TMI Tax Updates - e-Newsletter
April 20, 2024

Case Laws in this Newsletter:

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

Notifications

Customs

1. 30/2024 - dated 18-4-2024 - Cus (NT)

Rate of exchange of one unit of foreign currency equivalent to Indian rupees–Supersession Notification No.27/2024-Customs(N.T.), dated 4th April, 2024

GST - States

2. G.O. Ms. No. 1 - dated 4-4-2024 - Puducherry SGST

Notify “Public Tech Platform for Frictionless Credit” as the system with which information may be shared by the common portal based on consent under sub-section (2) of Section 158A of the Puducherry Goods and Services Tax Act, 2017

Circulars / Instructions / Orders

SEBI

1. SEBI/HO/AFD/SEC-1/P/CIR/2024/22 - dated 18-4-2024

Circular on Standardization of the Private Placement Memorandum (PPM) Audit Report

Income Tax

2. e-Verification Instruction No. 2 (i) of 2024 - F. No.: CIT(e-Verification)/2023-24/FVR/Instr./ - dated 19-3-2024

Instructions to the AO’s for initiating proceedings u/s 147 of I.T. Act, 1961 in e- Verification cases

3. e-Verification Instruction No. 2 of 2024 - dated 1-3-2024

Instructions to the AO’s for initiating proceedings u/s 147 of I.T. Act, 1961 in e-Verification cases

IBC

4. IBBI/LIQ/70/2024 - dated 18-4-2024

Partial modification to the circular no. IBBI/LIQ/61/2023 dated 28th September 2023 titled ‘Clarification w.r.t. Liquidators’ fee under clause (b) of sub-regulation (2) of Regulation 4 of IBBI (Liquidation Process) Regulations, 2016’.

Highlights / Catch Notes

GST

• Bail Granted in Economic Crime Case: Court Balances Personal Liberty with Stringent Conditions Amid Low Evidence Tampering Risk.

  Case-Laws - HC : Grant of Regular Bail - Forged tax invoices - Non-existent ghost business entities - commission of offence u/s 132(1)(b)(c) & (l) of the OGST Act - The court acknowledged the severe impact of economic offenses but also reiterated the fundamental right to personal liberty as enshrined in the Constitution. The court noted that the trial was well underway with significant witness testimonies already on record, reducing the risk of evidence tampering. The accused had already been in custody for a considerable period, which the court viewed as potentially punitive and prejudicial to the rights of the accused. Ultimately, the court granted bail to the applicants, setting stringent financial conditions and imposing strict requirements to ensure their appearance at trial.
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• Court Rules Against Improper Bank Account Attachment for Former Director in Tax Recovery Dispute.

  Case-Laws - HC : Recovery of tax arrears from the Former director of the Company - Attachment of Bank accounts - DIN of the petitioner got disqualified under Section 164(2)(a) of the Companies Act, 2013 - The High Court found that the attachment order was issued without proper consideration of the petitioner's status and without affording them an opportunity to present their case. The court held that this violated the petitioner's rights under Article 14 and 300A of the Constitution. - The High Court accepted the petitioner's argument that they had resigned from their directorship before the relevant period. As such, the court ruled that the petitioner could not be held liable for the company's tax dues during that period.
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• Petition for anticipatory bail and bank account release denied over alleged ineligible Input Tax Credit claims under CGST Act.

  Case-Laws - HC : Seeking grant for Anticipatory Bail - Allegations of availing ineligible Input Tax Credit (ITC) by their firm. - Prayer to release the attached bank account - non-existent at the given registered addresses - After thorough consideration, the High Court dismissed the plea, citing prima facie violations of the CGST Act, 2017, and the petitioner's failure to demonstrate eligibility for relief. The Court emphasized the seriousness of the allegations and the petitioner's lack of credibility, leading to the dismissal of the writ petition and the vacation of any interim protection.
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• Petitioner's GSTIN Activated Retroactively Due to Technical Errors, Allowing Input Tax Credit Claim from July 1, 2017.

  Case-Laws - HC : Seeking activation of GSTIN and granting final certificate of registration to the Petitioners from 01.07.2017 - The case involved a dispute regarding the activation of the petitioner's GSTIN under the Goods and Services Tax (GST) regime. Technical glitches initially resulted in the linkage of the petitioner's GSTIN to the PAN of a partnership firm instead of the proprietor's PAN. As a consequence, the petitioner faced challenges in availing input tax credit for purchases made during the transition period. - The High Court found merit in the petitioner's argument, ruling that they were not responsible for the initial technical errors. The Court ordered the activation of the correct GSTIN with retroactive effect from July 1, 2017, allowing the petitioner to avail input tax credit for the relevant period.
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• Court Rules Malabar Parotas as Bread for GST; Classified Under 5% Tax Rate, Aligning with Khakhra and Roti.

  Case-Laws - HC : Classification of goods - rate of tax - Classic Malabar Parota - Whole Wheat Malabar Parota - The court determined that the Malabar Parotas should not be classified under the heading 2106 as they are not akin to the other food preparations specified therein, which typically include items requiring more substantial processing. - The court highlighted that the 'bread' definition in the GST regime should be broadly interpreted to include varieties of bread prevalent in different cultures, including Indian flatbreads. - Ultimately, the court held that since Malabar Parotas are akin to items specified under tariff item 1905 9090, they should attract a GST of 5% (2.5% CGST + 2.5% SGST), as they are similar to products like Khakhra, plain chapati, or roti, which are also covered under this entry.
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• GST Registration Restored After Health-Related Filing Delays; Court Cites Trader Inclusion as Crucial for Economic Activity.

  Case-Laws - HC : Cancellation of GST Registrations - The High Court observed that the petitioner, a wholesaler and distributor, failed to file returns for six months due to ill-health. However, it noted that the cancellation was based on the failure to respond to the show cause notice, issued through an online portal. The court referred to a previous case where it was held that keeping traders out of the GST regime serves no useful purpose. Thus, the court directed the restoration of the petitioner's GST registration upon payment of due amounts and penalties.
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• Court Urges Fair GST Procedures: Notices Must Be Sent by Post and in Regional Languages to Ensure Justice.

  Case-Laws - HC : Violation of principles of natural justice - Mode of Communication - petitioner submits that in most of the cases, the assessees are not aware of the show cause notices and assessment orders due to lack of communication through post - The Court recognized the petitioner's argument regarding the lack of awareness among traders regarding electronic communications. It emphasized the importance of providing adequate opportunity to taxpayers, suggesting that notices should also be issued through postal services and in regional languages to facilitate better understanding and response. - The Court noted the petitioner's assertion regarding the Department's failure to adhere to prescribed procedures. - It emphasized the importance of fair procedures and providing sufficient opportunity to taxpayers before passing adverse orders.
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• Court Rules GST Registration Cancellation Unjust Due to Lack of Proper Notice; Orders Appeal with Extended Deadline.

  Case-Laws - HC : Cancellation of GST registration of petitioner - The High Court acknowledges that the show cause notice was served solely through the portal and not through other means such as email or letter. Considering the petitioner's lack of familiarity with the system and the failure of their previous accountant to inform them about the non-filing of returns, the Court finds merit in the petitioner's argument. The Court notes that the cancellation occurred without giving the petitioner an opportunity to be heard, which is against the principles of natural justice. - The Court considers the petitioner's personal circumstances and directs them to file an appeal within 30 days, ensuring the appeal is entertained without considering the issue of limitation.
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• Court Rules on Tax Levy for Non-Banking Financial Services; Trade Receivables Misclassified as Taxable Turnover.

  Case-Laws - HC : Levy of tax - non-banking financial services - sundry creditors - GSTR-9C reconciliation statement - The Court found that treating total trade receivables as taxable turnover was erroneous, especially when the issue of non-payment to sundry creditors was raised. It was reasoned that only trade payables, not receivables, should have been considered for tax liability. The impugned order was set aside on this issue, and it was remanded for reconsideration.
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Income Tax

• Court Rules Leasing Income from Malls as Business Income Due to Company's Primary Business Objective.

  Case-Laws - HC : Correct head of income - Income from leasing or letting out the properties in shopping-cum-entertainment Mall - “income from business” or “income from house property” - After careful consideration, the High Court affirmed the decision of the CIT(A) and the ITAT that the income derived from leasing out properties in the mall should be categorized as "income from business." The Court noted that the assessee company's main object, as per its Memorandum of Article and Association, involved various business activities related to owning, leasing, and managing properties like multiplexes, cineplexes, and shopping malls. Therefore, the income from leasing out properties in the mall constituted income from business under Section 28 of the Income Tax Act.
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• Reopening of Assessment Ruled Invalid Due to Lack of New Evidence and Failure to Allege Non-Disclosure of Material Facts.

  Case-Laws - HC : Validity of reopening of assessment - The High court observed that the reasons for reopening did not specifically allege any failure on the part of the petitioner to disclose all material facts. Moreover, the issues raised were already considered during the original assessment proceedings. Therefore, the reopening based on a change of opinion was not justified.
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• Court Affirms Proper Examination of CSR Expenses Under Income Tax Law, Dismisses Appeal.

  Case-Laws - HC : Revision u/s 263 - CSR expenses - admissibility as the deduction u/s 37(1) - The High Court concurred with the findings of the ITAT that the assessing officer had adequately inquired into the CSR expenses. It affirmed that the expenses were legitimately claimed by the respondent and were not erroneous. The Court emphasized that no substantial question of law arose in this factual matter, leading to the dismissal of the appeal.
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• Acquittal in Tax Evasion Case: Court Finds No Intent to Evade Despite 28-Month Filing Delay; Explanations Accepted.

  Case-Laws - HC : Acquittal of charge u/s 276CC - respondent has failed to comply with the provisions contained u/s 139(1) and he has submitted the income tax returns after a delay of 28 months - The High Court concluded that the prosecution failed to establish beyond reasonable doubt that the respondent had the requisite mens rea to evade tax. Considering the explanations provided by the respondent regarding the delay in filing income tax returns, the court found no evidence of deliberate wrongdoing. The court upheld the judgment of the trial court, acquitting the respondent of the charges under Section 276CC of the Income Tax Act, 1961.
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• Court Overturns Assessment Order Due to Denied Personal Hearing, Citing Video Conference Technical Issues.

  Case-Laws - HC : Denial of specific request for personal hearing - The High Court noted that the petitioner had indeed expressed a legitimate difficulty in availing the opportunity for a personal hearing through video conference due to technical issues with the web portal. Referring to a previous judgment, the Court emphasized that the mere failure to click on the request button should not preclude the petitioner from being granted a personal hearing, especially when the petitioner had explicitly requested it in written submissions. - Consequently, the Court set aside the impugned assessment order and directed that the assessment be framed after affording the petitioner a reasonable opportunity for a personal hearing through video conference within a specified timeframe.
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• Tribunal Affirms Deduction Eligibility for Assessee's Interest Income from Banks u/s 80P(2)(d.

  Case-Laws - AT : Deduction u/s 80P - interest income(s) derived from such nationalized/other bank(s) - After examining the provisions of Sec. 80P(2)(d) and relevant legal interpretations, including judicial pronouncements and the CBDT Circular No. 14, the Tribunal concluded that the assessee was entitled to the deduction. Despite conflicting views, the Tribunal favored precedents supporting the assessee's position.
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• Tribunal Rules Expenses from Income Declaration Scheme, 2016, Not Taxable as Unexplained Expenditure.

  Case-Laws - AT : Additions based on Cash Expenditure - Disclosure were made by the appellant in IDS - The Tribunal ruled in favor of the appellant, holding that the entries did not warrant additional taxation. It noted that the expenses were from known sources and reconciled with existing books, thus not constituting unexplained expenditure under section 69C. Moreover, it accepted the appellant's claim regarding the disclosure under the Income Declaration Scheme, 2016, ruling that the expenses should not be treated as taxable income.
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• Tribunal Rules Detailed Fact Analysis Needed; Invalidates Rectification Order on Investment Source Dispute.

  Case-Laws - AT : Validity of order passed u/s 154 - "Amount to Review" of the original assessment order or not - The primary issue was the source of investment - The Appellate Tribunal upheld the appellant's contention, emphasizing that a mistake apparent from the record must be evident without extensive deliberation. As the source of investment was subject to debate and required a thorough examination of facts, it did not qualify as a mistake apparent from the record. Therefore, the Tribunal deemed the rectification order invalid and set it aside, quashing the addition made to the assessee's income. - In conclusion, the Tribunal's decision reaffirmed the principle that a rectification order cannot be used to revise issues that require detailed analysis and interpretation of facts, especially when the original assessment has already accepted a particular position on the matter.
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• Relaunch Expenses Deemed Revenue, Not Capital: Tribunal Overturns Officer's Classification in Rebranding Case.

  Case-Laws - AT : Nature of expenses - Relaunch expenses - deferred revenue expenditure claimed to the extent of 1/3rd in each of the year -The tribunal disagreed with the AO's categorization of the relaunch expenses as capital expenditure. It recognized these expenses as revenue in nature, incurred during the ordinary course of business for rebranding and promotional activities. The tribunal referenced several precedents where similar expenses were treated as revenue expenses, thereby allowing the appeal on this point.
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• Tribunal Rules Sales Authentic During Demonetization, Rejects Unexplained Cash Credit Addition u/s 68.

  Case-Laws - AT : Addition of bogus sales - difference in opinion between learned Members constituting the bench - The appellate tribunal (Third Member) addressed the dispute arising from alleged bogus sales transactions during the demonetization period. The Assessing Officer treated these transactions as unexplained cash credit under Section 68 of the Income Tax Act. However, the Tribunal found that the assessee sufficiently proved the authenticity of the sales through meticulous record-keeping and documentary evidence, despite challenges such as non-responses from some parties and allegations of sham transactions. - The Third Member upheld the decision of the learned Accountant Member to reject the addition under Section 68, considering the adequacy of evidence presented by the assessee.
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• Tribunal Confirms Loan Deletion Due to Adequate Evidence, Dismisses Revenue's Appeal on Unsecured Loans and Share Application.

  Case-Laws - AT : Additions on account of Bogus unsecured loans and bogus share capital money - Revenue argued that the unsecured loan from entities controlled by a hawala operator should be treated as accommodation entries and assessed as the assessee's own income. - The Appellate Tribunal found that the assessee had provided sufficient evidence to establish the identity, genuineness, and creditworthiness of the lenders. Despite the AO's reliance on statements from the hawala operator, the Tribunal noted that such statements were recorded without the assessee's opportunity for cross-examination. As the assessee had fulfilled the burden of proof u/s 68, the Tribunal upheld the CIT(A)'s decision to delete the addition of the unsecured loan. - Furthermore, it was found that the share application money was not received by the assessee during the relevant assessment year, as evidenced by the balance sheet. Overall, the Tribunal dismissed the Revenue's appeal and confirmed the decisions of the CIT(A).
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• Section 50C Doesn't Apply to Leasehold Rights; ITAT Confirms Exclusion in LTCG Calculations for Limited Land Rights.

  Case-Laws - AT : Computation of LTCG u/s. 50C - leasehold right on land acquired - valuation of properties - The ITAT meticulously analyzed the nature of leasehold versus freehold properties and affirmed that Section 50C is applicable only to "land or building or both", not extending to leasehold interests which are fundamentally different in nature due to their restricted and limited rights. - The Tribunal also addressed the submission related to the first and second provisos to Section 50C concerning the valuation of properties based on agreements and their registration dates. It was emphasized that the agreement date and the actual consideration should guide the capital gains computation, especially when a discrepancy exists between the agreement date and registration date values. - Ultimately, the Tribunal supported the respondent's position by ruling that leasehold rights in land do not fall under the ambit of Section 50C.
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• Tax Tribunal Rules Enhancement of Security Deposit Taxable Without Due Process Invalid.

  Case-Laws - AT : Enhancement of assessment - Power of CIT(A) u/s 251(2) - addition u/s 56(2)(vii) - The appellant had received Rs. 25,00,000 as a security deposit from a developer, the amount was subsequently repaid - Providing / granting the appellant a reasonable opportunity to present their case against the enhancement - The Tribunal deemed this non-compliance as an irregularity rather than an illegality. However, the Tribunal decided to review the addition made under section 56(2)(vii) of the Act. It was determined that since the deposit received by the appellant was not without consideration, being related to a development agreement, the addition was not sustainable. Therefore, the appeal was allowed, and the impugned additions were directed to be deleted.
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• Tribunal Rules on Commission Expenses and Franking Charges as Allowable Business Expenditures Pending Verification.

  Case-Laws - AT : Addition of commission expenses and franking charges - Allowable business expenditure or not? - The Tribunal acknowledged that the assessee had provided details of the commission agents to whom payments were made, along with invoices. However, it noted that certain details, such as the PAN of some agents, were missing. The Tribunal directed the AO to verify whether these agents had declared the commission income in their tax returns. If the agents could demonstrate that they declared the income, and the services provided were genuine, the commission expenses should be allowed.
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• Tribunal Allows Deduction of Interest Payments by Indian Branch to Head Office Despite Initial Tax Disallowance.

  Case-Laws - AT : Disallowance of interest paid to Head Office - Non deduction of TDS - assessee submitted that Assessing Officer held that interest income is taxable under DTAA at 10% in the hands of the HO and disallowed the claim of deduction on account of non-deduction of tax which is allegedly deductible at source - The tribunal allowed the deduction of interest payments made by the Indian branch to its Head Office and overseas branches.
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• Tribunal Confirms Salary Expenses for Expatriates Not Deemed Income, Rejects Revenue's Section 28(iv) Claim.

  Case-Laws - AT : Additions (Benefit) u/s 28(iv) - Expenditure incurred by the HO for salary paid to the expatriate employees for rendering services to PE - The tribunal upheld the allowance of salary expenses paid to expatriate employees, rejecting the revenue's argument under Section 28(iv) of the Income Tax Act that unrecorded expenses should lead to deemed income. The tribunal agreed that since these expenses had already been subjected to tax as salary income in the employees' returns, they did not constitute a benefit under Section 28(iv).
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• Tribunal Overrules Tax Revision, Supports AO's View on Allowable Interest Expenditure in Business Loan Case.

  Case-Laws - AT : Revision u/s 263 - As per CIT, AO has not examined the issue of interest expenditure claimed against interest from third party - The Tribunal observed that the assessment order was not erroneous as the Assessing Officer had conducted a detailed inquiry and taken a plausible view. Additionally, the order was not prejudicial to the revenue's interest. Therefore, the Tribunal quashed the revisionary proceedings initiated under Section 263 of the Act. The Tribunal acknowledged the commercial expediency behind the utilization of funds for advancing loans to another entity. It concluded that the interest expenditure claimed was allowable, considering the circumstances and business nature of the assessee. - Consequently, the tribunal quashed the revisionary proceedings initiated u/s 263.
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• Tribunal Upholds Deletion of Additions for Bogus Loans and Cash Credits Due to Lack of Incriminating Evidence.

  Case-Laws - AT : Assessment u/s 153A - Addition u/s 68 - bogus unsecured loan - unexplained cash credit received from shell/paper companies under the garb of unsecured loan - The revenue challenged the deletion of additions relating to unexplained cash credits and disallowed interest expenses. However, the tribunal upheld the decision of the Commissioner of Income Tax (Appeals) based on the absence of incriminating material found during the search.
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• Tribunal Rules No Unaccounted Investment in Property Purchase; Insufficient Evidence for Cash Transactions.

  Case-Laws - AT : Addition u/s 69 - The dispute arose from the purchase of immovable properties by the assessee, where the payment was made through cheques but not disclosed in the books. The Revenue contended that the sale deed was executed without encashing the cheques, indicating unaccounted investment. However, the Appellate Tribunal, after thorough scrutiny of the facts and submissions, ruled in favor of the assessee. It highlighted the absence of evidence supporting cash transactions and the justifiable reasons for the delayed payment. Citing legal precedents, the Tribunal concluded that section 69 couldn't be invoked without evidence of actual expenditure and unexplained sources. Consequently, it directed the deletion of the addition.
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Customs

• Shipping Line Employee Cleared of Document Manipulation Penalty; Tribunal Finds No Evidence of Appellant's Involvement.

  Case-Laws - AT : Penalty imposed on the appellant being the employee of the Shipping Line u/s 114AA - manipulation in the document - The Tribunal analyzed the purpose behind the introduction of Section 114AA, which aims to penalize those who avail export benefits without actually exporting goods. The provision applies to those who knowingly or intentionally make false declarations or documents. The Tribunal noted that the manipulation in the documents was done by the Dubai branch of the shipping line at the behest of the actual supplier. There was no evidence linking the appellant to this manipulation. - Therefore, the Tribunal concluded that no penalty could be imposed on the appellant, and the appeal was allowed.
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• Tribunal Overturns Penalty Against Customs Broker; No Intent Found in Export Scheme Violations.

  Case-Laws - AT : Penalty under Rule 18 (1) of CBLR 2018 on customs broker - exporter availed undue benefit under Merchandise Exports from India Scheme (MEIS) in the export of safety matches - The Tribunal noted that while the appellant was accused of violating regulations 10(d) and 10(e) of CBLR 2018, it did not gain any direct benefit from the alleged violations. This lack of mens rea (intent) on the part of the appellant was a crucial factor in the decision-making process. The Tribunal emphasized that the classification of goods is a question of law and cannot be treated as misdeclaration or misstatement unless there is clear evidence of deliberate intent. - Ultimately, the Tribunal ruled in favor of the appellant, setting aside the penalty imposed and allowing the appeal.
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• Tribunal Upholds Duty Exemption for "Open Cells," Citing Misinterpretation of Exemptions; Calls for Fresh Adjudication.

  Case-Laws - AT : Benefit of exemption from Customs Duty - Classification of impugned goods viz. “Open Cells” and other components - The CESTAT affirmed the classification of the impugned goods under the relevant tariff headings as claimed by the appellants. The tribunal analyzed whether the goods meet the specific descriptions under the exemption notifications. It noted that previous interpretations by the Revenue might not have fully considered the specific descriptions and intended uses outlined in the notification. - The tribunal highlights the need for clear reasoning in administrative decisions affecting duty exemptions and stresses adherence to judicial precedents and proper examination of all relevant facts and laws. - Matter remanded back for fresh adjudication.
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Corporate Law

• Auditors Penalized for Misconduct After Ignoring Financial Irregularities and Misleading Audit Report Findings.

  Case-Laws - NFRA : Professional Misconduct by CA - The NFRA found that the auditors neglected their duty to perform an independent and thorough audit. They overlooked critical signals of potential financial irregularities communicated by the previously resigned auditor and failed to investigate or challenge the company's management on these points. The auditors issued an audit report that included an EoM paragraph suggesting no significant issues under section 143(12) of the Companies Act, which was misleading given the substantial evidence to the contrary. A monetary penalty of ₹3 crore was imposed on M/s Pathak H.D. & Associates. - Separate penalties imposed on EP and EQCR Partners.
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IBC

• Tribunal Rules Against Creditor Claim, Upholds Resolution Plan Due to Lack of Direct Security Interest and Registration Issues.

  Case-Laws - AT : Approval of Resolution Plan - whether the Appellant is secured creditor of the Corporate Debtor or not? - The Tribunal noted that the appellant based their claim on sanction letters and other documents which did not explicitly create a security interest over the corporate debtor’s assets directly. It was highlighted that the mortgages were held by guarantors, not the corporate debtor, and the registration of such charges was not adequately completed as per the requirements of the Companies Act, 2013. The NCLAT dismissed the appeal, upholding the resolution plan and affirming the decision of the lower tribunal.
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Service Tax

• Technology Transfer Deemed Non-IP Under Indian Law, No Service Tax on License Fees to Russian Firm.

  Case-Laws - AT : Levy of service tax - Intellectual Property Services - The Tribunal observed that the technology transfer did not qualify as intellectual property rights under Section 65(55a) of the Act, as it was confidential and not registered under Indian law. Therefore, it did not fall under the definition of intellectual property services as per Section 65(55b). Referring to past cases and Circular No. 80/2010/2004-S.T., the Tribunal concluded that the appellant was not liable to pay service tax on the license fees and incidental expenses to the Russian company.
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• Tribunal Revises Service Tax Assessment Rules for Cross-Border Services, Focuses on Preventing Tax Avoidance.

  Case-Laws - AT : Point of Taxation rules - Liability for service tax on provisional entries made for services received from an associated enterprise located outside India. - The Tribunal notes that up to April 2012, tax should be paid based on the date of credit or payment, whichever is earlier. Post-April 2012, the rule changed to the date of debit or payment. The Tribunal acknowledged that provisional entries are a reasonable basis for determining tax liability due to statutory amendments aimed at curtailing tax avoidance. - The Tribunal remanded the case to the original authority to reassess the tax and penalties based on actual figures and compliance with statutory provisions.
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• Reimbursed Expenses to Foreign Distributors Taxable as Business Auxiliary Services, Tribunal Rules.

  Case-Laws - AT : Taxability of expenses reimbursed to the foreign distributors under reverse charge mechanism (RCM) - Business Auxiliary Services (BAS) - The Tribunal concluded that the services provided by the overseas distributors fell under BAS. It held that even though the relationship was structured as principal to principal, the services relating to warranty claims and network management performed by the distributors qualified as BAS due to their nature of marketing and promoting the appellant’s products.
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VAT

• Petitioner's Request to Remove Property Encumbrance Denied; Can Prove Bona Fide Intentions in Trial Court.

  Case-Laws - HC : Seeking to remove the encumbrance of the attachment in the petitioner's property - specific case of the petitioner is that the petitioner is a bona fide purchaser of the property from the fifth respondent and is therefore entitled to immunity under proviso to Section 43 of TNVAT Act, 2006 - The court dismissed the writ petition, granting the petitioner the liberty to establish his bona fide intentions in a trial court.
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Case Laws:

• GST

• 2024 (4) TMI 781
  Forged tax invoices - Grant of Regular Bail - non-existent ghost business entities - commission of offence u/s 132(1)(b)(c) (l) of the OGST Act - wrongfully availing Input Tax Credit (ITC) without physical receipt and supply of goods - Tests for grant or refusal of bail - right to speedy trial - Violation Of fundamental right as guaranteed under Article 21 of the Constitution of India - HELD THAT:- Keeping in view the core values of personal liberty, when the present case is tested, it appears that there is allegation of wrongfully availing Input Tax Credit of Rs. 316 crores against the petitioners and others. Out of the eight accused persons against whom PR was submitted, the present petitioners are in custody since 06.07.2022. However, the petitioner Niku @ Chhatar Singh was released on interim bail by the order of the learned trial Court and by the order of learned Addl. Sessions Judge for a total period of 81 days and he has surrendered to custody after expiry of interim bail on each occasion. It is also not disputed that the offence alleged against the petitioners is punishable up to five years, meaning thereby, the petitioners can be sentenced to a maximum period of five years in case of their conviction, but it is not sure as to whether the petitioners would be sentenced to the maximum imprisonment, even if on their conviction as the same is the discretion and domain of trial Court which can impose sentence by taking into relevant consideration in this case. As per the report of the learned trial Court and the affidavit filed on behalf of the petitioner Niku @ Chhatar Singh, 13 out of 23 PR witnesses have already been examined in this case, but the trial is yet to be concluded even after one year nine months of the custody of the petitioners. It is also clarified by the learned counsel for the CT, GST that out of the 10 remaining witness, one has already been expired and the whereabouts of another is not available and 3 out of the remaining 8 witnesses are official witnesses and rest are private witnesses and therefore, how much time would be required to complete the trial is eventually a guess in this situation. In the peculiar facts and circumstances of the situation, especially when the prolong custody of the petitioners which frustrates the right to speedy trial and the maximum punishment that is provided for the offence is five years, out of which one year nine months has already been suffered by the petitioners as a pretrial detention and taking into account a hypothetical consideration that the personal liberty of the petitioners cannot be restored back if the prosecution fails to bring home the charge against them on the face of the prolong incarceration generally militates against the most precious fundamental right as guaranteed under Article 21 of the Constitution of India and already 13 witnesses having examined in this case and the decision of the case revolves around documentary evidence and thereby, further detention of the petitioners in custody reasonably may not be in the interest of justice. Important tests for grant or refusal of bail is the tripod test which prescribes three tests; (i) whether the accused poses a flight risk? (ii) whether the accused is capable of influencing prosecution witnesses and lastly (iii) whether the accused is capable of tampering prosecution evidence? In this case, the petitioners appears to be resident of different place of Sundargarh District and their apprehension of posing flight risk can be curtailed by imposing appropriate conditions by directing them to surrender Passport or in the event, they are not having any Passport, they may be asked to file an affidavit before the trial Court. Additionally, the petitioner Niku @ Chhatar Singh having surrendered to custody on earlier occasions after expiry of interim bail granted to him also indicative of his not posing any flight risk to some extent. Further, examination of 13 witnesses without any adverse report against the petitioners for tampering their evidence, the apprehension of tampering of evidence can be prima facie ruled out at this stage. Similarly, prosecution report having already been submitted, there is hardly any question of influencing witnesses by the petitioners. Further, the grant of bail to an accused pending trial should not be confused with his acquittal of the criminal charges, which is of course to be decided by the criminal Court on appreciation of evidence tendered by the witnesses on conclusion of trial, but grant of bail to an accused is a process of transfer of custody of accused from the custody of law to the custody of surety on certain terms and conditions and the surety certainly has a duty to ensure appearance of the accused before the trial Court till conclusion of trial. In view of the undisputed logical sequitur of the discussions made hereinabove on the face of conspectus of materials placed on record including the long pretrial detention of the individual petitioners, which have punitive content, vis- -vis the maximum punishment prescribed for the offence alleged against the petitioners being not beyond five years, this Court is persuaded to take a lenient view in favour of the personal liberty of the petitioners to exercise its discretion to grant bail to the petitioners. Hence, the bail applications of the petitioners stand allowed and the petitioners namely Subash Kandulna, Chhatar Singh @ Niku Singh, Ram Bharose Shaw and Dhanman Shaw are allowed to go on bail on furnishing an unencumbered property surety of Rs. 50,00,000/- (Rupees Fifty Lakhs) each, in addition to bail bonds in the sum of Rs. 5,00,000/- (Rupees Five Lakhs) each with two solvent sureties for the like amount to the satisfaction of the learned Court in seisin of the case, on such terms and conditions as deem fit and proper. Accordingly, the BLAPL stand disposed of.

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• 2024 (4) TMI 780
  Violation of principles of natural justice - challenge to the ex parte nature of the order - no proper notice to file reply and in any case, no prior notice of hearing was served to the petitioner before the impugned order came to be passed - HELD THAT:- While there can be no dispute to the fact that the proceedings conducted by the respondent authorities are wholly irregular and contrary to the provisions of law and ex parte, without issuance of any notice to the petitioner and without communication of any date of hearing fixed in the proceedings, detailed note is made of the order sheet to record the wholly unacceptable conduct of the respondent authority in proceeding in the manner in which he has. Adjudication orders give rise to serious civil consequences. They create demands of tax as also penalties are often imposed. In the self assessment scheme, unless the noticee/assessee is given fair opportunity to furnish its reply and to present his case before the adjudicating authority the adjudication orders may only give rise to frivolous and wholly avoidable litigation contrary to the statutory scheme itself. The impugned order dated 23.02.2024 is set aside - the petitioner may treat the impugned order to be a final show-cause notice and furnish its detailed reply within a period of two weeks from today - the writ petition is disposed off.

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• 2024 (4) TMI 779
  Recovery of tax arrears from the Former director of the Company - Attachment of Bank accounts - DIN of the petitioner got disqualified under Section 164(2)(a) of the Companies Act, 2013 - HELD THAT:- A bare reading of section 79 of the Maharashtra Goods and Service Tax Act, 2017 (MGST Act) would bring about a cumulative effect that the principal liability is not on the petitioner who is not a registered person within the meaning of Section 79(1). Further Section 89 clearly provides that before taking any action of recovery against the directors of the company, a subjective satisfaction is required to be achieved by the concerned officer in regard to whether a person concerned against whom recovery is sought to be made was a director of a Private Limited Company for the concerned period. It is only after such satisfaction to the effect that such person was the director of the company, the liability could be fastened against such director - there is no manner of doubt that the impugned order passed against the petitioner is illegal and cannot be sustained. It is certainly in breach of the rights guaranteed to the petitioner under Article 14, read with Article 300A, of the Constitution. The attachments are lifted - petition allowed.

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• 2024 (4) TMI 778
  Maintainability of petition - Appellate Tribunal has not been constituted - this Writ Petition filed to review the order passed by the 1st respondent Deputy Commissioner(ST) GST (Appellate Authority)/1st respondent herein - HELD THAT:- The order does not call for any interference. The order does not suffer from any of the vices which would render the impugned order amenable/susceptible to a review under Art.226 of the Constitution of India. The order is also well reasoned and also does not suffer from any short coming. Therefore, the Writ Petition is liable to be dismissed. However, considering the fact that the petitioner has paid the disputed tax on 27.07.2022, the only relief the petitioner can seek is for payment of interest in installment. As per Sec.80 of the TNGST Act, 2017, the petitioner has to approach the Commissioner. This Writ petition is dismissed with liberty to the petitioner to approach the Commissioner within a period of 30 days from the date of receipt of this order.

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• 2024 (4) TMI 777
  Validity of impugned assessment order - reply to SCN given or not - violation of principles of natural justice - HELD THAT:- The petitioner is a small time contractor who has incurred the liability in the impugned order for a sum of Rs. 2,77,524/-. The petitioner has also been imposed with penalty of Rs. 27,752/- and interest of Rs. 15,192/-. It appears that petitioner is a semi literate person and may have not been fully aware of the implications of the notices issued by the Tax Department. Considering the same, this Court is inclined to give a partial relief to the petitioner by setting aside the impugned order and remitting the case back to the respondent to pass a fresh order on merits within a period of 60 days from the date of receipt of a copy of this order provided the petitioner furnishes all the documents that were called for along with a reply to the notice and also pays a token amount equivalent to 10% of the disputed tax to the department. Subject to such compliance, respondent may proceed to adjudicate the issue afresh. The writ petition is disposed off.

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• 2024 (4) TMI 776
  Validity of assessment order - Attachment of Bank Account of petitioner - HELD THAT:- The impugned order of attachment pre-date the order passed by this Court on 26.09.2023. Therefore, in the absence of an order staring against the petitioner as on date, continuance of impugned attachment order dated 03.06.2022, bearing reference Na.Ka.No.A8/1944/2021, cannot be sustained. It has to be set aside. Already, this Court has directed the authorities to grant personal hearing to the petitioner and thereafter, pass orders within a period of three months from the date of receipt of a copy of that order. However, more than three months have lapsed, since the order was passed on 26.09.2023. The first respondent is therefore directed to complete the proceedings within a period of 30 days from the date of receipt of a copy of this order. The writ petition is disposed off.

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• 2024 (4) TMI 775
  Violation of principles of natural justice - non-speaking order - period between July 2017 to March 2018 - HELD THAT:- It is noticed that the impugned order is not a speaking order. It has also not considered the reply filed by the petitioner on 01.11.2023 which has been referred to in Item No.3 in the reference column to the impugned order. As the impugned order is without proper reasoning, it is liable to be set aside and remitted back to the respondents to pass a fresh order on merits and in accordance with law within a period of six weeks from the date of receipt of a copy of this order. The writ petition is disposed off

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• 2024 (4) TMI 774
  Validity Of Order passed - No opportunity of personal hearing - inadvertent error committed while filing the GSTR 3B return was rectified while filing the annual return in Form GSTR 9 and the reconciliation statement in Form GSTR 9C - HELD THAT:- The impugned order reveals that the tax proposal was confirmed on the ground that the petitioner did not file any documents in proof of its reply. The petitioner had annexed the profit and loss account and the GSTR 9 and 9C returns along with reply dated 18.08.2023. In those circumstances, the conclusion that the petitioner did not file any documents cannot be sustained although the petitioner did not file all the documents listed at pages 76 and 77 of the typed set. It is also noticeable that no personal hearing was provided to the petitioner. Therefore, the impugned order calls for interference. Thus, the impugned assessment order dated 30.12.2023 is set aside and the matter is remanded for reconsideration. W.P. is disposed of on the above terms and connected miscellaneous petitions are closed.

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• 2024 (4) TMI 773
  Validity Of order in original - passed without any application of mind - Cancellation of registration of petitioner - HELD THAT:- In the present case, the facts are similar to one in Surendra Bahadur Singh [ 2023 (8) TMI 1262 - ALLAHABAD HIGH COURT] , wherein the appeal was barred by time u/s 107 of the Act. However, the Division Bench in Surendra Bahadur Singh s case (supra) took into consideration the original order and set aside the same being non-reasoned and allowed the petitioner therein to file reply to the show cause notice. Thus, the orders impugned herein are liable to be set aside. Accordingly, the order in original dated February 21, 2023 and the appellate order dated February 21, 2024 are quashed and set aside. The petitioner is directed to file its reply to the show cause notice within three weeks from date and the adjudicating authority is directed to proceed de novo and pass order after granting opportunity of hearing to the petitioner. With the above directions, the writ petition is allowed.

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• 2024 (4) TMI 772
  Violation of principles of natural justice - No opportunity of personal hearing - mandatory requirement u/s 75(4) of the Uttar Pradesh Goods and Services Tax, Act, 2017 - impugned adjudication order has been passed in breach of principle of natural justice or not - HELD THAT:- The significance of the word or in Section 75(4) of the UPGST Act, 2017 cannot be underestimated. The usage of the word or extends beyond its disjunctive function; it serves as a pivotal indicator of legislative intent regarding the necessity of providing an opportunity for personal hearing. Personal hearing represents a fundamental aspect of procedural fairness and natural justice, ensuring that individuals have the opportunity to present their case, respond to allegations, and address any concerns or mitigating factors directly to the decision-maker. It is a vital safeguard against arbitrary or unjust decisions. The inclusion of or in Section 75(4) of the UPGST Act, 2017, emphasizes the dual nature of the obligation to provide a personal hearing, accommodating both proactive requests from individuals seeking to defend their interests and reactive responses to adverse orders contemplated by tax authorities. In either scenario, the statutory mandate remains clear: the individual must be afforded an opportunity for personal hearing before any final determination is made regarding tax or penalty imposition. Moreover, the statutory mandate for personal hearing reflects an acknowledgement of the complex and multifaceted nature of tax and penalty determinations, which often involve intricate legal and factual considerations. Personal hearing provides a forum for nuanced discussion and exploration of these complexities, enabling decision-makers to make well-informed and equitable decisions based on a comprehensive understanding of the circumstances at hand. This Court in M/s Shree Sai Palace v. State of U.P. and Another [ 2024 (3) TMI 49 - ALLAHABAD HIGH COURT] relying on two judgments of coordinate Bench of this Court in Bharat Mint and Allied Chemicals v. Commissioner Commercial Tax and Others [ 2022 (3) TMI 492 - ALLAHABAD HIGH COURT] and M/s Primeone Work Force Pvt. Ltd. v. Union of India ,[ 2024 (1) TMI 625 - ALLAHABAD HIGH COURT] , in similar facts and circumstances has held that no orders can be allowed to pass through the legislative barriers of natural justice erected to safeguard individual rights and prevent abuse of power and that the opportunity of hearing is required to be afforded to the petitioner before passing orders. Thus, let there be a writ of certiorari issued against the order dated July 12, 2023 and the order dated August 18, 2022. These orders are quashed and set aside. This writ petition is, accordingly, allowed.

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• 2024 (4) TMI 771
  Writ Petition Challenging the Penalty order - Wrong description of the vehicle is entered by the dealer in the e-way bill - Goods shifted through Truck, accompanying delivery challan, e-way bill and bilty - intercepted the goods and detained the vehicle - HELD THAT:- It is not in dispute that goods were being transported by the dealer through stock transfer from its unit at Saharanpur to its sale depot at Ghaziabad. From perusal of the e-way bill which has been brought on record, it is clear that the vehicle number has been mentioned as UP-14BT/3276. As there is no dispute to the fact that it is a case of stock transfer and there is no intention on the part of dealer to evade any tax, the minor discrepancy as to the registration of vehicle in State in the e-way bill would not attract proceedings for penalty u/s 129 and the order passed by the detaining authority as well as first appellate authority cannot be sustained. Moreover, the Department has not placed before the Court any other material so as to bring on record that there was any intention on the part of the dealer to evade tax except the wrong mention of part of registration number of the vehicle in the e-way bill. The number of vehicle through which the goods were transported was manually corrected by the transporter while only there is a minor discrepancy in Part-B of the e-way bill where the description of the vehicle is entered by the dealer. Thus, the orders dated May 21, 2018 and August 5, 2019 are unsustainable in the eyes of law and both the orders are hereby set aside. Writ petition succeeds and is hereby allowed.

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• 2024 (4) TMI 770
  Validity Of Assessment order passed - discrepancies between the petitioner s GSTR 3B returns and the auto populated GSTR 2A - show cause notice - credit notes were erroneously reported as ITC - certificate produced by the Chartered Accountant rejected, without assigning any reasons - HELD THAT:- On examining the findings, I find that the explanation of the petitioner was not duly examined from the perspective of ascertaining whether the amount reflected as ITC tallies with the value of credit notes issued by the petitioner. If such exercise had been carried out, it would become clear as to whether there was revenue loss by way of excess availment of ITC. Since such exercise was not carried out and findings were recorded confirming the tax demand merely because credit notes were not duly reported in GSTR 1 or in the auto populated GSTR 2A, the impugned order calls for interference on this issue. As regards the provision of a Chartered Accountant s certificate to explain the discrepancy to the extent of about Rs. 53,18,913/-, the impugned order merely records that the certificate issued by the Chartered Accountant and the petitioner s reply are not accepted. It is unclear as to why the certificate was rejected because no reasons are discernible from the impugned order. Thus, the impugned order calls for interference and is hereby set aside. As a corollary, the matter is remanded for re-consideration by the respondent. The respondent is directed to provide a reasonable opportunity to the petitioner, including a personal hearing, and thereafter issue a fresh order after taking into consideration the contentions of the petitioner. Such order shall be issued within two months from the date of receipt of a copy of this order. W.P. is disposed of on the above terms. No costs. Consequently, W.M.P. are closed.

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• 2024 (4) TMI 769
  Seeking grant for Anticipatory Bail - Input Tax Credit - Prayer to release the attached bank account - non-existent at the given registered addresses - purchase invoices issued by the non-existent/ bogus suppliers without any actual supply of goods - Violation to Section 16(2) of the CGST Act, 2017, read with section 155 of the Act - burden to Prove - Summon issued - Petitioner failed to participate in the proceedings on various occasions - HELD THAT:- It is pertinent to note that, the petitioner s firm, is not in existence on the three addresses given as the registered addresses, but even the suppliers, from whom the petitioner has claimed to have purchased the goods, are non-existent at their given address. The petitioner has not come before this Court with clean hands. The petitioner has been time and again issued various summons adhering to the provisions of law, in order to provide an opportunity to the petitioner, to participate in the investigation and put forth his case. He has failed to participate in the proceedings on various occasions. The fake addresses of the petitioner s firm as well as suppliers do not make him eligible for any protection from this Court. The conduct of the petitioner is availing ineligible ITC of Rs. 10.38 Crores, amounts to playing fraud on the Public Exchequer. The case of the petitioner would prima facie be covered by Section 132(1)(c) read with Section 132(5) of the CGST Act, 2017. Considering that the Appeal of the petitioner regarding the cancellation of registration is already sub-judice before the appropriate authority, and the allegations made by the petitioner in the present writ petition, prima-facie, do not appear to be correct, therefore, we do not think that the petitioner should be granted any order of protection. After going through the petition along with the annexures, and the reply filed by the respondent No. 2 herein, we do not find that the petitioner has made out a case for grant of any protection. Prima facie, it appears that the petitioner, has in fact, availed the ITC, from non-existent entities. The burden of proof on the contrary is on the petitioner, as per Section 155 of CGST Act, 2017 to prove he is eligible for ITC. The petitioner has been granted several opportunities. The petitioner was summoned, to participate in the investigation and submit documents/information regarding the ongoing investigation as provided u/s 70 of the CGST Act, 2017. The petitioner has failed to show to the respondents, the existence of the entities. Hence, there is no merit in the contention of the petitioner that principles of natural justice have not been followed. The petitioner has placed reliance on the Judgment of the Hon ble Apex Court, in the case of State of Gujrat V/s. Choodamani Parmeshwaran Iyer [ 2023 (7) TMI 1008 - SUPREME COURT] , in order to demonstrate that a person summoned under the CGST Act, 2017, cannot invoke Section 438 of the Cr. P.C., for Anticipatory Bail. The petitioner therefore claims to have approached this Court seeking protection Orders. However, after going through the reply filed by the respondent No. 2 herein, we do not find that the petitioner has made out a prima-facie case for grant of any protection to the petitioner. Thus, we are not inclined to grant protection to the petitioner. Hence, the writ petition stands dismissed. As a result, the interim protection stands vacated. Petition stands disposed of accordingly.

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• 2024 (4) TMI 768
  Condonation of delay of 120 days in filing appeal - It is the specific case of the petitioner that after the order was passed, the petitioner had given the papers to the Chartered Accountant, who failed to prefer an appeal in time - HELD THAT:- The petitioner has already paid the disputed tax on 14.03.2024. There are no impediment in giving liberty to the petitioner to challenge the impugned order before the Appellate Commissioner within a period of 30 days from the date of receipt of a copy of this order. If such an appeal is filed within such time, the Appellate Commissioner shall dispose of the appeal on merits and in accordance with law without reference to the limitation. The release of the vehicle is subject to the final outcome of the confiscation proceeding. The writ petition is disposed off.

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• 2024 (4) TMI 767
  Maintainability of Writ Petition since GST Appellate Tribunal not constituted - Period of limitation - Order Appealable u/s 112 of the CGST/OGST Act, 2017 - Statutory benefit of stay - Non-constitution of the Appellate Tribunal as required u/s 109 - HELD THAT:- The respondent State authorities have acknowledged the fact of non-constitution of the Tribunal and come out with a notification bearing Order No. 09/2019-State Tax, S. O. 399, dated 11.12.2019 for removal of difficulties, in exercise of powers u/s 172 of the B.G.S.T Act, which provides that period of limitation for the purpose of preferring an appeal before the Tribunal u/s 112 shall start only after the date on which the President, or the State President, as the case may be, of the Tribunal after its constitution u/s 109 of the B.G.S.T Act, enters office. This Court is, therefore, inclined to dispose of the instant writ petition in the following terms:- (i) Subject to deposit of a sum equal to 20 percent of the remaining amount of tax in dispute, if not already deposited, in addition to the amount deposited earlier under Sub-Section (6) of Section 107 of the B.G.S.T. Act, the petitioner must be extended the statutory benefit of stay under Sub-Section (9) of Section 112 of the B.G.S.T. Act. The petitioner cannot be deprived of the benefit, due to non- constitution of the Tribunal by the respondents themselves. The recovery of balance amount, and any steps that may have been taken in this regard will thus be deemed to be stayed. It is not in dispute that similar relief has been granted by this Court in the case of SAJ Food Products Pvt. Ltd. vs. The State of Bihar Others [ 2023 (3) TMI 1390 - PATNA HIGH COURT] (ii) The statutory relief of stay, on deposit of the statutory amount, however in the opinion of this Court, cannot be open ended. For balancing the equities, therefore, the Court is of the opinion that since order is being passed due to non - constitution of the Tribunal by the respondent- Authorities, the petitioner would be required to present/file his appeal u/s 112 of the B.G.S.T. Act, once the Tribunal is constituted and made functional and the President or the State President may enter office. The appeal would be required to be filed observing the statutory requirements after coming into existence of the Tribunal, for facilitating consideration of the appeal. (iii) In case the petitioner chooses not to avail the remedy of appeal by filing any appeal u/s 112 of the B.G.S.T. Act before the Tribunal within the period which may be specified upon constitution of the Tribunal, the respondent - Authorities would be at liberty to proceed further in the matter, in accordance with law. (iv) If the above order is complied with and a sum equivalent to 20 per cent of the remaining amount of the tax in dispute is paid then, if there is any attachment of the bank account of the petitioner pursuant to the demand, the same shall be released. (v) Whatever has been deposited, would be given account in determining the 20 per cent directed to be paid herein. With the above liberty, observation and directions, the writ petition stands disposed of.

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• 2024 (4) TMI 766
  Validity Of Order in original - No reasonable opportunity provided to contest the tax demand - mismatch between the GSTR 3B and GSTR 1 returns - HELD THAT:- From the impugned order, it is evident that such order was issued without hearing the petitioner. No doubt, the petitioner was provided an opportunity but failed to avail of such opportunity. It is also clear that the tax liability pertains to three issues, namely, output mismatch between GSTR 3B and 1, input mismatch between GSTR 3B and 2A and e-way bill verification. As contended by learned senior counsel, on the first two issues, the extent of discrepancy is not substantial. The summary of the show cause notice does not appear to deal with the issue relating to e-way bill verification. It is also noticeable that an aggregate sum of Rs. 6,04,893/- was debited from the petitioner s electronic credit ledger towards tax liability confirmed in the impugned order. Thus, it is just and necessary to provide an opportunity to the petitioner to contest the tax demand on merits. Therefore, the impugned order dated 09.11.2023 is set aside and the matter is remanded for reconsideration. Upon receipt thereof, the 1st respondent is directed to provide a reasonable opportunity to the petitioner, including a personal hearing, and thereafter issue a fresh order within two months from the date of receipt of the petitioner s reply. The writ petition is disposed of. Consequently, connected miscellaneous petitions are closed.

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• 2024 (4) TMI 765
  Seeking activation of GSTIN and granting final certificate of registration to the Petitioners from 01.07.2017 and appropriating the GST paid and returns filed by the Petitioners under the current GSTIN thereunder - permission to file returns, avail input tax credit and pay applicable tax under currently active GSTIN - HELD THAT:- It appears that there is no fault on part of the petitioner for not being able to utilise the provisional GST number which was given to the petitioner on transition after the petitioner has taken over the business of the proprietorship concern. The GSTN Portal is required to map the PAN number of the petitioner with the GST number instead of PAN number of the partnership firm, which was not done and therefore, the petitioner was unable to utilise the input tax credit during the interregnum period for the goods purchased from 01st July, 2017 till March, 2018. The contentions raised on behalf of the respondent is, therefore, required to be considered in light of the facts of the case that there was no option for the petitioner but to obtain new PAN number for the proprietorship which was inactive and there was no question of filing GST Returns with regard to the GSTN which was allotted to the petitioner after mapping of PAN number as the petitioner had already obtained fresh GSTN number. Therefore, the only remedy which would be available to the respondent Department was to get the GST number which was obtained by the petitioner in the year 2018 to make it effective from 01st July, 2017 so as to enable the petitioner to get the input tax credit for the goods purchased during the interregnum period from 01st July, 2017 to March, 2018. Petition disposed off.

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• 2024 (4) TMI 763
  Classification of goods - rate of tax - Classic Malabar Parota - Whole Wheat Malabar Parota - classifiable under Chapter Heading 1905 or same are to be covered under Chapter Heading 2106- exemption from payment of GST in terms of entry No. 97 of N/N. 2/2017 dated 28.06.2017 Central Tax/ SRO No. 361/2017 dated 30.06.2017 - HELD THAT:- The Explanatory Notes to HSN sub heading 1905 provides that the most common ingredients of the products of this Heading are cereal flours, leavens and salt but they may also contain other ingredients such as gluten, starch, milk, sugar, fats, improvers etc., like yeast, sour dough, baking soda which facilitates fermentation and improve characteristics and appearances of the products. The products of this heading may also be obtained from dough based on the flour of any cereal - Rule 4 of GRI provided that goods which cannot be classified in accordance with the Rules I to III shall be classified under the Heading appropriate to the goods to which they are akin. It cannot be doubted that the products of the petitioner would be in category of Chapter Heading 1905, and therefore, by applying the fourth GRI which provides that goods which cannot be classified in accordance with the above rules shall be classified under the Heading appropriate to the goods to which they are most akin should be applied to see whether the goods should fall under the Chapter Heading 1905 or not. It is also relevant to take note of the fact that Chapter Heading 21 particularly, Entry HSN 2106 prescribes food preparation not elsewhere specified or included and the petitioner product or not akin to any of the products which are mentioned in Chapter Heading 2106. In view thereof, the petitioner s product are to be included in Chapter Heading 1905. The two Rate Notification mentioned above would provide that similar products such as Khakhra, plain chapati or Roti are exigible for 5% tax as per 99A of the Schedule I or they are exempted from the payment of GST as per the Rate Notification - It is no doubt that the petitioner s product is not specifically included in the exemption from payment of GST under entry 97 as the exemption notifications are to be constituted strictly and they are item specific. The petitioner s item is not included in the exemption notification, and therefore the petitioner claims the exemption from payment of the GST has no merit. When there is no doubt in any manner that the petitioner s product should fall within the HSN 1905, as the petitioner s products are akin / similar to the products mentioned in the said Chapter Heading 19 and the ingredients used in and the process applied in their preparations are somewhat similar to the other products which are specifically mentioned there, the tax in the products of the petitioner s at the rate of 18% would not be justified. If the petitioner products are akin / similar to the products mentioned in HSN code 1905 of Chapter 19 with heading Preparations of cereals, flour, starch or milk; pastrycooks products as the ingredients used and process applied in their preparations are somewhat similar to the products mentioned in Chapter heading HSN Code 1905, excluding the petitioner s products from Entry 99A of the Rate Notifications which are almost similar to the three products mentioned in the said Entry, cannot be justified - the petitioner s products are also exigible at the rate of 5% GST and not 18% as contended by the learned Special Government Pleader and held by the Advance Ruling Authority and Advance Ruling Appellate Authority. The present writ petition is partly allowed.

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• 2024 (4) TMI 762
  Cancellation of registration of petitioner - SCN not responded - HELD THAT:- In the peculiar facts and circumstances of the present case and taking into consideration no objections on behalf of the respondents, the present petition is disposed of by directing the petitioner to approach the Officer concerned for restoration of his GST number within a period of seven days who shall restore the GST number of the petitioner and thereafter the petitioner shall deposit the taxes, penalty along with interest within a period of seven days in terms of the Act. Petition disposed off.

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• 2024 (4) TMI 761
  Maintainability of petition - availability of alternative remedy - Challenge to impugned adjudication order and SCN - petitioner participated in the impugned adjudication proceeding subsequent to the impugned show cause notice by availing opportunity of personal hearing - HELD THAT:- On perusal of the impugned adjudication order, it is found that the same has been passed neither in violation of principle of natural justice nor the petitioner was denied opportunity of personal hearing nor the impugned order has been passed by the authority having inherent lack of jurisdiction, nor the impugned order is a non-speaking order, nor any constitutional validity of any provision of law is involved in this writ petition which are the criteria for invoking the constitutional writ jurisdiction of this Court under Article 226 of the Constitution of India in spite of availability of statutory alternative remedy. Considering the facts and circumstances of the case as appears from record this Writ Court cannot act as an appellate authority over the impugned adjudication order and more particularly in the facts and circumstances of this case recorded herein above and on the ground of availability of alternative remedy by way of statutory appeal against the impugned adjudication order and proceeding in which petitioner has participated, the petition cannot be entertained. Petition dismissed.

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• 2024 (4) TMI 760
  Rejection of appeal - Condonation of delay in filing appeal - limitation - Cancellation of GST Registrations - Petitioner claims that due to ill-health, he could not file the returns for a period of six months - HELD THAT:- The petitioner in this case is a whole seller and distributor of Airtel EC. Most of the small scale entrepreneurs like carpenters, electricians, fabricators etc. are almost uneducated and they are not accustomed with handling of e-mails and other advance technologies. Though they are providing e-mail IDs at the time of Registration, the applications are prepared by some agents by creating an e-mail IDs, however, on reality most of the Traders are not accustomed with handling of e-mails. They are also not aware about the consequences of not filing the Returns in Time. The department shall workout the possibilities of issuing these notices in the respective regional languages and also by SMS and registered post. So that, the uneducated traders can also respond to these notices to some extent. Otherwise, these notices will be an empty formality and will not serve any purpose for which it has been issued. The object of any Government is to promote the trade and not to curtail the same. The cancellation of registration certainly amounts to a capital punishment to the traders, like the petitioner. In similar circumstances, this Court, in Suguna Cutpiece Vs. Appellate Deputy Commissioner (ST) (GST) and others [ 2022 (2) TMI 933 - MADRAS HIGH COURT] , allowed the writ petitions by holding that no useful purpose would be served by keeping the petitioners out of the Goods and Service Tax regime. By applying the above ratio, this writ petition is allowed with a direction to the respondents to permit the petitioner to pay the due amount and penalty, if any and thereafter, restore the petitioner s GST registration . No costs. Consequently, connected miscellaneous petitions are closed.

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• 2024 (4) TMI 759
  Violation of principles of natural justice - petitioner submits that in most of the cases, the assessees are not aware of the show cause notices and assessment orders due to lack of communication through post - grievance of the petitioner is that the respondent without verifying the documents and returns, which are very much available in the web portal has passed the impugned order stating the escaped turnover of the petitioner - HELD THAT:- The case of the petitioner is that notice sent by the Department through the electronic mode has not been noticed by the petitioner and therefore, he could not reply in time. The petitioner has valid ground to substantiate that there is no mismatch that the Kodaikanal Municipality has wrongly reported the petitioner s turnover in GSTR-7 as Rs. 1,79,99,069/-, when the petitioner s actual turnover is of Rs. 15,14,204/-. When option is available to the Department to prefer any mode of communication as per Section 169 of the TNGST Act, 2017, the Department has preferred only electronic mode of communication. Any decision taken by the Department would affect the traders and their business. The Department cannot expect that all the traders/tax payers are accustomed with the portal and they are filing their returns on their own - The Department shall work out on the possibility of issuing notice and other communications through postal and that too, in a regional language, which certainly enables the tax payers to respond in time and the same will definitely reduce the unnecessary litigations before this Court. Hope, the Department shall consider the fact that all the tax payers are not filing the returns on their own and they are depending upon some service providers for the same. The Government, which is promoting our Tamil language in Tamil Nadu, is taking action against the traders, like carpenters, cooks, vegetable vendors by issuing notice in English language. The object of issuing notice is based on the principles of natural justice. No one should be punished unheard . This object can be achieved only when the notices are issued in Regional languages - This Court once again reiterates that the intention of any Government must be to promote the trade and not to curtail the same. While initiating action as against the traders, which would affect them adversely, the Department has to work out the possibility of issuing the notice in a regional language and also through post and phone, text message so that the traders can have the real opportunity. Otherwise, it would be an empty formality. The impugned order passed by the first respondent is set aside and the first respondent shall re-do the assessment for the year 2019-20 by providing an opportunity of hearing to the petitioner - the writ petition is allowed.

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• 2024 (4) TMI 758
  Condonation of delay in filing the revocation application - compliance with all the requirements of paying the taxes, interest, late fee, penalty etc. due, the 3B Return Form filed by the Petitioner - HELD THAT:- The delay in Petitioner s invoking the proviso to Rule 23 of the Central Goods and Services Tax Rules (CGST Rules) is condoned and it is directed that subject to the Petitioner depositing all the taxes, interest, late fee, penalty etc. due and complying with other formalities, the Petitioner s application for revocation will be considered in accordance with law. A copy of this order will be produced by the Petitioner before the proper officer, and subject to the Petitioner complying with the above conditions, the proper officer will open the portal to enable the Petitioner to file the GST return - Writ petition disposed off.

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• 2024 (4) TMI 757
  Rejection of appeal - time limitation - reason for rejection was owing to delay in submission of appeal and according to her, there was only two days delay in preferring the appeal - HELD THAT:- The said Division Bench in Civil Writ Jurisdiction Case No. 17202 of 2023 [ 2024 (1) TMI 229 - PATNA HIGH COURT] observed that we do not see any rationale for the date fixed of 31.03.2023, as a cutoff date. We notice that the notification itself was brought out on 02.11.2023 and in such circumstances any order passed in at least three months before that date; the time provided for filing an appeal, ought to have been considered for such beneficial treatment . Accordingly the division bench opined that the petitioner also can be allowed to comply with the conditions in N/N. 53 of 2023-Central Tax dated 02.11.2023 upon which the order passed in appeal would stand set aside and a fresh consideration will be made by the first Appellate Authority. This Court does not incline to take a different view than that of the view already expressed. As such, the order passed by the 1st Appellate Authority dated 28.12.2023 under Annexure-3 on the ground of limitation is not sustainable in the eye of law and accordingly the same is hereby quashed and the matter is remitted back to the 1st Appellate Authority to consider the same in accordance with law. The writ petition is disposed off.

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• 2024 (4) TMI 756
  Rejection of delayed appeal - time limitation - appeal rejected for reason of the appeal having not been filed within the period of limitation - HELD THAT:- In the present case, the appeal was filed and was dismissed by the first Appellate Authority. In such circumstances, it is only proper that the appeal be restored to the files of the Authority subject to the conditions under paragraph no. 3 being satisfied - Hence the petitioner would be entitled to satisfy paragraph no. 3 of the aforesaid Notification by paying up the deficient amounts as would be required to maintain the appeal under the notification. The impugned order set aside on condition of the assessee satisfying the aforesaid conditions before the time stipulated in Notification; i.e. 31.01.2024, in which event, the appeal would be taken up and considered on merits - the writ petition is allowed.

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• 2024 (4) TMI 755
  Maintainability of petition - availability of statutory remedy of appeal - non-constitution of the Tribunal - HELD THAT:- The respondent State authorities have acknowledged the fact of non-constitution of the Tribunal and come out with a notification bearing Order No. 09/2019-State Tax, S. O. 399, dated 11.12.2019 for removal of difficulties, in exercise of powers under Section 172 of the B.G.S.T Act, which provides that period of limitation for the purpose of preferring an appeal before the Tribunal under Section 112 shall start only after the date on which the President, or the State President, as the case may be, of the Tribunal after its constitution under Section 109 of the B.G.S.T Act, enters office. The petition is disposed off subject to deposit of a sum equal to 20 percent of the remaining amount of tax in dispute, if not already deposited, in addition to the amount deposited earlier under Sub-Section (6) of Section 107 of the B.G.S.T. Act, the petitioner must be extended the statutory benefit of stay under Sub-Section (9) of Section 112 of the B.G.S.T. Act. The petitioner cannot be deprived of the benefit, due to non- constitution of the Tribunal by the respondents themselves.

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• 2024 (4) TMI 754
  Cancellation of GST registration of petitioner - Opportunity of hearing not provided - violation of principles of natural justice - HELD THAT:- It is an admitted fact that the show cause notice was served on the petitioner only through Portal on 21.02.2023 and not by means of any other modes of communication, viz., e-mail or letter. Since the petitioner is not well accustomed with the system knowledge, the petitioner is not aware as to when such show cause notice was issued, and for what purpose. Even the earlier Accountant, whom the petitioner has entrusted the work of filing NIL returns, failed to file returns for a period of six months and also not informed the petitioner about the same and the petitioner came to know about the cancellation of their registration only on verification of their returns via. Portal through another Accountant, who has been subsequently engaged by the petitioner. Further, it is noticed that the impugned order was passed without affording opportunity of hearing to the petitioner. Though the petitioner has failed to exhaust the alternative remedy of filing appeal, the same is due to the reason that the petitioner s husband had fallen sick and therefore, she was not in a position to file appeal against the impugned order within the prescribed time. This Court is of the view that suffice it would be to dispose of the Writ Petition with a direction to the petitioner to challenge the impugned order of cancellation of registration by way of appeal before the Appellate Authority, who shall entertain the same and pass orders in accordance with law after affording an opportunity of hearing to the petitioner. The Writ Petition is disposed of.

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• 2024 (4) TMI 733
  Levy of tax - non-banking financial services - sundry creditors - income received - tax proposal was confirmed in view of the failure of the petitioner to submit that the trial balance pertaining to its operations in Tamil Nadu. - GSTR-9C reconciliation statement. Sundry Creditors - HELD THAT:- Given that the issue relating to sundry creditors pertains to alleged non-payment by the petitioner for supplies received, the imposition of tax liability on the total value of trade receivables flies in the face of reason. Even assuming that dues to sundry creditors were not discharged, only the trade payables and not receivables should have been taken into account. Therefore, the impugned order is unsustainable as regards this issue. Income received - HELD THAT:- The total income was taken from the financial statement and tax appears to have been imposed on such turnover at 36%. In relation to this issue, the petitioner has placed on record the reconciliation statement in GSTR-9C to contend that the annual turnover under the relevant registration was only Rs. 8,82,352/-. Once again, the impugned order confirms the tax demand solely on the ground that the trial balance for Tamil Nadu was not provided. The impugned order dated 31.12.2023 is set aside insofar as it pertains to the issues relating to sundry creditors and income received. As a corollary, these two issues are remanded for reconsideration by the 5th respondent. After providing a reasonable opportunity to the petitioner, including a personal hearing, the 5th respondent is directed to pass a fresh order within two months from the date of receipt of a copy of this order. Petition disposed off by way of remand.

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• Income Tax

• 2024 (4) TMI 753
  Correct head of income - True character of the income - Income from leasing or letting out the properties in shopping-cum-entertainment Mall - income from business or income from house property - ITAT held that where the letting out the property is the main object of a company, its income is to be computed under the head income from business and it cannot be treated as income from house property , affirmed the order passed by the CIT (A) HELD THAT:- AO did not find any material against the assessee to come to the conclusion that sub-leasing of the premises was only a part of its predominant object of the assessee. The respondent s right from the construction of mall till the matter was taken into scrutiny had been offering income from the business of constructing, owning, acquiring, developing, managing, running, hiring, letting out, selling out or leasing multiplex, cineplex, cinema hall, theater, shop, shopping mall etc., sub-licence by it under the head profit and gain of business or profession of the Income Tax Act. Therefore, the CIT (A) as well as ITAT have rightly set aside the order of A.O. The Apex Court in case of Raj Dadarkar and Associates [ 2017 (5) TMI 586 - SUPREME COURT] has held that ITAT being a last forum insofar as factual determination is concerned, these findings have attained finality. No material has been produced even before us to show how the aforesaid findings are perverse. The order passed by A.O. nowhere shows that the entire income or substantial income of the assessee was from letting out of the properties, which is admittedly not the principal business activity of the assessee. Therefore, we do not find any perversity in the findings recorded by the ITAT as well as the CIT (A) and also do not find any substantial question of law involve in these appeals.

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• 2024 (4) TMI 752
  Validity of reopening of assessment - appeals for Assessment Years 2011-2012, 2013-2014 and 2014-2015 were pending before the ITAT and as the assessment was getting time barred and to safeguard the interest of the Revenue, the assessment was reopened on 3 issues i.e., 8% profit treating contractor, Proportionate income and Capital gain - HELD THAT:- Admittedly, the ITAT has now held against the Revenue. Therefore, the entire basis for reopening has collapsed. The Revenue s case that an appeal has been filed in this Court challenging the orders passed by the ITAT for Assessment Years 2011-2012, 2013-2014 and 2014-2015 will not be of any help because admittedly there is no stay. As held in Union of India v/s. Kamlakshi Finance Corporation Ltd. [ 1991 (9) TMI 72 - SUPREME COURT ] the principles of judicial discipline require that the orders of the higher appellate authorities should be followed unreservedly by the subordinate authorities and the order 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. Admittedly, the order of the ITAT, which is challenged in appeal in this Court, has not been suspended. Therefore, the order of the ITAT is certainly binding on the Revenue. Respondents also submitted that assessment can be opened on the basis of order passed in another assessment year which is a settled position in law. Though we will not enter into a debate with him/Respondents on this aspect, still to issue notice itself the Revenue has to, in the facts of the case, cross the first hurdle of the proviso u/s 147 of the Act and if they do not, as we have observed above, the reopening will be bad in law. We hereby quash and set aside the impugned notice. Consequently the order on objections also is hereby quashed and set aside.

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• 2024 (4) TMI 751
  Addition u/s 68 on account of share capital and premium - addition made on absence of identity of the creditors, genuineness and creditworthiness of the entire transaction - ITAT deleted addition - HELD THAT:- Findings recorded by the Tribunal, is not supported by facts. AO has held that the assessee was a Private Limited company which cannot issue shares in the same manner in which Public Limited company does and in so far as creditworthiness of the share subscribers is concerned, there must be positive evidence to show the nature and source of resources of the share subscribers and if the assessee was serious enough to establish his case, it ought to have complied with the notices/letters issued by the Assessing Officer and ought to have produced the directors of the subscribing companies before the AO so that they could explain the sources from which the share subscription was made. As stated that there is no complaints either from the end of the assessee company or from the end of the alleged subscriber company. This finding recorded by the AO as affirmed by the CIT(A), if required to be set aside by the Tribunal, reasons have to be assigned. Therefore, we find that the conclusion arrived at by Tribunal is insufficient to support its ultimate conclusion in allowing the assessee s appeal. Therefore, we are of the view that the matter has to be remanded back to the Tribunal for fresh consideration. Revenue appeal is allowed. The order passed by the learned Tribunal is set aside and the matter is remanded to the Tribunal to take a fresh decision.

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• 2024 (4) TMI 750
  Revision u/s 263 - CSR expenses admissibility as the deduction u/s 37(1) - assessee is public sector undertaking - Tribunal on fact concluded that it is not a case of no enquiry and nor it is a case of non-application of mind - HELD THAT:- ITAT s factual finding cannot be dislodged in an appeal filed u/s 260A where we are required to answer substantial questions of law for consideration. With regard to the admissibility of the expenses u/s 37(1) Tribunal has taken note of the decision in the case of Hindustan Copper Limited. [ 2020 (1) TMI 1324 - ITAT KOLKATA] the facts of the said case is also on the similar line as in the said case the assessee was a public sector undertaking and certain directives issued by the Government of India was followed by the assessee. There are two notifications issued by the Government of India, the first of which is by Office Memorandum dated 21.06.2011, wherein the expenses incurred by public sector undertakings in the form of fee charged for participation in CSR Training Programme/Workshops or for sponsorship of Workshops/programmes organized by Tata Institute of Social Sciences etc. will be allowed to be included under the CSR Budgets of Central Public Sector Enterprises. The other notification is dated 1st November, 2011 which stipulates the guidelines on Corporate Social Responsibility for Central Public Sector Enterprises. Admittedly, the respondent assessee has complied with the said directives issued by the Government of India. Identical issue was considered by this Court in the case of Ramesh Prasad Sao [ 2023 (10) TMI 405 - CALCUTTA HIGH COURT] wherein the assessee company was engaged in iron ore mining and it incurred periphery development expenses for territorial welfare as well as welfare of local people in the area in which mines were operating as per the direction of the local administration and such CSR expenses incurred by the assessee prior to the assessment year 2015-16 were held to be liable as business expenditure as same was wholly and exclusively incurred for the purpose of business. Thus on facts we are convinced that the expenses were allowable more so, when the respondent assessee is a public sector undertaking and they had carried out a notification and they had implemented the notifications issued by the Government of India. The specific case of the assessee was that they incurred the expenditure for facilitating the business of construction and repair of ships mainly for Indian Navy and they were required to take up certain activity for the benefit of people residing in the said locality. Matter is entirely factual and no substantial question of law arises.

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• 2024 (4) TMI 749
  Acquittal of charge u/s 276CC - respondent has failed to comply with the provisions contained u/s 139(1) and he has submitted the income tax returns after a delay of 28 months - intention , motive and knowledge - culpable mental state on the part of the accused - HELD THAT:- Apex Court in the case of Prem Das [ 1999 (2) TMI 6 - SUPREME COURT] held that for holding an accused guilty u/s 276CC mens rea is a necessary ingredient. Hence, in absence of proof of mens rea and on the basis of mere presumption u/s 132(4-A), the conviction cannot be sustained. In the above case, the Hon ble Apex Court has clearly held that the complainant in order to bring home the guilt of the accused for the offence punishable u/s 276C has to prove the mens rea of the accused for non-payment of tax or attempt to evade the tax. But in the present case, the accused respondent has explained the reasons, in detail, about the delay in filing the income tax returns and depositing the entire tax amount with penalty subsequently. Therefore, the complainant/ appellant has failed to prove that the respondent had mens rea to evade the payment of tax. Accordingly, the Income Tax Department has failed to prove the guilt of the accused respondent beyond all the reasonable doubts. The trial Judge came to the conclusion that even no notice was given to the respondent prior to filing of the complaint against him. Hence, it was found that the offence u/s 276CC was not found to be proved against the respondent. It is the settled principle of law that while appreciating the evidence, in an appeal against acquittal, if the appellate Court finds that two views are plausible, then the view favouring the innocence of an accused must be taken into consideration. This Court does not find any perversity in the findings arrived at by the trial Court in acquitting the accused under the aforesaid offences. Accordingly, the instant Criminal Appeal is dismissed. The judgment of acquittal of the accused respondent, passed by the Court below, is upheld.

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• 2024 (4) TMI 748
  Denial of specific request for personal hearing - petitioner expressing his difficulty in availing the opportunity of personal hearing through video conference, personal hearing was not granted, on the premise that the petitioner had not clicked on the Assessee Request Button/Icon and also not filled up the Box of agenda of VC - HELD THAT:- We find there is merit in the submissions of the learned counsel for the petitioner, since under identical circumstances, this Court has already held that personal hearing ought to have been extended, though the petitioner assessee might have failed in clicking on the appropriate button. In view of the same, the impugned order is set aside. The assessment order shall be passed after affording the petitioner reasonable opportunity and personal hearing through video conference. The above exercise shall be carried out within a period of twelve weeks from the date of receipt of copy of this order.

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• 2024 (4) TMI 747
  Unexplained credit u/s 68 - unexplained bogus share applications - HELD HAT:- As observed once the respondent-Company furnished all the relevant and requisite documents, and in the assessment order, there is nothing which could show that the respondent-Company introduced its own income from undisclosed sources in the form of shares; the assessment order was passed only on the basis of suspicion and doubt, which is not permissible under the law, as has rightly been held by the learned CIT in its order, which in turn has rightly been upheld by the Appellate Tribunal vide the impugned order. CIT as well as Appellate Tribunal have rightly ordered deletion of the above-said amounts, because the respondent-Company had furnished all the required the details, and further held that it cannot be said to be an unexplained credit under Section 68 of the Act of 1961. Therefore, the impugned order passed by the Appellate Tribunal is justified in law. Disallowance of various expenses - The said disallowing is on a higher side and the same was considered by the learned CIT, and that the disallowance was restricted to Rs. 75,000/- and the respondent-Company got the relief of Rs. 75,000/-, which is completely justified in law. Disallowance of employees contribution to ESI - CIT directed the AO to verify the contention of the respondent-Company that the employees contribution towards PF and ESI was deposited on or before the due date of filing the return u/s 139 (1) the same was upheld by the learned Appellate Tribunal. Therefore, now the same does not require any reconsideration by this Court. This Court further observes that there are concurrent findings arrived at by the learned CIT as well as learned Appellate Tribunal, which are well reasoned and have been arrived at after taking into due consideration the overall facts and circumstances of the case and upon duly analyzing the material available on record before them. This Court does not find it a fit case so as to grant any relief to the appellant in the present appeal. This Court does not find it a fit case so as to grant any relief to the appellant in the present appeal.

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• 2024 (4) TMI 746
  Deduction u/s 80P - interest income(s) derived from such nationalized/other bank(s) - HELD THAT:- The issue is no more res integra in light of this tribunal s recent coordinate bench s order in The Rena Sahakari Sakhar Karkhana Ltd [ 2022 (1) TMI 419 - ITAT PUNE] allowed the assessee s claim for deduction under Sec. 80P(2)(d) on the interest income earned on its investments/deposits with co-operative bank. Even the latter limb of interest income derived from investments made in nationalized/other bank(s), the Revenue could hardly dispute that case law The Vaveru Cooperative Rural Bank Ltd. [ 2017 (4) TMI 663 - ANDHRA PRADESH HIGH COURT ] that interest income(s) derived from such nationalized/other bank(s) also qualifies for Sec. 80P deduction and thereby declined it s very stand. Thus accept the assessee s Sec. 80P(2)(a)(i)/80P(2)(d) deduction claim(s) in very terms - Decided in favour of assessee.

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• 2024 (4) TMI 745
  Validity of exercise of jurisdiction u/s 153A and 153C - Addition based on manual cash book found at the premises of the Company - scope of incriminating material for the purpose of Section 153A of the Act to make addition in hands of assessee as a searched person - HELD THAT:- Manual cash book contained entries related to cash withdrawals and expenses of Company which were duly recorded and reconciled with its books of account, as also cash introduced, withdrawn and expenses on behalf of the appellant. Thus we are of the considered view that once CIT(A) has endorsed the findings of AO that based on this manual cash book, of the Company, no substantive addition is required to be made in the hands of Company and as the cash inwards and outwards are found to be from known sources and existing books, which have been considered final in the assessment of Company, then same set of books of the Company, including the manual cash book found at the premises of the Company, cannot be considered to be incriminating material for the purpose of Section 153A of the Act to make addition in hands of assessee as a searched person, as the two AYs before us are of concluded assessments. The corollary to aforesaid being that to consider the said seized document of transactions of appellant reflected in manual cash book in the hands of appellant, provisions of Section 153C should have been invoked at the first instance. Thus the change of head of the addition by Ld. CIT(A), has resulted in vitiating the exercise of jurisdiction u/s 153A of the Act and 153C of the Act. Additions u/s 69C against Cash Expenditure - Disclosure were made by appellant in IDS - Even otherwise, if Ld. CIT(A) has given benefit to the appellant of having cash in hand subsequent to the disclosure in IDS, then the source of impugned expenditures incurred by Mr Vasudevan, on behalf of the appellant should also be accepted. Restricting the benefit to opening balance in AY 2015- 16 has no basis except being based on presumption. Thus, there was no justification with CIT(A) to hold that the said expenditure by Mr. Vasudevan, were the benefit or perquisites given by the company to its director which is chargeable to tax u/s 2(24)(iv) of the Act. Admittedly, these expenditures were not even claimed as deduction in the hands of the company. The most excruciating fact is that Mr. Vasudevan could not have accounted the amount given by appellant to him as a receipt in the manual cash book as the dates reflected in the said cash book are prior to the date of declaration in IDS made by appellant. Hence, it could be safely concluded, to offset the negative cash balance reflected in manual Cash Book qua the transactions of appellant, the disclosure of Rs. 50 lacs was made by appellant in IDS. Hence, there is no scope for making any addition at all in the hands of the appellant as appellant would be entitled for telescoping benefit. Assessee appeal allowed.

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• 2024 (4) TMI 744
  Validity of order passed u/s 154 - Amount to a review of the original assessment order or not - investment in the property was not properly explained by the assessee during the year under consideration, there is a mistake apparent from record rectifiable u/s 154 - whether question is not a mistake apparent from record? - as argued addition u/s. 68 made despite the assessee having explained the source of investment with proper documentary evidences - HELD THAT:- As per well established law it is not in dispute that the source of the investment which was accepted by AO in his original assessment order cannot be revised in an order u/s 154 as it cannot be said to be a mistake apparent from record. We find that AO wants to change his view in the garb of rectification of mistake u/s 154 which is not permissible under the law. We find that the impugned order of the AO was passed u/s 154 and Section 154 of the IT Act mandates rectification of mistake apparent from record. The Hon ble Apex Court in the case of ITO vs. Volkart Brothers and others [ 1971 (8) TMI 3 - SUPREME COURT] has held that a mistake apparent on record must be an obvious and patent mistake and not something which can be established by a long drawn process of reasoning, on points on which there may be conceivably two opinions. A decision on a debatable point of law is not a mistake apparent from the record. Thus, respectfully following the aforesaid binding principle rendered in ITO vs. Volkart Brothers [ 1971 (8) TMI 3 - SUPREME COURT] , we hold that the impugned order passed u/s. 154 of the Act of the Assessing Officer is invalid and liable to be quashed. Appeal of the assessee is allowed.

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• 2024 (4) TMI 743
  Disallowance u/s. 36(1)(iii) - interest paid alleging diversion of interest bearing borrowals to the appellant s Group Companies - AO was of the opinion that the loan was diverted for non-business purposes and accordingly, he proceeded to make interest disallowance u/s 36(1)(iii) - HELD THAT:- Assessee uses mixed funds for the purpose of its business. The Share capital and free reserves are Rs. 217.20 Crores whereas loan funds are to the extent of Rs. 135.61 Crores. It is also seen that the secured loans are for specific purposes i.e., project loans, vehicle loans etc. only and the same could not be diverted for other purposes. In such a situation, unless the nexus of borrowed funds vis- -vis the loans advanced by the assessee is established by Ld. AO, a presumption could be drawn in assessee s favour that the advances were funded out of own funds and not out of borrowed funds. We find that no such exercise has been carried out by Ld. AO and therefore, it was to be presumed that funds were advanced first out of interest free funds available with the assessee. This is as per the decision of Hon ble Supreme Court in the case of CIT Vs. Reliance Industries Ltd. [ 2019 (1) TMI 757 - SUPREME COURT] The decision of Savera [ 1997 (11) TMI 37 - MADRAS HIGH COURT] also supports this view. Therefore, we delete the impugned disallowance and allow corresponding grounds raised by the assessee. This issue arises in assessee s appeal for AY 2011-12 also. Facts being pari-materia the same, the corresponding grounds raised in AY 2011-12 also stand allowed accordingly. Nature of expenses - Relaunch expenses - deferred revenue expenditure claimed to the extent of 1/3rd in each of the year - HELD THAT:- Assessee has undertaken publicity campaign and incurred relaunch expenses, such an activity has not enlarged the profit making apparatus of the assessee. The assessee has not ventured into any new line of business rather it is seeking growth in the existing line of business. Further, the nature of the expenditure would show that it is substantially in the nature of revenue expenditure though the benefit of the same may have accrued to the assessee over several years. Nevertheless the said expenditure could not be branded as capital expenditure merely on account of the fact that the benefit would flow in more than one year. The assessee has not enlarged its profit making apparatus and it seeks improvement in the existing line of business only. It could not be said that the assessee has acquired enduring advantage in capital field. Therefore, we direct Ld. AO to accept the claim of the assessee. In other words, the expenditure claimed by the assessee to the extent of 1/3rd would be allowable to the assessee. The depreciation as allowed to the assessee shall stand reversed. The corresponding ground stand allowed accordingly. Short Credit of TDS - HELD THAT:- We direct Ld. AO to allow correct TDS credit in accordance with law. This ground stand allowed for statistical purposes. Disallowance u/s 14A - no exempt income has been earned by the assessee - HELD THAT:- We find that this issue is covered in assessee s favor by the decision of Chettinad Logistics P. Ltd [ 2017 (4) TMI 298 - MADRAS HIGH COURT] holding that Section 14A cannot be invoked where no exempt income was earned by assessee in relevant assessment year. Respectfully following the same, we direct Ld. AO to verify the same. If no exempt income has been earned by the assessee, the impugned disallowance shall stand deleted. The Explanation to Sec.14A, as referred to by Ld. CIT(A), in our considered opinion, is prospective in nature and the same is not applicable in this year. The corresponding grounds raised by the assessee stand allowed for statistical purposes. Disallowance of prior period items - HELD THAT:- From assessee s submissions, it emerges that various expenditure, though pertaining to earlier years, have been ascertained during this year only. The same would be claimed and allowable only upon crystallization. It is also not the case that the assessee has claimed deduction of the same in earlier years. Therefore, the impugned expenditure, in our considered opinion, is allowable to the assessee in this year only. We order so. The corresponding grounds raised by the assessee stand allowed. Disallowance of late payment of Employee s contribution to PF / ESI - HELD THAT:- Admittedly, this issue stand covered against the assessee by the decision of Checkmate Services P. Ltd [ 2022 (10) TMI 617 - SUPREME COURT] Respectfully following the same, we dismiss the corresponding grounds raised by the assessee. TDS u/s 195 - Disallowance u/s 40(a)(i) on account of payment made to foreign agencies - PE in India or not? - impugned disallowance was deleted by CIT(A) as held that Fees for Technical Services means managerial, technical and consultancy services but do not include payments considered as salary by the recipient of such income. Journalism is the process of collection, analyzing and disseminating information in public interest - HELD THAT:- Admittedly, none of the payee has permanent establishment in India. As noted by Ld. CIT(A), Fees for Technical Services means managerial, technical and consultancy services. The process of gathering information is nothing but a profession and these kind of services are covered under specific Article-5, Article-7 and Article-15 of India-USA DTAA and India-UK DTAA which are applicable to the facts of the present case. These articles exempt such payment from taxation in the absence of any permanent establishment. The provisions of DTAA, being more beneficial to the assessee, would apply in preference to the provisions of the Act. Decided in favour of assessee.

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• 2024 (4) TMI 742
  Addition of bogus sales - difference in opinion between learned Members constituting the bench - matter referred to third member - Accountant Member has given a clear cut finding that no addition u/s 68, whereas, Judicial Member has returned a finding that the addition has to be made u/s. 69 - whether, the ingredients of section 68 of the Act are satisfied to sustain the disputed additions? and whether additions in dispute can alternatively made u/s. 69? - assessee is a resident partnership firm stated to be engaged in the business of trading in bullion, jewellery etc. HELD THAT:- As far as the salesalleged to have been made to bogus entities controlled by entry operator Shri Sonu Punjabi, it is observed that in course of assessment proceeding as well as before the First Appellate Authority the assessee has furnished various documentary evidences, such as, party wise details of purchase and sale for the entire year, VAT returns and VAT assessment orders, item wise stock register and purchase invoices, confirmation from the suppliers, audited books of accounts, quantitative tally of purchase and sale etc. It is also a fact that the suppliers from whom the assessee purchases gold/bullion confirmed the transactions in response to notices issued u/s. 133(6) of the Act. Pertinently, no deficiency or discrepancy was found either in the books of accounts maintained by the assessee or the documentary evidences furnished. This is so because, neither the AO nor the FAA have returned any adverse inference, either in relation to the books of accounts maintained by the assessee or the documentary evidences furnished. Merely, because the notices issued u/s. 133(6) and summons issued u/s. 131 returned unserved or remained unanswered, cannot lead to the conclusion that sales are bogus, when there are overwhelming documentary evidences brought on record in the form of audited books of accounts, stock register, item wise purchase and sales, VAT return, VAT assessment order accepting the sale transactions to demonstrate that the assessee indeed has effected the sales. In respect of sales made to M/s. RBPL the addition in our view was made purely on conjectures and surmises - Admittedly, the AO has not found any discrepancy or deficiency in the books of accounts and stock register maintained by the assessee. Thus, when the assessee has maintained item wise purchase and sale details as well as stock register and, moreover neither in course of survey any stock discrepancy was found nor any unaccounted cash was found, certain sales cannot be treated as bogus. Similar is the factual position qua the sales effected to M/s. Olivia Tradelinks India P. Ltd., and M/s. S.S Overseas, as, the assessee has furnished all documentary evidences to prove the identity, creditworthiness and genuineness of transaction. Thus, the assessee has sufficiently discharged the initial burden cast upon it to prove the credit entries appearing in the books of account. Once it is established that the initial burden cast upon the assessee has been discharged, the burden shifts to the Assessing Officer to conclusively prove that the credit entries appearing in the books of accounts are unexplained in terms with section 68 of the Act. In the facts of the present appeal, the Assessing Officer has failed to do so. As rightly observed by Accountant Member, since the Assessing Officer has started the computation of income with the returned income of the assessee, it goes to prove that the entire trading account shown in the financial statement filed with the return of income has been accepted by the Assessing Officer. Also agree with learned Accountant Member that once the sales made by the assessee are supported by stock register, sale bills, payments through banking channel and sales have not only been disclosed in VAT returns but stand duly verified and accepted by VAT Department, such sales cannot be treated as bogus, so as to enable the Assessing Officer to invoke the provisions of section 68 of the Act. Thus, addition made u/s. 68 of the Act was rightly deleted. Addition u/s 68 v/s 69 - In the facts of the present appeal, it is an admitted factual position that the disputed transactions are duly recorded in the books of accounts of the assessee. Therefore, at the very threshold the provisions of section 69 will not get attracted. In fact, Revenue fairly accepted aforesaid factual and legal position. In any case of the matter, both the Assessing Officer and learned First Appellate Authority have proceeded on the premise that the credit entries appearing in the books of account are unexplained cash credit u/s. 68 - It is quite patent and obvious that provisions contained u/s. 68 and 69 of the Act operate in different situations and conditions therein are also different. Therefore, when it was never the case of the Department that the disputed addition has to be treated as unexplained investment u/s. 69 of the Act, at the second appellate stage, a new dimension cannot be given to the disputed issue by converting the addition from section 68 to section 69, that too, without providing an opportunity of being heard to the assessee. More so, when applicability of section 69 was never within the purview of the Tribunal and not even the case of the Department. Revenue, though, had fairly agreed that provisions of section 69 cannot get attracted, however, he urged and pleaded that the addition made u/s. 68 of the Act should be sustained - aforesaid contention of learned Standing Counsel is unacceptable considering the fact that the mandate given to me as Third Member is very limited in its scope and I have to agree with the view expressed by one of the Members. In the facts of the present appeal, learned Accountant Member has given a clear cut finding that no addition u/s 68 of the Act can be made. Whereas, learned Judicial Member has returned a finding that the addition has to be made u/s. 69 of the Act. In other words, learned Judicial Member impliedly agrees that the addition could not have been made u/s. 68 of the Act. Thus, in third member view, there is no disagreement between the learned Members with regard to applicability of section 68 of the Act to the disputed addition. Ratio laid down in the decisions referred to by learned Accountant Members clinches the issue in favour of the assessee. Thus, additions made u/s. 68 of the Act are unsustainable as agreeing with the view expressed by learned Accountant Member.

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• 2024 (4) TMI 741
  Bogus unsecured loans and bogus share capital money - not providing cross-examination of maker of the statement on which AO relies upon to take adverse view against an assessee - CIT(A) deleted addition - HELD THAT:- Merely because the lenders did not appear before the AO, cannot be the sole reason for drawing adverse view against the assessee/transaction in question. Since the assessee filed the aforesaid relevant documents by the assessee, we find it had discharged the burden to prove the identity and creditworthiness of the lenders parties and genuineness of the loan given to assessee We rely on the decision of Andaman Timber Industries Vs. CCE [ 2015 (10) TMI 442 - SUPREME COURT] wherein it was held that not providing cross-examination of maker of the statement on which AO relies upon to take adverse view against an assessee is a serious flaw which render the action of AO a nullity. Same view was reiterated in the decision of CIT v Odeon Builders Pvt. Ltd. ( 2019 (8) TMI 1072 - SUPREME COURT ). Further, we note that the assessee has shown the nature of the receipt as unsecured loan, and has discharged the burden casted upon it u/s 68 of the Act by providing proof of creditors i.e. identity of the lender by furnishing their PAN details, their ITR acknowledgment for AY. 2009-10; and from a perusal of the relevant financials of share subscribers, we note that they had sufficient creditworthiness to make investment in assessee company; and from perusal of the bank statement it reveals that loan was given and repaid through banking channel. We further note that AO has not been able to find any infirmity in the aforesaid evidence furnished by the assessee. In such a scenario, we agree with the impugned action of the Ld. CIT(A) deleting the addition - Therefore, we uphold the action of Ld. CIT(A) the deleting the addition. Investment in the form of share capital in earlier years - Merely on the basis of information given by Investigation Wing and the statement recorded by Shri Pravin Kumar Jain (accommodation entries provider) the AO without applying the mind made an addition of Rs. 80 Lakhs, despite the fact that the assessee has infused share capital of only Rs. 50,000/- in the year AY. 2009-10, and thus erred in making an addition of Rs. 80 Lakhs which action of the AO cannot be countenanced and the Ld. CIT(A) rightly noted that the impugned share capital of Rs. 80 Lakhs has not been infused in the relevant year under consideration from the companies named by AO as noted (supra). In such a scenario, we do not find any infirmity in the action of the Ld. CIT(A) deleting the addition which we confirm. Appeal of the revenue stands dismissed.

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• 2024 (4) TMI 740
  LTCG u/s. 50C - leasehold right on land acquired - CIT(A) deleted addition by holding that leasehold right on land are not within the purview of section 50C - Ld. Counsel submitted that section 50C applies only in case of a transfer of capital asset being land or building or both and this section does not make a specific reference to rights in lands or building which otherwise is included in other provisions in the Act Whether the transfer of leasehold rights in land falls within the purview of section 50C or not? - HELD THAT:- Coming to the facts of present case, where the transaction relates to transfer of a leasehold property whereby an industrial plot of land was allotted by MIDC under a lease agreement to the assessee and subsequently assessee transferred the said leasehold land to SMI for the remaining period of lease, the important point we need to consider is whether the leasehold rights which are restricted in nature are covered within the meaning of capital assets being, land or building or both , contained in section 50C(1). We need to understand the nature of rights accruing on a property which is freehold and the one which is leasehold. In this respect, we do find force in the submission made by the Ld. Counsel exhaustively dealing with several parameters to distinguish between the features of leasehold property and a freehold property, already tabulated above. Accordingly, the capital asset being land or building or both referred to in sec. 50C(1) do not include leasehold rights in land or building or both. Wherever legislature intended to include specific reference to rights in land or building or part thereof which is included in certain sections such as section 54D, section 54G, sec. 54GA, sec. 27(iiib), sec. 5(1) of Wealth Tax Act, 1957 and explanation to sec. 269UAD. Such a reference to rights in land or building or part thereof does not find place in sec. 50C(1) which sets it apart from the inference to be drawn that capital asset being, land or building or both would also include rights in land or building or part thereof, to cover leasehold rights which are limited in nature and cannot be equated with ownership of land or building or both. The Act has given separate treatment to land or building or both and the rights therein. Thus we are in agreement with the submissions made by assessee to hold that leasehold rights in land are not within the purview of section 50C of the Act. Accordingly, we concur with the finding arrived at by CIT(A) in deleting the addition on account of long term capital gain for transfer of leasehold industrial plot u/s. 50C of the Act. Alternate plea made by the Ld. Counsel as to application of first and second proviso to section 50C, we do find force in the same - assuming for a moment for the purpose dealing with this alternate plea that transfer of a leasehold right in land is covered by sec. 50C(1) then, on this alternative plea also, the assessee is adequately safeguarded by first and second proviso to sec. 50C whereby it had entered into agreement to sale with SMI to transfer the leasehold rights in land in the year 2011 itself for a consideration of Rs. 2 Cr. against which assessee had received Rs. 5 lacs in advance through banking channel, fact of which are undisputed and uncontroverted. Assessee had also placed on record the stamp duty value at that relevant time on record which is lesser than the actual consideration of Rs. 2 Cr. and thus, there cannot be any adverse bearing on the assessee by applying first and second proviso to sec. 50C in the instant case. Appeal of the revenue is dismissed.

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• 2024 (4) TMI 739
  Enhancement of assessment by CIT(A) u/s 251(2) - addition u/s 56(2)(vii) - HELD THAT:- As from the perusal of the provisions of section 251 of the Act, it is pertinent to note that though the statute has conferred the power of enhancement on the learned CIT(A) while disposing of an appeal against an order of assessment, however, as per the provisions of sub-section (2) the learned CIT(A) is required to grant reasonable opportunity of showing cause against such enhancement to the assessee prior to making any such enhancement. Ostensibly, in the present case, no such opportunity was granted by the learned CIT(A) to the assessee while making the aforesaid enhancement and directing the AO to tax Rs. 25 lakh in the hands of the assessee under section 56(2)(vii)(a) of the Act. Therefore, we are of the considered view that the learned CIT(A), while directing the impugned addition under section 56(2)(vii)(a) of the Act, did not comply with the provisions of section 251(2) of the Act. Addition u/s 56(2)(vii)(a) - Whether such a contravention is an illegality or irregularity ? - As u/s 56(2)(vii)(a) of the Act, one of the preconditions for the taxability of the money received by the assessee is that the same should have been received without consideration, which, in our considered view, is not fulfilled in the present case, as the amount was received by the assessee as a security deposit towards the development agreement entered into by the assessee with the developer for development of non-agriculture land. Since one of the conditions for applicability of section 56(2)(vii)(a) of the Act is not satisfied in the present case, we are of the considered view that the impugned enhancement directed by the learned CIT(A) under section 56(2)(vii)(a) of the Act is not sustainable. Therefore, the impugned addition u/s 56(2)(vii)(a) is directed to be deleted. Since the relief has been granted to the assessee on merits, the course of action as noted above in case of non-compliance with the procedure prescribed under section 251(2) of the Act is now rendered to be merely an academic exercise and thus not required in the facts of the present case. Appeal by the assessee is allowed.

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• 2024 (4) TMI 738
  Addition of commission expenses and franking charges - Allowable business expenditure or not? - HELD THAT:- From a perusal of it is noted that the assessee had furnished the details of the parties to whom the franking charge has been incurred by assessee (on behalf of the customers). However, no other evidences have been filed by assessee to prove that franking charges have been incurred wholly and exclusively for the purpose of business, CIT(A) confirmed the action of AO. On the same reason, the action of Ld. CIT(A) confirming the action of AO disallowing same is confirmed. Therefore, issue regarding commission payment is restored back to the file of the AO for verification and the assessee to submit the relevant evidences as stated and the AO to pass order in accordance to law after hearing the assessee. Appeal of the assessee is allowed for statistical purposes.

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• 2024 (4) TMI 737
  Expenditure incurred by the HO for salary paid to the expatriate employees for rendering services to PE - as per revenue these expenses being not recorded in books of assessee (PE) in India, were neither actually paid nor shown payable in books of Indian PE and as the assessee did receive the services of such value through its HO, simultaneously there was equivalent income also accruing to assessee u/s 28(iv) and once the AO having not made any separate addition u/s 28(iv), the disallowance of expenses claimed directly in computation of income was merely to bring tax neutrality - HELD THAT:- We observe from the record that identical issue is decided in favour of the assessee in the A.Y. 2001-02 [ 2023 (11) TMI 1250 - ITAT MUMBAI] wherein held that non-reimbursement of expenses incurred by HO for salary of employees of Indian PE did not result in taxable income in the hands of PE/HO under section 28(iv). Taxability of interest income in the hands of Head Office - HELD THAT:- Identical issue is decided in favour of the assessee in the A.Y. 2001-02 [ 2023 (11) TMI 1250 - ITAT MUMBAI] interest paid by Branch to the Head office is not taxable under the domestic laws for the year under consideration. Disallowance of interest paid to Head Office - assessee submitted that Assessing Officer held that interest income is taxable under DTAA at 10% in the hands of the HO and disallowed the claim of deduction on account of non-deduction of tax which is allegedly deductible at source - HELD THAT:- Identical issue is decided in favour of the assessee for the A.Y. 2001-02 [ 2023 (11) TMI 1250 - ITAT MUMBAI] to allow the deduction of interest paid to HO/OB in line with the decision of the Mumbai Special Bench in case of in case of Sumitomo Mitsui Banking Corporation [ 2012 (4) TMI 80 - ITAT MUMBAI] Further, the Appellant submit that Special Bench decision in case of Sumitomo (supra) is not only dealing with India-Japan Tax Treaty but also dealt with India-Netherland Tax Treaty. Your Honour will appreciate that the language of India-UK Tax Treaty (applicable in case of the Appellant) is in line with India-Netherland Tax Treaty. Revenue is not able to produce any argument to controvert the facts of the ground raised by the assessee and also not able to controvert the stand taken by the special bench in the case of Sumitomo Mitsui Banking Corporation (supra). Nature of expenditure on Refurbishment - assessee submitted that these expenses incurred on refurbishment of various branch premises like electrical works, cabling and wiring, etc. Assessing Officer held that these expenses are capital in nature (and not revenue) disallowed the same - HELD THAT:- Identical issue is decided in favour of the assessee for the A.Y. 2001-02 [ 2023 (11) TMI 1250 - ITAT MUMBAI] as held looked upon expenditure which did bring about some kind of an enduring benefit to the company as revenue expenditure when the expenditure did not bring into existence any capital asset for the company. The asset which was created belonged to somebody else and the company derived an enduring business advantage by expending the amount. In all these cases, the expense has been looked upon as having been made for the purpose of conducting the business of the assessee more profitably or more successfully. In the present case also, since the asset created by spending the said amounts did not belong to the assessee but the assessee got the business advantage of using modern premises at a low rent, thus saving considerable revenue expenditure for the next 39 years, thus the expenditure should be looked upon as revenue expenditure. TP Adjustment - Disallowance of expenses directly attributable to operation in India - Whether the allocation of cost by the Head Office are eligible and whether it is covered within the provisions of section 44C ? - HELD THAT:- These costs are allocated between the Head office and branches which are nothing but allocation of costs within the cost centers of same assessee, allocated the cost on the basis of allocation key, which are accepted principles without any profit element on it. The arrangements are within the organization and there cannot be any agreement, strictly speaking the agreement on allocation key is itself on an agreed terms between the branches. It is not necessary that it should have a separate agreement between the branches and also there is no requirement of invoices between the branches it is enough that there are approved internal memo. It is agreed that it is an international transaction there has to be certain documents justifying the allocation with proper allocation key, which has to be documented with mutual agreement for demonstration of acceptance of such allocation key. Once the branches and head office justifies the allocation key for allocation of various expenses, it justifies the purpose of sharing the internal costs. We observe that these costs are not just shared this year, it is a regular practice over the years by the head office or relevant branches which does services by submitting the various costs with proper allocation key. It is brought to our notice that various services are offered by the head office and relevant branches which also demonstrates the increase in the volume of business as well as services to Indian customers, this itself a benefit derived by the Indian branch. Therefore, in sum and substance, we observe that AO has intended to disallow the whole cost allocation made by the Head office to toe along with the findings in the earlier assessment years and not inclined to relook at the actual material or facts on record. In our view, he has grossly rejected the documents and justification submitted by the assessee. We do not see any reason to differ from the findings of the Coordinate Bench in the earlier assessment years - AO himself partially accepted the findings of TPO and proceeded to disallow the whole allocation of costs, which demonstrates that he has no inclination to allow the costs incurred by the assessee. Even the TPO partially recognizes the allocation of costs and rejects the cost which according to him not supported by the sufficient documents. It is Transfer Pricing Officer s obligation to call for the whole documents before closing the Transfer Pricing assessments and also he cannot treat any TP adjustment without properly justifying the reasons for such rejection. In this case, we observe that he has merely considered the submissions made by the assessee and he partially accepted the allocation and other part, he has proceeded to treat them as nil with the observation that there is no proper documents submitted before him. The revenue cannot reject the CPA certificate since the same are specific and authenticated. As per Rule 10D(2)(A), the document must be supported by authentic documents, which includes authentication by the CPA. Therefore, the certification of allocation key and the same was authenticated by the CPA is proper documents as per Reule 10(2)(A) of the I.T. Rules. Respectfully following the above decision, we observe that in the given case also, the assessee has provided informations under Rule 10D(2)(A) and the cost allocation was also certified by the statutory auditors (CPA) of the Head Office and the service branches are submitted before tax authorities. However, this was not taken cognizance by the tax authorities. Therefore, we direct the Assessing Officer to verify the CPA certificate and verify the allocation key and relevant allocation of the cost to the Indian entity. Disallowance u/s 14A - HELD THAT:- As following the principle of consistency, the view taken by the Tribunal in A.Y. 2001-02 is respectfully followed, accordingly, Assessing Officer is directed to restrict the disallowance to 1% of exempt income and ground raised by the assessee is partly allowed. Premium paid on acquisition of retail asset portfolio - HELD THAT:- We observe from the record that the assessee has acquired the retail loan portfolio from Standard Chartered Grindlays Bank Ltd, which is a separate legal entity on the proprietary basis, it is also relevant to note that it has acquired the running retail portfolio business. Therefore, it is only a trading assets acquired by it. In our view, the assessee will get the benefit based on the tenure of this trading assets. It was submitted by the Ld AR that the tenure of this retail loans are for the period 2 to 5 years. Therefore, cost verses benefit has to be recognized in this transaction. The assessee has benefitted and recognized the income in the next 5 years, hence, in our view, it should be treated as deferred revenue expenditure and allocated in 5 equal installments. Therefore, we direct the AO to allow 1/5th of the cost in this assessment year and balance can be carried forward to the subsequent years. Accordingly, the ground raised by the assessee is partly allowed. Deduction of Head office expenditure - HELD THAT:- Head office expenditure is allowed in entirety under the provisions of Article 26 of the tax treaty without the applicability of restriction under section 44C of the Act, and as the submissions by assessee not controverted by the Revenue, In view of this, ground of appeal of the assessee is allowed.

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• 2024 (4) TMI 736
  Revision u/s 263 - As per CIT, AO has not examined the issue of interest expenditure claimed against interest from third party - SCN was issued relating to advancing of borrowing funds to the third parties without utilizing the funds for assessee s own business - HELD THAT:- We find that the in the notice issued u/s 142(1) of the Act specific questions have been raised in point 6 with regard to the investments/loans appearing in the balance sheet and justification regarding interest paid to others has been asked for. The assessee had made detailed submissions and after considering the same, the assessment has been completed and in the body of the assessment order, this issue has been dealt by the AO. Assessing Officer has extensively examined this issue and has taken a plausible view after proper application of mind. It is not the case of no enquiry or incomplete enquiry. AO has carried out a detailed enquiry and after considering the fact that the assessee being into real estate project has borrowed funds from SREIIFL for the business purpose and for short term when the funds were idle as a prudent business man and for commercial expediency, the funds were utilized for giving loan to another concern. AO fairly dealt with this issue and on observing that interest expenditure has been claimed in the interest of business has allowed the said claim. Under these given facts and circumstances, we firstly find that the assessment order is not erroneous as a detailed enquiry has been conducted and secondly not prejudicial to the interest of the revenue as the assessee has set off the interest expenditure against the interest income earned from applying the short term loans and advances - Revisionary proceedings u/s 263 quashed - Decided in favour of assessee.

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• 2024 (4) TMI 735
  Assessment u/s 153A - Addition u/s 68 - bogus unsecured loan - unexplained cash credit received from shell/paper companies under the garb of unsecured loan - CIT(A) deleted addition - HELD THAT:- As on the date of search i.e., 29/01/2021, Assessment Years 2014-15 and 2015-16 fall under the category of completed/unabated assessment years and addition for such assessment years could have been made only if any incriminating material has been found by the search team indicating that the assessee had any unaccounted income/investment/unaccounted money. Perusal of the assessment order shows that the ld. Assessing Officer has not referred to any incriminating material. He has merely acted upon the informations available in the audited balance sheet relating to unsecured loans taken and based on the post search enquiry/information from third parties have made the alleged additions We find that the ratio laid down by the Hon ble Apex Court in Abhisar Buildwell ( 2023 (4) TMI 1056 - SUPREME COURT] is squarely applicable on the facts of the instant case and, therefore, since the AY 2014-15 2015-16 are completed and unabated Assessment Years and no incriminating material was found for the alleged Assessment Years during the course of search and the ld. Assessing Officer has made the addition without referring to any incriminating material, the addition has been rightly deleted by the ld. CIT(A). We thus fail to find any infirmity in the finding of the ld. CIT(A). Accordingly, the grounds of appeal raised by the revenue for both the Assessment Years are dismissed.

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• 2024 (4) TMI 734
  Addition u/s 69 - AO made addition merely on the reasoning that the payment of consideration was not disclosed - assessee before the CIT(A) contended that the lands purchased by it through sale deed was not disclosed in the books as the consideration was not paid due to dispute - CIT(A) after considering the facts in totality confirmed the addition made by the AO - HELD THAT:- There is no dispute that the land in question was purchased by the assessee much earlier through the sale deed and payment for the same was made subsequently. Generally, such transactions are against the prevailing market forces/ practices. Under standard conditions, the buyer needs to make the payment to the vendor on or before the registration of the sale deed. There can always be exceptions to such kind of prevailing market practices but the same can be accepted if there is some reasonable justification. We note that in the case of CIT versus Lubtec India Ltd [ 2007 (7) TMI 281 - DELHI HIGH COURT ] has observed that the provisions of section 69C of the Act are applicable with respect to the expenditures which have actually been incurred by the assessee and the assessee fails to offer any explanation about the source of such expenditure. From the judgement, it s transpired that actual expenditure, the source of which has not been explained, should have been incurred for attracting the deeming provisions provided u/s 69 of the Act. In the present case there were several justifiable factors for the delayed payment against the purchase of land. These justifiable factors have been elaborated in the preceding paragraph and the same has not been doubted by the revenue authorities. Thus, in such facts and circumstances, we are of the view that the addition cannot be made in the hands of the assessee merely on the reason that the assessee got the property transferred through registered sale without making the payment to the vendor. There was no document brought on record by the Revenue suggesting that the assessee has incurred the expenses in connection with the purchase of land in cash so as to apply the provisions of section 69 of the Act. As such, the provisions of section 69 of the Act cannot be attracted in the light of the discussion held in the case of Lubtec India Limited. (supra). Thus addition directed to be deleted - Decided in favour of assessee.

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• Customs

• 2024 (4) TMI 732
  Penalty imposed on the appellant being the employee of the Shipping Line u/s 114AA - manipulation in the document - statement recorded u/s 108, wrongly stated that the supplier of the goods in the subject container was Jubilee Middle East General Trading LLC, Dubai - HELD THAT:- From the RUDs placed on record by the learned AR, we find the Bill of Lading dated 6.11.2014 the supplier has been mentioned as M/s. Jubilee Middle East General Trading LLC Dubai, UAE. Therefore, the appellant is not wrong in saying that the shipper/supplier is M/s. Jubilee Middle East General Trading LLC. Hence, no fault can be attributed on the appellant. The provisions of section 114 AA provides for imposition of penalty on a person who knowingly or intentionally make, sign, uses or causes to be made any declaration, statement or documents, which is false or incorrect in any material particular in the transaction of any business for the purpose of the Act. From the statement of Shri Ravinder Singh, we find that the manipulation in the documents were done by the Dubai Branch of the shipping line at the behest of the actual supplier. There is no evidence to link the appellant with the said manipulation done at Dubai office. The shipping line has not been roped in the present proceedings. The revenue has not substantiated the charge of connivance of the appellant with the illegal import rather he was instrumental in ascertaining the correct valuation of the impugned goods. We, therefore, do not find any justification for imposition of penalty u/s 114AA of the Act. The consistent stand taken in the judicial pronouncements is that no penalty can be imposed on the employee, who acts under the instructions of his employer unless and until there is proof of fraud having been committed by him. We are, therefore of the view that no penalty can be imposed on the appellant who was working as an employee being the Operation Manager with the Shipping Line and on the basis of the Bill of Lading made the statement that the supplier was M/s. Jubilee Middle East General Trading LLC, Dubai and the manipulation in the document was at the Dubai office of the shipping line stands proved by the statement of Shri Ravinder Singh, the present employee of the shipping line. The impugned order deserves to be set aside and the appeal needs to be allowed. Accordingly, the appeal stands allowed.

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• 2024 (4) TMI 731
  Penalty under Rule 18 (1) of CBLR 2018 on customs broker - exporter availed undue benefit under Merchandise Exports from India Scheme (MEIS) in the export of safety matches - misclassifying the same under CTH 36050090 as against CTH 36050010 - facilitated the filing of documents relating to export on behalf of their exporter client - violation of Regulations 10(d) 10 (e) ibid - HELD THAT:- In the case of M/s. Max Miller Agencies [ 2024 (1) TMI 1220 - CESTAT CHENNAI] this Bench has considered an almost similar issue and after considering several judicial pronouncements has found it proper to delete penalty imposed for violations of regulation in 10 (d) and 10 (e). Thus, I deem it proper to delete the penalty imposed on the appellant and therefore, the impugned order calls for interference. Resultantly, the impugned order is set aside and the appeal is allowed.

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• 2024 (4) TMI 730
  Period of limitation for filing refund claim of SAD - Period start from the date of payment Or from the date of sale of the goods - HELD THAT:- The ratio laid down in the case of M/s. Abhishek Marketing [ 2024 (3) TMI 1050 - CESTAT KOLKATA] wherein the Tribunal has held that the one-year period for filing the refund claim should start from the date of payment of additional customs duty, is squarely applicable to the factual matrix of the present appeals. I observe that the judgements of the Hon ble Delhi High Court cited by the appellant pertain to refund claims filed prior to the amendment carried out vide Notification No. 93/2008-Cus. dated 01.08.2008. Thus, I find that the decisions cited by the appellant are not relevant in the facts and circumstances of the present case. Accordingly, I do not see any reasons for interfering with the impugned orders and the same are accordingly upheld. In the result, the appeals filed by the appellant stand dismissed.

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• 2024 (4) TMI 729
  Benefit of exemption from Customs Duty - Validity Of Original re-assessment orders - Modification of self assessment made by the appellant claiming the benefit of exemption under Sl. No. 29 and 30 of Notification No.24/2005-Customs as amended - Classification of impugned goods viz. Open Cells under CTH 85.24 and in classification of associated parts of Open Cells under CTH 85.29 - whether the imported goods is the Liquid Crystal Device or not - HELD THAT:- On careful reading of the impugned order passed by the learned Commissioner of Customs (Appeals), it transpires that he has given a specific finding that there is no dispute in the classification of impugned goods viz. Open Cells under CTH 85.24 and in classification of associated parts of Open Cells under CTH 85.29. Further, he had stated that the issue in contention is whether exemption under Serial No. 29 30 of Notification No.24/2005-Customs dated 01.03.2005 is applicable to the impugned goods or not. In answering to the issue in dispute, learned Commissioner of Customs (Appeals), had concluded that Open Cell cannot be considered as the Liquid Crystal Display (LCD) itself, as certain other components have to be attached to convert it into a fully functional LCD. We also find that such an examination has not been carried out. This is for the reason that firstly, the description of the goods specified in the exemption entry at Sl. No. 39 viz., Liquid Crystal Devices has not been explained to state whether the imported goods is the Liquid Crystal Device or not. Instead, it has been simply stated that the imported goods are not a fully functional Liquid Crystal Display , as open cell needs to be added with certain other components to make it so. Even the original authority did not examine these aspects despite the claim made by the appellants that Open Cell is a Liquid Crystal Device in terms of HSN Explanatory note to the heading 8524. The facts of the case further indicate that in the Original order dated 17.11.2022, customs duty exemption benefits under Sl. No.515A and 516 of Notification No.50/2017-Customs dated 30.06.2017 have been extended, whereas in the Original order dated 29.11.2022, merit rate of duty has been applied without extending any duty exemption benefit, while reassessing the B/Es u/s 17(5) ibid, in contrary to the declaration made for self assessment of goods by the appellants u/s 17(1) ibid. In this context, the learned Commissioner of Customs (Appeals), has not examined in detail how the exemption was allowed for imported goods under one B/E and in other B/E the same was rejected, without verifying the fulfillment of the exemption entries under Sl. No.515A and 516 of Notification No.50/2017-Customs dated 30.06.2017 which are subject to certain conditions under Customs (Import of Goods at Concessional Rate of Duty) Rules, 2017, and upheld this contradictory original orders, in the same Order-in-Appeal i.e., impugned order dated 21.02.2023. Thus, in our considered view is a clear case of non-application of the mind and thus the impugned order dated 21.02.2023, is liable to be set aside on these grounds alone. From the arguments advanced by the Advocates for the appellants, explaining in detail the relevant customs tariff entries and the Chapter 85 and 90, introduction of Chapter Note 7 chapter 85 and the explanation for the insertion of new CTH 85.24 and the entries therein, legislative history of open cell , technical literature and explanation in the form of an affidavit duly notarized stating that open cell are used for Television or monitor or display screen application and the various process involved in manufacture of such articles, concluding that open cell and panel are both LCD devices; various decisions of the Tribunal and the judgements of the Hon ble Supreme Court relied upon by them, there is legal force in the argument that the exemption benefit under Sr. No.29 30 of the Notification No.24/05-Cus., dated 01.03.2005 should be extended to the impugned goods. We are also of the considered view that the authorities below in reassessment of impugned goods u/s 17(5) ibid, are required to pass a reasonable order, which is of a speaking nature, conforming to the requirements of the definition of assessment which include such reassessment . Hence, it is imperative that amongst other issues, tariff classification of imported goods and exemption or concession of duty issued under notifications issued under Section 25 ibid are required to be examined and determined in order to fulfill the requirements of reassessment in terms of Section 2(2) ibid. We are of the considered view that the impugned order passed by the learned Commissioner (Appeals) cannot be sustained on merits. However, we are also of the considered view that in order to examine the various issues of reassessment of impugned goods covered under the two Bills of Entry (B/E) No. 9574139 dated 16.07.2022 and B/E No.2453614 dated 15.09.2022 for deciding upon the eligibility to Customs duty exemption benefits under Sl. No. 29 and 30 of Notification No.24/2005-Customs dated 01.03.2005, as amended, the matter needs to be decided afresh in de novo proceedings by the original authority. Therefore, the impugned orders are set aside and the appeals are allowed in favour of the appellants by remanding the matter for a fresh decision by Original Authority after duly taking into consideration the various submissions made by the appellants and the points advanced by Revenue in these appeals before the Tribunal. In the result, the appeals are allowed by way of remand for fresh de novo proceedings in the above terms.

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• Corporate Laws

• 2024 (4) TMI 728
  Professional Misconduct by CA - Failure to disclose a material fact known to him which is not disclosed in a financial statement, but disclosure of which is necessary in making such financial statement where the statutory auditors are concerned with that financial statement in a professional capacity - Failure to report a material misstatement known to him to appear in a financial statement with which EP is concerned in a professional capacity - Failure to exercise due diligence and being grossly negligent in the conduct of professional duties - Failure to obtain sufficient information which is necessary for the expression of an opinion, or its exceptions are sufficiently material to negate the expressions of an opinion - Failure to invite attention to any material departure from the generally accepted procedures to audit applicable to the circumstances - sanctions and penalties. HELD THAT:- EP and PHD committed professional misconduct as defined by Section 132 (4) of the Companies Act, 2013, read with Section 22 and Clause 5 of Part I of the Second Schedule of the Chartered Accountants Act, 1949 (No. 38 of 1949) as amended from time to time, which states that a CA is guilty of professional misconduct when he fails to disclose a material fact known to him which is not disclosed in a financial statement, but disclosure of which is necessary in making such financial statement where he is concerned with that financial statement in a professional capacity - This charge is proved as PHD and EP failed to disclose in their report the material noncompliances the Company made. EP and PHD committed professional misconduct as defined by Section 132 (4) of the Companies Act, 2013, read with Section 22 and Clause 6 of Part I of the Second Schedule of the Chartered Accountants Act, 1949 (No. 38 of 1949) as amended from time to time, which states that a CA is guilty of professional misconduct when he fails to report a material misstatement known to him to appear in a financial statement with which he is concerned in a professional capacity - This charge is proved as EP and PHD failed to disclose in their report the material misstatements made by the Company. EP, EQCR Partner and PHD committed professional misconduct as defined by Section 132 (4) of the Companies Act, 2013, read with Section 22 and Clause 7 of Part I of the Second Schedule of the Chartered Accountants Act, 1949 (No. 38 of 1949) as amended from time to time, which states that a CA is guilty of professional misconduct when he does not exercise due diligence or is grossly negligent in the conduct of his professional duties - This charge is proved as EP, EQCR Partner and PHD conducted the Audit of a Public Interest Entity in total disregard of their statutory duties, evidenced by multiple critical omissions and violations of the standards. The instances of failure to conduct the audit in accordance with the SAs and applicable regulations, and failure to report the material misstatements in the financial statements and non-compliances made by the Company. EP, EQCR Partner and PHD committed professional misconduct as defined by Section 132 (4) of the Companies Act, 2013, read with Section 22 and Clause 8 of Part I of the Second Schedule of the Chartered Accountants Act, 1949 (No. 38 of 1949) as amended from time to time, which states that a CA is guilty of professional misconduct when he fails to obtain sufficient information which is necessary for expression of an opinion or its exceptions are sufficiently material to negate the expression of an opinion - This charge is proved since EP, EQCR Partner and PHD failed to conduct the audit in accordance with the SAs and applicable regulations as well as due to their total failure to obtain sufficient appropriate audit evidence to support their opinion on the financial statements. EP and PHD committed professional misconduct as defined by Section 132 (4) of the Companies Act, 2013, read with Section 22 and Clause 9 of Part I of the Second Schedule of the Chartered Accountants Act, 1949 (No. 38 of 1949) as amended from time to time, which states that a CA is guilty of professional misconduct when he fails to invite attention to any material departure from the generally accepted procedure of audit applicable to the circumstances - This charge is proved since EP and PHD failed to conduct the audit in accordance with the SAs as explained in Paras C1 to C7 above but falsely reported in their audit report that the audit was conducted as per SAs. Thus it is concluded that the charges of professional misconduct in the SCN, as detailed above, stand proved based on the evidence in the Audit File, the audit reports on the standalone financial statements and consolidated financial statements for the FY 2018-19, the submissions made by EP, EQCR Partner and PHD and the Annual Report of RCL for the FY 2018-19. Sanctions and penalties - HELD THAT:- Section 132 (4) of the Companies Act, 2013 provides for penalties in a case where professional misconduct is proved. The seriousness with which proved cases of professional misconduct are viewed is evident from the fact that a minimum punishment is laid down by the law. Because professional misconduct has been proved and considering the nature of violations and principles of proportionality, in the exercise of powers under Section 132 (4) (c) of the Companies Act, 2013, it is ordered: a. Imposition of a monetary penalty of Rs.3 crore (Rupees Three Crore) on the Audit Firm M/s Pathak H.D. Associates. b. Imposition of monetary penalties of Rs.1 crore (Rupees One Crore) and Rs.50 Lakh (Rupees Fifty Lakh) respectively on EP CA Parimal Kumar Jha and EQCR Partner CA Vishal D Shah. c. In addition, EP and EQCR partners are debarred for 10 years and 5 years respectively from being appointed as an auditor or internal auditor or from undertaking any audit in respect of financial statements or internal audit of the functions and activities of any company or body corporate.

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• Insolvency & Bankruptcy

• 2024 (4) TMI 727
  Approval of Resolution Plan - whether the Appellant is secured creditor of the Corporate Debtor or not? - whether the decision of the RP declaring the Appellant as unsecured creditor is in accordance with law? - HELD THAT:- It is true that Section 3(31) does not refer to any registration of charge under Section 77. The judgment of the Hon ble Supreme Court in Paschimanchal Vidyut Vitran Nigam Ltd. vs. Raman Ispat Pvt. Ltd. [ 2023 (7) TMI 831 - SUPREME COURT ], which has been relied by learned Counsel for the Appellant, is noticed. The above was a case where a claim was filed under IBC for government dues. The assets of the Corporate Debtor were attached and in the above context issue arose as to whether Electricity Department is secured creditor or not and further in the above context Section 77 of the Companies Act was looked into - Hon ble Supreme Court did not consider it appropriate to rule on the submissions of the Liquidator, vis- -vis the fact of non-registration of charges under Section 77 of the Companies Act. On looking into the definition of Section 3(31), it is clear that right, title or interest or a claim to property, created in favour of, or provided for a secured creditor by a transaction which secures payment or performance of any obligation and includes mortgage, charge, hypothecation, assignment and encumbrances or any other agreement or arrangement securing payment or performance of any obligation of any person , no transaction has been placed on record, under which a security interest is created in favour of the Corporate Debtor with regard to assets of the Corporate Debtor. As noted above, mortgages of immovable property and non-agricultural land were mortgages, which were referred in Sanction Letter, were mortgages by Guarantors and no assets of the Corporate Debtor was mortgaged to the Appellant. The Sanction Letter cannot be said to be a transaction, which secures payment or performance of an obligation. The Adjudicating Authority, thus, was very well aware that Application has been filed for extension on 11.08.2023 and the Plan was approved on 23.08.2023. The mere fact that no formal orders were passed on that Application are not sufficient to set aside the impugned order on this ground. It is to be noted that 13.08.2023 was a date when 180 days was expiring. Present is not a case that there was any other extension claimed for. The Adjudicating Authority after noticing the aforesaid fact, approved the Resolution Plan, which makes it clear that Adjudicating Authority did not find any infirmity in approval of the Resolution Plan on 23.08.2023. In any view of the matter, exclusion having been prayed for and no order having been passed by the Adjudicating Authority on the said extension, no infirmity can be found on that ground and exclusion as prayed for was fully admissible and is required to be granted. There are no error in order of the Adjudicating Authority approving the Resolution Plan - appeal dismissed.

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• Service Tax

• 2024 (4) TMI 726
  Levy of service tax - Intellectual Property Services - license fees and other incidental expenses paid to the Russian Company i.e. M/s. Rosboronexport, Moscow, Russia towards transfer of technical knowhow and technical assistance for manufacture of aircraft engines - amount received from the Malaysian company i.e. M/s. Setia Technologi SDN, BHD, Malaysia against repair/rectification of MIG Engines - Reverse Charge Mechanism - suppression of facts - Extended period of Limitation. Service tax on license fees and other incidental expenses paid to the Russian Company i.e. M/s. Rosboronexport, Moscow, Russia towards transfer of technical knowhow and technical assistance for manufacture of aircraft engines - HELD THAT:- This Tribunal in the case of M/S. SICPA INDIA PVT. LTD. VERSUS COMMISSIONER OF CENTRAL EXCISE, CUSTOMS SERVICE TAX, SILIGURI [ 2017 (9) TMI 1325 - CESTAT KOLKATA ] held that technical knowhow provided by a foreign company to an Indian company under a licence for manufacture of goods for consideration of Royalty equal to a percentage of net sale price of the goods, was nowhere registered / patented in India as an IPR service and therefore, the recipient of such service was not liable to pay Service Tax under RCM as IPR service - the transfer of technology by M/s. Rosboron export would not qualify as intellectual property right within the meaning of Section 65(55a) of the Act for the various aspects as listed in paragraph 3.1 of this Order and therefore, would not be covered under the definition of intellectual property service within the scope of Section 65(55b). Amount received from the Malaysian company i.e. M/s. Setia Technologi SDN, BHD, Malaysia against repair/rectification of MIG Engines - HELD THAT:- The activity of repairs and maintenance was carried out within the jurisdiction of India and therefore was liable for tax under Section 65(105)(zzg) as management, maintenance or repair service and was liable for payment of duty in terms of Rule 3(1)(ii) of the Export of Services Rules, 2005. The Ld. Commissioner vide the impugned order has categorically held that the provision of service having took place in India, there is a breach of Rule 6A of the Service Tax Rules, 1994 and Rule 3(1)(ii) of the Export of Services Rules, 2005. To this extent, the findings of the Ld. Commissioner on the aspect agreed upon. Extended period of limitation - Suppression of facts or not - HELD THAT:- There are no merit to impute the charge of suppression to a government organization owned by the Ministry of Defence, for the non-payment of duty / tax with intent to evade the same by suppressing the material information, more so when it is depicted inappropriately and construed accordingly - the demand for the extended period cannot be sustained as there is nothing on record to establish mala-fides on the part of the appellant - the extended period of limitation is not invokable in the circumstances. The impugned order is set aside - appeal allowed.

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• 2024 (4) TMI 725
  Point of Taxation rules - service received from associate enterprises on the taxable value as determined in terms of section 67 of the Finance Act, 1994 - demand made in the present case on the basis of certain provisional entries made by the appellant in their book of accounts, as expenses towards the payments to be made to their associate enterprises, for the services of professionals visiting them - Extended period of Limitation - Penalty - HELD THAT:- By not paying the service tax at the time of making the expense entries in their book of accounts, appellant has failed to pay the service tax at the relevant time, as per Rule 6 (1) of the Service Tax Rules, 1994. Even if it is concluded that appellant have correctly discharged the service tax liability subsequently they are required to pay interest on the delayed payment of the tax as per Section 75 of the Finance Act, 1994. Extended period of Limitation - HELD THAT:- The submissions made by the appellant to effect that the demand is barred by limitation for the reason that the audit was conducted on various dates between 24.09.2012 to 06.05.2013, so the fact was in the knowledge of the department within the normal limitation period and the show cause has been issued only on 05.10.2015, not agreed upon. Proviso to Section 73 (1) of the Finance Act,1994 provides that extended period of limitation can be invoked if the necessary ingredients as prescribed therein exist. The fact that appellant was making the expense entries in the book of accounts, in case of the receipt of services from the associated enterprises was well in knowledge of the appellant and the provisions of the Section 67 read with Rule 6(1) and Rule 7 of the Point of Taxation Rules, 2011 clearly laid down the manner in which the service tax liability was to be discharged in respect of these entries. By not following the said procedure appellant have sought to short pay the service tax, by suppressing the fact of the said entries in their book of accounts with intent to evade payment of tax at time and in the manner prescribed as per law. In case of COMMISSIONER OF C. EX., SURAT-I VERSUS NEMINATH FABRICS PVT. LTD. [ 2010 (4) TMI 631 - GUJARAT HIGH COURT ] Hon ble Gujarat High Court has held The language employed in the proviso to sub-section (1) of Section 11A, is, clear and unambiguous and makes it abundantly clear that moment there is non-levy or short levy etc. of central excise duty with intention to evade payment of duty for any of the reasons specified thereunder, the proviso would come into operation and the period of limitation would stand extended from one year to five years. This is the only requirement of the provision. Once it is found that the ingredients of the proviso are satisfied, all that has to be seen as to what is the relevant date and as to whether the show cause notice has been served within a period of five years therefrom. Penalty - HELD THAT:- As the invocation of the extended period of limitation as per Section 73 of the Finance Act, 1994 is upheld, the penalty as per Section 78 becomes mandatory as has been held by Hon ble Apex Court in case of UNION OF INDIA VERSUS M/S RAJASTHAN SPINNING WEAVING MILLS AND COMMISSIONER OF CUSTOMS AND CENTRAL EXCISE VERSUS M/S. LANCO INDUSTRIES LTD. [ 2009 (5) TMI 15 - SUPREME COURT ]. For re-computation of the demand of tax and interest, and the penalties imposable the matter need to be remanded back to the original authority - appeal allowed in part.

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• 2024 (4) TMI 724
  Levy of service tax - Business Auxiliary Services (BAS) - expenses reimbursed to the foreign distributors under reverse charge mechanism - Extended period of limitation - HELD THAT:- Hon ble Apex Court held in the case of COLLECTOR OF CENTRAL EXCISE, CALCUTTA VERSUS PRADYUMNA STEEL LTD. [ 1996 (1) TMI 127 - SUPREME COURT] that mere mention of wrong provision of law, when the power exercised is available even though under a different provision is by itself not sufficient to invalidate the exercise of that power. It is found that the show-cause notice was issued alleging that the appellants have not paid the service tax for the various services received by them from their overseas dealers/ distributors and that such services fall under Business Auxiliary Service . It is found that the show-cause notice mentions at Para 7 that the appellants are incurred an expense on account of advertisement for sale promotion which appear to be covered under BAS. Thus, it is seen that in the instant case, the purport of the show-cause notice is to put the appellants on notice that they have received services from their foreign dealers and have not discharged due service tax under the BAS. Whether the appellants have received services under Business Auxiliary Services from their overseas distributor/ dealers and if so whether they are liable to discharge duty on Reverse Charge Mechanism? - HELD THAT:- It is pertinent to note that though, the free repairs during the warranty period are undertaken by the dealer, the customer perceives that the same are provided by the manufacturer of the car. The dealers/ distributors are always associated with the manufacturer. To that extent, it is understood that the dealer/ distributor is performing his work on behalf of or as an agent of the manufacturer in this case, the appellants. Similarly, in advertising, promotion of good-will, overseeing the network of dealers/ distributors, business interest of the manufacturer of the motors is taken care even though the activity aids for his own business promotion. Therefore, the submission of the appellant not agreed upon that the relationship between the appellant and the overseas dealers is on a principal-to-principal basis. As long as the overseas dealers/ distributors are rendering some service on behalf of/ on account of/ in connection with the business of the appellant, they take the role of the manufacturer/ appellant. The overseas dealer/ distributor is receiving a consideration for this purpose. Therefore, there is a force in the argument of the Department that the services rendered are in the nature of BAS. The Chennai Bench of the Tribunal has gone into an identical issue concerning a similarly placed manufacturer of motor cars, i.e M/S. HYUNDAI MOTOR INDIA PVT. LTD. VERSUS COMMISSIONER OF CENTRAL EXCISE SERVICE TAX [ 2019 (6) TMI 856 - CESTAT CHENNAI] , having similar arrangements with the overseas dealers has decided that the overseas dealers/ distributors are rendering services classifiable under BAS to the appellants therein. It is found that as contended by the learned Authorized Representative for the Department, the exemption under Notification No.12/2003-ST dated 20.06.2003 is admissible only when goods are sold during the course of provision of service; there is documentary evidence in relation to the sale of said goods and if the appellants have not availed CENVAT credit - in the instant case, the gross value of taxable service for the purpose of computation of service tax shall be the gross amount paid by the recipient of such service. Time Limitation - suppression of facts - HELD THAT:- It is found no case has been made by the Department to show any positive act with an intent to evade payment of duty. It is found that it was held in the case of SUNSHINE STEEL INDUSTRIES VERSUS COMMISSIONER OF CGST, CUSTOMS CENTRAL EXCISE JODHPUR (RAJ.) [ 2023 (1) TMI 638 - CESTAT NEW DELHI] upheld by Supreme Court in COMMISSIONER OF CGST CUSTOMS AND CENTRAL EXCISE VERSUS SUNSHINE STEEL INDUSTRIES [ 2023 (7) TMI 479 - SC ORDER] that extended period cannot be invoked for a demand raised on the basis of audit. Therefore, the extended period cannot be invoked and the demand needs to be sustained only for the normal period. Looking into this background, the imposition of penalties is also not justified in the instant case. The impugned order is modified to the extent of confirming the demand for the normal period; penalties imposed are set aside; the appeal is partially allowed.

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• 2024 (4) TMI 723
  Recovery of service tax alongwith interest and penalties - Business Auxiliary Service - Business Support Service - agreements with M/s Rathipriya Trading Pvt. Ltd. [presently known as M/s Indiawin Sports Pvt. Ltd., Mumbai (ISPL)] for playing in Indian Premiere League - HELD THAT:- The Tribunal in its judgment, in the case of SOURAV GANGULY VERSUS COMMISSIONER OF SERVICE TAX, KOLKATA (NOW COMMISSIONER OF CENTRAL GOODS SERVICE TAX CENTRAL EXCISE, KOLKATA SOUTH) [ 2020 (12) TMI 534 - CESTAT KOLKATA] has relied on the case of CST, DELHI VERSUS MS. SHRIYA SARAN [ 2014 (7) TMI 78 - CESTAT NEW DELHI] and the Hon ble Calcutta High Court s decision in the case of COMMISSIONER OF SERVICE TAX AND ANR. VERSUS SOURAV GANGULY AND ORS. [ 2019 (10) TMI 221 - CALCUTTA HIGH COURT] and this judgment has been followed in many other cases. The Hon ble High Court of Calcutta held that the remuneration received by the petitioner from the IPL franchisee could not be taxed under business support service. The issue is no longer res integra - Appeal allowed.

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• Central Excise

• 2024 (4) TMI 722
  Invocation of Extended period of limitation - contravention of provision of rule 9(1)(f) of CCR - Levy of penalty u/r 15(3) of CCR - HELD THAT:- The Commissioner (Appeals) has also not recorded any specific reasons of invoking the extended period of limitation - only reason given in the show cause notice for invoking extended period of limitation is that the appellant had contravened the provision of rule 9(1)(f) of CCR. It has been presumed that CENVAT credit was availed by the appellant with intention to increase its CENVAT balance with the logical consequence of non-payment of duty in cash and with intent to evade payment of duty. It is a well settled legal position that all show cause notices can be issued only within the normal period of limitation. To invoke extended period one of the aggravating factors necessary must be established. In this case, the only reason for invoking extended period of limitation given in the show cause notice was that the appellant had availed CENVAT credit on the strength of ineligible documents in violation of Rule 9(1)(f) of CCR. The intention to evade payment has been presumed. The impugned orders and the OIO also do not indicate, let alone establish, the existence of any of the five aggravating factors. As the show cause notice was time barred and consequently the impugned orders which affirm the proposals in the show cause notice cannot be sustained and need to be set aside - Appeal allowed.

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• 2024 (4) TMI 721
  Clandestine Removal - corroborative evidences or not - entire demand has been raised on the basis of three private unauthenticated seized documents from the office of M/s. EFPL - penalty - HELD THAT:- Although it is the claim of the Revenue that truck numbers are mentioned on the said documents which were involved in clandestine removal of goods, no investigation was conducted with regard to the truck owners or drivers to find out as to whether those vehicles were used by the appellant for clandestine removal of the goods, in support of the allegation of clandestine clearance. Further, no evidence has been produced by the Revenue with regard to excess purchase and payment thereof. No evidence in the form of excess consumption of electricity was brought on record. Moreover, no payment for clandestine removal of the goods by illicit means has been brought on record. Mere documents recovered from the premises of a third party cannot be the basis to allege clandestine removal of goods - Moreover, it has not been ascertained as to who was maintaining those documents and who had kept these documents in the premises of M/s. EFPL. Therefore, the Revenue has failed to establish their case of clandestine removal of the goods in question, particularly in view of the decision in the case of M/S. CONTINENTAL CEMENT COMPANY VERSUS UNION OF INDIA OTHERS [ 2014 (9) TMI 243 - ALLAHABAD HIGH COURT] wherein the Hon ble High Court of Allahabad has observed we are of the opinion that when there is no extra consumption of electricity, purchase of raw materials and transportation payment, then manufacturing of extra goods is not possible. No purchase of raw material out side the books have been proved. Penalty - HELD THAT:- As there is no corroborative evidence available on record in support of the charge of clandestine removal of the goods, the demand of Central Excise Duty is not sustainable against the appellant. As the demand of duty is not sustainable, consequently, no penalty can be imposed on the appellants. The impugned order is set aside - appeal allowed.

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• CST, VAT & Sales Tax

• 2024 (4) TMI 764
  Short payment of Interest - denial of interest from 01.04.2017 to 18.12.2020, the period during which the amount of input tax credit was lying in the electronic credit ledger of the petitioner - section 38 of the VAT Act. HELD THAT:- On perusal of provisions of subsection (2) of section 38 of the Act, it is clear that the registered dealer is entitled to refund from the date immediately following the date of closure of the accounting year to which the said the amount of refund relates till the date of payment of the amount of such refund. In the facts of the case, appellant order would be the relevant date or the end date however, the date from which the interest starts running is the date of immediately following the accounting year which is 01.04.2017 under the facts of the case. Merely because the petitioner has transferred the amount to the electronic credit ledger coupled with the fact that such amount remained unutilized till it was reversed by the petitioner by filling Form DRC-03, the transfer of amount to the electronic credit ledger was only a memorandum entry on 01.07.2017 which was reversed on 18.12.2020. For all effect and purpose, the amount was never utilized by the petitioner and the Commissioner has also rightly not granted refund of the amount input tax credit which is utilized by the petitioner. It is pertinent to note that the petitioner made claim of refund for the amount of Rs. 42,35,215/- after considering already utilized amount of Rs. 3,45,133/- and there was shortfall of Rs. 22,500/ and therefore, the Commissioner, while granting refund, has taken into consideration this aspect and granted refund of only Rs. 42,34,894/- to the petitioner. Therefore, respondent-authority is required to calculate the interest on the amount as per the order passed by the appellate-authority from 01.07.2017 till the date of order i.e. 22.05.2023. The respondent authorities are directed to refund balance amount of Rs. 8,81,322/- within a period of four weeks from the date of receipt of copy of this order - Petition allowed.

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• 2024 (4) TMI 720
  Seeking to remove the encumbrance of the attachment in the petitioner s property - specific case of the petitioner is that the petitioner is a bona fide purchaser of the property from the fifth respondent and is therefore entitled to immunity under proviso to Section 43 of TNVAT Act, 2006 - HELD THAT:- In the facts and circumstances of the case, it is evident that the petitioner and the fifth respondent are known to each other and are in the same business. The petitioner ought to have obtained the certificate or for prior permission from the Commercial Tax Department before purchasing the property as to whether the property was fully free from any encumbrance. Instead, the petitioner has blindly purchased the property perhaps colluding with the fifth respondent to defraud the revenue. Therefore, the challenge to the impugned communications dated 05.02.2021, 01.09.2020 and 22.02.2022 issued by the third respondent cannot be quashed. The petitioner will have to establish his bona fide before the trial Court by filing a suit establishing that the purchase of the property from the fifth respondent was bona fide . The writ petition is dismissed.

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• Indian Laws

• 2024 (4) TMI 719
  Dishonour of Cheque - grant of interim compensation - whether the provision of sub-section (1) of Section 143A of the Negotiable Instruments Act, 1881 (for short, the N.I. Act ), which provides for the grant of interim compensation, is directory or mandatory? - factors to be considered while exercising powers under sub-section (1) of Section 143A of the N.I. Act. HELD THAT:- In the case of Section 143A, the power can be exercised even before the accused is held guilty. Sub-section (1) of Section 143A provides for passing a drastic order for payment of interim compensation against the accused in a complaint under Section 138, even before any adjudication is made on the guilt of the accused. The power can be exercised at the threshold even before the evidence is recorded. If the word may is interpreted as shall , it will have drastic consequences as in every complaint under Section 138, the accused will have to pay interim compensation up to 20 per cent of the cheque amount. Such an interpretation will be unjust and contrary to the well-settled concept of fairness and justice. If such an interpretation is made, the provision may expose itself to the vice of manifest arbitrariness - there are no manner of doubt that the word may used in Section 143A, cannot be construed or interpreted as shall . Therefore, the power under sub-section (1) of Section 143A is discretionary. Section 143A can be invoked before the conviction of the accused, and therefore, the word may used therein can never be construed as shall . The tests applicable for the exercise of jurisdiction under sub-section (1) of Section 148 can never apply to the exercise of jurisdiction under subsection (1) of Section 143A of the N.I. Act. Factors to be considered while exercising powers under sub-section (1) of Section 143A of the N.I. Act - HELD THAT:- When the court deals with an application under Section 143A of the N.I. Act, the Court will have to prima facie evaluate the merits of the case made out by the complainant and the merits of the defence pleaded by the accused in the reply to the application under sub-section (1) of Section 143A. The presumption under Section 139 of the N.I. Act, by itself, is no ground to direct the payment of interim compensation. The reason is that the presumption is rebuttable - While deciding the prayer made under Section 143A, the Court must record brief reasons indicating consideration of all the relevant factors. In the present case, the Trial Court has mechanically passed an order of deposit of Rs.10,00,000/- without considering the issue of prima facie case and other relevant factors. It is true that the sum of Rs.10,00,000/- represents less than 5 per cent of the cheque amount, but the direction has been issued to pay the amount without application of mind. Even the High Court has not applied its mind - the Trial Court is directed to consider the application for grant of interim compensation afresh. In the meanwhile, the amount of Rs. 10,00,000/- deposited by the appellant will continue to remain deposited with the Trial Court. The impugned orders are set aside, and the application made by the complainant under Section 143A (1) of the N.I. Act is restored to the file of Judicial Magistrate First Class, Bokaro - appeal allowed in part.

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