporate Debtor, the liquidator steps into the shoes of the Corporate Debtor and as per Regulation 39 of the IBBI (Liquidation Process) Regulation 2016, the liquidator is empowered to proceed to recover and realize the dues to the Corporate Debtor for maximization of value to the stakeholders, can initiate action for recovery of dues - Further, the maxim 'reddendo singula singulis', or for that case any interpretation should be given to a sentence, only if the said sentence is vague and ambiguous and when the section is lucid and unambiguous then there is no need for any interpretation. Further, even for the sake of argument, if the interpretation of 'reddendo singula singulis' is applied to section 60(6) of the IBC, 2016, it should be noted that the said interpretation should be confined only with the object and words contained in section 60(6) of IBC, 2016 and should not be referred or read in consonance with section 14 of IBC, 2016. It can safely be concluded that an amount of ₹ 24,36,00,048/- is due and payable by Respondent to the Corporate Debtor - Application allowed. Respondent is directed to make the payment of the said amount o within six weeks from the date of the pronouncement of this order, failing which 12% interest per annum shall be charged from the Respondent on delayed payments till the realization of the whole of amount.
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2020 (4) TMI 513
Approval of Resolution Plan - the contention of the Appellant is that the Resolution Plan approved is not in compliance with the provisions of the Insolvency and Bankruptcy Code, 2016 (IBC); that the provision of paying NIL amount to the Operational Creditors is not as per provisions of IBC and also that the Operational Creditors deserved a similar treatment as Financial Creditors; that it is wrong on the part of Committee of Creditors (COC) to approve a Resolution Plan which provided for payment only to members of the Committee and no other stakeholders. HELD THAT:- We have already reproduced portion from Part B - Financial Proposal with regard to what the approved Resolution Plan states regarding dues to the Operational Creditors. The proposal is based on the assessment that there is no liquidation value due to Operational Creditors. Although it is not stated but there is reason to doubt that the Resolution Applicants were aware of the liquidation value. There is no dispute that so many of the Operational Creditors have been left high and dry giving them nil amount which Hon'ble Supreme Court has observed that giving NIL to Operational Creditors would certainly not balance the interest of all stakeholders or maximise the value of assets of the Corporate Debtor if it becomes impossible to continue running its business as a going concern. The Impugned Order accepting the Resolution Plan cannot be upheld. The Resolution Plan does not appear to have taken care of interest of all stakeholders including Operational Creditors and the decision of the COC also does not reflect that it has taken into account the fact that the Corporate Debtor needs to be kept as a going concern and that there is need to maximise the value of the assets and that the interest of all the stakeholders including Operational Creditor has to be taken care of - matter remitted back to the Adjudicating Authority with a direction to send back the Resolution Plan to the Committee of Creditors to resubmit the Plan - appeal disposed off.
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2020 (4) TMI 512
Maintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its debt - existence of debt and dispute or not - HELD THAT:- Considering the nature of business, the petitioner cannot be considered as operational creditor. As defined under sub-section (20) of section 5 of the I B Code an operational creditor means a person to whom an operational debt is owed and includes any person to whom such debt has been legally assigned or transferred. In the instant case there is no operational debt owed by the respondent, rather the applicant procures raw diamond and supplies it to the respondent for finishing/polishing and after polishing the same is sent back to the applicant - On a mere perusal of the definition of operational creditor and operational debt it is found that, in the instant case, there is no such relation of operational creditor and corporate debtor between the two parties as the applicant never provided any goods and services to the respondent. The application so filed is not maintainable and hence stands dismissed.
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2020 (4) TMI 511
Maintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its debt - existence of debt and dispute or not - HELD THAT:- It is always open to the 'Corporate Debtor' to point out existence of dispute, if any or to show that claimed amount has been paid already and there is no debt due and payable. However, such existence of dispute should be that of a period prior to the issuance of the demand notice under section 8(1) of the Code. In Mobilox Innovations (P.) Ltd. v. Kirusa Software (P.) Ltd. [ 2017 (9) TMI 1270 - SUPREME COURT ] , the Hon'ble Supreme Court held that the existence of the dispute and/or the suit or arbitration proceeding must be pre-existing - i.e. it must exist before the receipt of the demand notice or invoice, as the case maybe. It is clear that the existence of dispute must be pre-existing i.e. it must exist prior to issuance of the demand notice or invoice. If it comes to the notice of the Adjudicating Authority that the 'operational debt' is exceeding ₹ 1 lakh and the application shows that the aforesaid debt is due and payable and has not been paid, in such case, in absence of existence of a dispute between the parties or the record of the pendency of a suit or arbitration proceeding filed before the receipt of the demand notice of the unpaid 'operational debt', the application under section 9 cannot be rejected and is required to be admitted. Merely because the 'Corporate Debtor' has disputed the claim by showing that there is certain counter claim, it cannot be held that there is pre-existence of dispute - when the facts of the instant case are considered, it is observed that having received the statutory notice u/s 8 from the Operational Creditor, the Corporate Debtor had sent a reply within 10 days of receipt of the notice. This Adjudicating Authority is satisfied that the Operational Creditor has proved its case by placing evidence that default has occurred for which the Corporate Debtor was liable to pay - Petition admitted - moratorium declared.
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2020 (4) TMI 510
Maintainability of petition - initiation of CIRP - Financial debt - existence of debt and dispute or not - HELD THAT:- The constitution of Financial Creditor as an NBFC is evidenced by the certificate of registration issued by the RBI. The grant of financial assistance is evidenced by the banking transactions. The accepted liability to pay interest thereon finds corroboration by tender of interest and deduction of TDS duly deposited with the Income-tax Authority and substantiated by Form 26AS of the Financial Creditor. The resistance raised by the Corporate Debtor that the same was not a loan, finds no merit with this Bench. This Bench has taken note of the fact that a record of disbursal of the amount by the petitioner, a Non-Banking Financial Company, to the Corporate Debtor is vide a Banking transactions. The Corporate Debtor therefore cannot dispute the same. It has also not been repudiated that the debt has not been repaid - the insistence of the Corporate Debtor that the transaction is not a financial debt is inexplicable. The Act does require that a financial obligation shall only arise upon the terms being reduced into writing. Ld. PCS has cogently explained that the transaction does not get vitiated for want of an agreement in terms of section 186(11) of the Companies Act, 2013. The resistance of the prayer by the Corporate Debtor has no legs to stand upon. The defence is frivolous raised in a desperate attempt to resist initiation of the CIR process. This Bench is therefore of the opinion that Operational Creditor is entitled to seek initiation of the CIR process of the Corporate Debtor for its inability to liquidate its dues. Accordingly, this petition is Admitted. Petition admitted - moratorium declared - Report be filed before this Bench on 11th March, 2020.
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2020 (4) TMI 509
Maintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its debt - existence of debt and dispute or not - HELD THAT:- There are several disputed question of facts, which cannot be looked into in a proceedings initiated under the provisions of Code, which is admittedly summary in nature, wherein prima facie debt and default in question should not be in dispute, in an Application/Petition filed under provisions of section 9 of Code. The Adjudicating Authority, even cannot go simply go by debt and default, it should also see the object of Code, before initiating CIRP against the Corporate Debtor, which would have serious civil consequences, and would result in devastating effect on various stakeholders of Corporate Debtor. It is settled position of law that the provisions of Code cannot be invoked for recovery of outstanding alleged amount(s) - The Hon'ble Supreme Court in the case of Mobilox Innovations (P.) Ltd. v. Kirusa Software (P.) Ltd. [ 2017 (9) TMI 1270 - SUPREME COURT ] has inter alia, held that IBC, 2016 is not intended to be substitute to a recovery forum. The Petitioner failed to point out the claim in question is un-disputed and it filed with an intention to recover the alleged dues rather to justify to initiate CIRP in respect of Corporate Debtor - Petition dismissed.
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2020 (4) TMI 508
Maintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its debt - existence of debt and dispute or not - HELD THAT:- This Adjudicating Authority is satisfied that, (a) Existence of debt is above Rs. One Lac; (b) Debt is due; (c) Default has occurred on 08/06/2017; (d) Petition has been filed within the limitation period as the date of default is 08/06/2017 and the petition has been filed on 20/07/2018. (e) Inspite of giving Demand Notice in Form No. 3 as required by Section 8 of the IB Code read with Rule 5 of the IB Rules and Publication of notice in the newspaper Respondent did not choose to give any reply. (f) Copy of the Application filed before the Adjudicating Authority has been sent to the Corporate Debtor, Paper publication was done and the application filed by the Petitioner under section 9 of IBC is found to be complete for the purpose of initiation of Corporate Insolvency Resolution Process against the Corporate Debtor. Petition admitted.
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2020 (4) TMI 507
Maintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its debt - existence of debt and dispute or not - HELD THAT:- There is no pre-existing dispute regarding the unpaid operational debt, being the principal amount of ₹ 6,10,42,439.00. The invoices for the period of 2-11-2015 to 25-6-2018 were raised upon the Corporate Debtor on a running account basis, but the outstanding dues were not paid. Thus, the existence of debt and default is established. The application made by the Operational Creditor is complete in all respects as required by law. It clearly shows that the Corporate Debtor is in default of a debt due and payable, and the default is in excess of minimum amount of one lakh rupees stipulated under section 4(1) of the IBC. Therefore, the default stands established and there is no reason to deny the admission of the Petition - Petition admitted - moratorium declared.
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2020 (4) TMI 506
Maintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its debt - existence of dispute or not - HELD THAT:- This is an Application filed under section 7 of the Code by Punjab National Bank for initiating the CIRP process as against the Corporate Debtor alleging default in repayment of loan availed by the Corporate Debtor. The availing of loan and executing the documents as referred to in the Application is not at all under challenge - the ld. Counsel, appearing for the corporate Debtor, has attempted to establish that the demand for repayment of ₹ 15 crore along with interest is actually not due and payable by the Corporate Debtor. What is demanded by the Financial Creditor, here in the case in hand, is the sum of ₹ 22,65,61,156.57, which includes interest @ 16% per annum and the demand was on the basis of terms and conditions in the sanction letter dated 30-07-2012. Admittedly, the Corporate Debtor has committed default. According to the Financial Creditor, the account maintained in the name of the Corporate Debtor has been classified as non-performing asset as on 28-01-2016 and produced record of default (copy of CIBIL Report- Annexure -1 at Page 222) to prove the default - Application admitted - moratorium declared.
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2020 (4) TMI 505
Maintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its debt - existence of debt and dispute or not - HELD THAT:- The debt and default in question having no dispute and having no objections filed by the Respondent. The Adjudicating Authority has granted sufficient time to explore the possibility of settlement of the issue in question. Therefore, there is no option left for the Adjudicating Authority except to admit the case by initiating CIRP in respect of the Corporate Debtor, appointing IRP and imposing moratorium, etc. Application admitted - moratorium declared.
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2020 (4) TMI 504
Maintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its dues - operational debt exceeding ₹ 1 Lakh or not - existence of debt and dispute or not - HELD THAT:- The existence of a dispute between the parties or a record of pendency of a suit or arbitration should be filed before the receipt of the Demand notice of the unpaid Operational Debt. Admittedly, in this case, the Demand notice was issued to the Corporate Debtor on 1-5-2019 to which the Corporate Debtor has admitted his liability and has also stated that they have not filed any appeal against the award of the Arbitrator. It is an admitted fact that only after filing of the petition, the Corporate Debtor has filed the O.P. No. 549 of 2019 challenging the arbitral award which cannot be considered as a pre-existing dispute as contended by the Ld. Counsel for the Corporate Debtor in view of the above stated facts. Hence, there are no merit in the submissions made by the Ld. Counsel for the Corporate Debtor and therefore the application filed by the Corporate Debtor stands dismissed. From the documents produced on record, it is evident that the claim falls within the period of limitation of 3 years and is not barred by limitation. The claim amount as made in the petition is also in excess of ₹ 1,00,000/- being the statutory minimum amount fixed under section 4 of the IBC, 2016 for approaching this Tribunal by the creditors, in the instant case by an Operational Creditor - the Application as has been filed by the Operational Creditor is admitted and consequently Corporate Insolvency Resolution Process is initiated - petition admitted - moratorium declared.
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2020 (4) TMI 503
Approval of Resolution Plan - CIRP - whether by virtue of approval of the resolution plan for Adhunik Alloys and Power Limited -(the Principal Debtor of State Bank of India) and State Bank of India has consented for approval of that plan, right to file this proceeding against Corporate Debtor who is the guarantor of Adhunik Alloys and Power Limited for any default? - HELD THAT:- If we peruse the relevant portion of the resolution plan for Adhunik Alloys and Power Limited, approved by this Adjudicating Authority, we certainly come to know that the guarantor is not exonerated or discharged from its liability of paying balance outstanding though SBI - one of the members of the CoC in that proceeding gave consent for the approval of the plan. Under the I B Code, 2016, the debtor is discharged on approval and implementation of the resolution plan. The resolution plan is approved when the Adjudicating Authority is satisfied that the resolution plan is approved by CoC and its contents are in accordance with the law. Therefore, the principal debtor discharged under I B Code, 2016 not on the instance of a creditor but due to operation of law that is approval of the resolution plan. Hence, the Guarantor is not discharged of its liability towards the creditor on discharge of principal debtors liability under the I B Code, 2016. The application filed by the Financial Creditor under section 7 of the Insolvency Bankruptcy Code, 2016 for initiating Corporate Insolvency Resolution Process against the Corporate Debtor, M/s Sungrowth Share Stocks Ltd., is hereby admitted - Application admitted - moratorium declared.
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Central Excise
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2020 (4) TMI 502
Clandestine removal - production capacity of machines - scope of remand proceedings - the reasonings arrived at by the Commissioner did not find favour with the Tribunal. In such circumstances, the matter came to be remitted - Tribunal completely overlooked the fact that in the first round of the litigation, the remand was on the very same issue and, therefore, there was no question of taking the view that it would be a futile exercise. Whether the Tribunal committed any error in passing the impugned order? Held that:- It is expected of the Department to know the position of law. When the position of law is abundantly clear that such examination of the machine can be undertaken at some other place, the Department should have agreed to do so. Having not done so, the Department now cannot take shelter of the order passed by the Tribunal, which is not tenable in law - By now, this litigation is almost two decades old. It will be too much for this Court to once again remand the matter for the very same exercise, which could have been undertaken a decade back. In such circumstances, we decline to accept the vociferous submission of the learned standing counsel appearing for the Revenue that the appellants should not be permitted to have an undue advantage as the same would lead to a huge loss to the Revenue. The case of the Department, of clandestine manufacture and removal of the goods should be looked into having regard to the production capacity of the machine, installed in the factory premises - For any good reason, if the Department was unable to arrive at any final conclusion with regard to the production capacity of the machine on account of the same not in a working condition, then the Department owed a duty to examine the machine of similar type, which might have been installed in any other factory premises. This is what Rule 173(E) of the Rules, 1944, provides for. The principle of law, in this regard, is that the burden will be upon the Department to show that the entries in the Registers, etc. match with the production capacity of the machine. The impugned orders passed by the Tribunal are hereby quashed and set aside. The substantial questions of law are answered in favour of the appellants and against the Revenue - Appeal allowed.
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2020 (4) TMI 501
Remission of duty - samples which were destroyed in the factory itself - whether the duty is required to be paid on the samples which were not removed from the factory but destroyed after conducting necessary tests on the same? - HELD THAT:- Undisputedly, the Appellants drew samples during the course of manufacture of aerated water for testing purposes. After testing, the remnant samples were kept for future complaints relating to the said manufactured products. After a period of time, the remnant samples were also destroyed. Reliance placed in the case of THE COMMISSIONER OF CENTRAL EXCISE VERSUS RPG LIFE SCIENCES LTD [ 2010 (12) TMI 52 - BOMBAY HIGH COURT] where it was held that Where the goods are not cleared out of the factory premises but were drawn for testing within the factory and in fact were consumed within the factory during the process of testing, the question of demanding any duty on those samples does not arise. In the present case, the Appellants are undisputedly maintaining the records meticulously on the consumption and disposal of the samples - appeal allowed - decided in favor of appellant.
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2020 (4) TMI 500
Extended period of limitation - CENVAT Credit - exempt goods - demand on the ground that Refined Cotton Seed Oil which is the major product of the appellant was exempted from payment of Excise Duty with effect from 01.03.2006 vide Notification No. 04/2005-C.E. dated 01.03.2005 as amended - HELD THAT:- A more or less similar issue has been addressed to by this Bench in the case of M/S SRIBA AGRO LTD., VERSUS CCE ST, GUNTUR [ 2016 (12) TMI 272 - CESTAT HYDERABAD] wherein this Bench has held that the Show Cause Notice issued after invoking the extended period of limitation could not sustain. The issue being identical, it is held that the appellant will have to succeed on limitation since the Revenue has not made out a case for invoking the extended period of limitation - demand set aside - appeal allowed - decided in favor of appellant.
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CST, VAT & Sales Tax
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2020 (4) TMI 499
Reduction of input tax credit - reduction on the ground that the limitation of availing of the tax credit as provided under Section 11(3)((b) could be applied only once irrespective of the fact as to whether particular commodity purchased falls in more than one sub-clauses of Section 11(3)(b) of the VAT Act - whether Section 84A of the VAT Act is a validating Act? HELD THAT:- It is evident that the amending Act specifically provides for validation of various aspects (namely assessment, reassessment, collection etc.) notwithstanding any judgement, decree or order of any court, Tribunal or authority to the contrary - Vide the Gujarat Value Added Tax (amendment) Act, 2018 (Gujarat Act No. 10 of 2017) Section 84A has been inserted in the Gujarat Value Added Tax Act, 2003 with retrospective effect. However, the amending Act does not provide for any validation of various acts of the revenue authorities namely the assessment, re-assessment, collection etc. Accordingly, the said Act cannot be treated as a validating Act . Section 84A (as inserted by 2017 amendment Act), provides for exclusion of certain period spent by the revenue authorities in the appellate proceedings for the purpose of calculating time limit for (i) audit assessment (ii) turnover escaping assessment (iii) appeal and (iv) revision. All these provisions provide for outer time limit of the order to be made. In case where the orders are already made by the revenue authorities and matter is closed, the retrospectives amendment without validation may not validate such orders. It is permissible for the Legislature, subject to its legislative competence otherwise, to enact a law which will withdraw or fundamentally alter the very basis on which a judicial pronouncement has proceeded and create a situation which if it had existed earlier, the Court would not have made the pronouncement - it is difficult to take the view that the VAT Amendment Act, 2018 is a validating Act. Competence of the State Legislature to enact Section 84A of the Act - HELD THAT:- A law enacted by a legislature without having legislative competence would be void ab initio and the same cannot be revived or revitalised even if the legislative competence is conferred on that legislature subsequently. But in a case where the legislature has legislative competence to enact a law, and some of its provisions violate any of the fundamental rights contained in Part III of the Constitution, the same would be rendered void under Article 13(2) of the Constitution and would remain unenforceable. The law so enacted is not wiped off the Statute Book nor it stands repealed. Further if the offending provisions of the Statute which violate fundamental rights are removed the law would become effective and enforceable even without re-enactment. Such a law, whether preConstitution or post-Constitution, is not wholly dead if it violates fundamental rights; it is merely eclipsed by fundamental right and remains as it were in a moribund condition as long as the shadow of fundamental rights falls upon it - A law declared void by a court is not effected from the Statute Book; it is revived and revitalised if Constitutional limitations are removed by Constitutional amendment or by re-enactment by legislature. Thus, Section 84A of the Gujarat Value Added Tax (Amendment) Act, 2018 is invalid on the ground that the same is beyond the legislative competence of the State Legislature. Whether Section 84A of the VAT Act is manifestly arbitrary and is liable to be struck down being violative of Article 14 of the Constitution of India? - HELD THAT:- It is well settled that as long as the legislation has the necessary competence to frame a law and the law so framed is not violative of the fundamental rights enshrined in the constitution or any of the constitutional provision, the Court would not strike down the statute merely on the perception that the same is harsh or unjust. Particularly, in taxing statutes the Courts have recognized much greater latitude in the legislation in framing suitable laws - It is equally well settled that wherever the parliament has the power to frame a statute it also includes the power to make the law retrospective. In other words, the parliament also has wide powers to frame the laws including taxing statutes with retrospective effect. However, the Courts have recognized certain inherent limitations in framing retrospective tax legislations. If unlimited time period is available to the Revenue for assessment/re-assessment/revision in any case based on a decision rendered in the case of any other dealer the same would lead to an irreparable situation and, in such circumstances, it renders Section 84A manifestly arbitrary and unreasonable - Section 84A of the VAT Act is liable to be struck down even on the ground of being manifestly arbitrary, excessive, oppressive and unreasonable. Section 84A of the Gujarat VAT Act is ultra vires and beyond the legislative competence of the State Legislature - Section 84A of the Gujarat VAT Act is manifestly arbitrary, unreasonable and therefore, violative of the Articles 14 and 19(1)(g) of the Constitution of India - Section 84A of the Gujarat VAT Act is not a validating Act. Section 84A of the Gujarat VAT Act is declared as ultra vires and beyond the legislative competence of the State Legislature under Entry 54 of List II of the Seventh Schedule to the Constitution of India and is also declared to be violative of Article 14 of the Constitution of India on the ground of being manifestly arbitrary, unreasonable and oppressive - the impugned notices in each of the writ applications issued under Section 75 of the Gujarat VAT Act is hereby quashed and set aside.
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Indian Laws
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2020 (4) TMI 498
Dishonor of Cheque - insufficiency of funds - Section 138 of the NI Act - HELD THAT:- The cheque was issued towards the amount due and payable by the appellant for purchase of pesticides. As rightly observed by the High Court production of the account books/cash book may be relevant in the civil court; but may not be so in the criminal case filed under Section 138 of the N.I.Act. This is because of the presumption raised in favour of the holder of the cheque - In view of the concurrent findings recorded by the Trial Court as well as by the High Court there are no ground warranting interference with the conviction of the appellant under Section 138 of the N.I.Act. So far as the question of sentence is concerned, the cheque was issued by the appellant, for discharge of the debt, way back in the year 1999. Considering the fact that the cheque was issued in the year 1999 and having regard to the other facts and circumstances of the case and in the interest of justice we deem it appropriate to modify the sentence of imprisonment imposed upon the appellant and also the fine amount of ₹ 4,17,148/-. Appeal allowed in part.
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2020 (4) TMI 497
Adjournment of the case - on the last date adjournment slip had been moved on behalf of defendant no. 5 6 as counsel was keeping unwell and even on 26.09.2019, same had been the reason for adjournment - HELD THAT:- List the matter for completion of cross examination of PW-1 on 10.07.2020 at 12 noon.
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