TMI Tax Updates - e-Newsletter
May 6, 2022

Case Laws in this Newsletter:

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

Articles

1. Summary SCN not fulfilling the ingredients of a proper SCN and thus violative of principles of natural justice

   By: Bimal jain

2. EXPORTED GOODS CANNOT BE CONFISCATED UNDER SECTION 113(d) OF CUSTOMS ACT, 1962

   By: DR.MARIAPPAN GOVINDARAJAN

3. ADJUDICATION UNDER GST (PART-8)

   By: Dr. Sanjiv Agarwal

4. INDIAN INCOME TAX UPDATED RETURN – ITR U – preliminary analysis of relevant provisions

   By: DEVKUMAR KOTHARI

News

1. Webinar on ‘Enhancements in GSTR-1/IFF’

2. Smt. Anupriya Patel calls upon SMEs to adopt technology towards raising productivity and promoting sustainability, encourages Industry 4.0 to reach out to Tier-2 and Tier-3 cities

Notifications

Companies Law

1. G.S.R. 335 (E) - dated 4-5-2022 - Co. Law

Companies (Share Capital and Debentures) Amendment Rules, 2022

Customs

2. 40/2022 - dated 5-5-2022 - Cus (NT)

Rate of exchange of one unit of foreign currency equivalent to Indian rupees - Supersession Notification No. 34/2022-Customs(N.T.), dated 21st April, 2022

Circulars / Instructions / Orders

GST - States

1. F.3(377)/GST/Policy/2021/1243-49 - dated 28-4-2022

Corrigendum - Circular No. -15/2021-GST of State Tax dated 10.03.2022

2. 21/2021-GST - dated 27-4-2022

Clarification regarding extension of time limit to apply for revocation of cancellation of registration in view of Notification No. 34/2021-State Tax dated 05.01.2022

3. 20/2021-GST - dated 27-4-2022

Clarifications regarding applicable GST rates & exemptions on certain services

4. F.3(432)/GST/Policy/2022/1209-1223 - dated 26-4-2022

Standard Operating Procedure (SOP) for Scrutiny of returns for FY 2017-18 and 2018-19

FEMA

5. 02 - dated 5-5-2022

Exim Bank's Government of India supported additional Line of Credit (LoC) of USD 190 million to the SBM (Mauritius) Infrastructure Development Company Ltd

Highlights / Catch Notes

GST

• GST Registration Reinstated: Rule 25 Violated Due to Lack of Inspection Notice to Property Owner; No Tax Liability Found.

  Case-Laws - HC : Revocation of cancellation of GST registration of petitioner - It is not in dispute that although, Rule 25 requires inspection to be done in the presence of the person whose property is being inspected, it was not done as the petitioner had no notice of the inspection - the perusal of the order dated 09.12.2020 clearly discloses that there is no tax outstanding qua the petitioner. - The order of cancellation set aside - The respondents will ensure that the petitioner’s registration is revived. - HC
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• High Court Examines Binding Nature of Advance Ruling Orders u/s 103(1)(b) of GST Acts for Subordinate Authorities.

  Case-Laws - HC : Constitutional Validity of Section 103(1)(b) of the GST Acts - applicability of advance ruling appellate orders passed in the case of other taxable persons having identical facts and circumstances are binding on all authorities who are subordinate to the Chief Commissioners of CGST and SGST which constitute the advance ruling appellate authority - Notices issued - HC
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Income Tax

• Supreme Court Discusses Reopening Assessments: Balancing Revenue and Taxpayer Rights u/ss 147 and 148A.

  Case-Laws - SC : Reopening of assessment u/s 147 - Scope of new provision section 148A - Validation of notices after quashed by various High Courts - if the aforesaid order is passed, it will strike a balance between the rights of the Revenue as well as the respective assesses as because of a bonafide belief of the officers of the Revenue in issuing approximately 90000 such notices, the Revenue may not suffer as ultimately it is the public exchequer which would suffer. - SC
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• Jurisdictional Issues in Income Tax Reassessment: High Court of Orissa at Cuttack Appropriate for Section 147 Dispute.

  Case-Laws - HC : Reopening of assessment u/s 147 -“cause of action” - jurisdiction to this High Court - Appropriate High Court - The writ applicant has a PAN card at such place. The impugned notice under Section 148 of the Act, 1961 was also issued at Cuttack. The return of income for the A. Y. 2015-16 was also filed at Cuttack. The final assessment order dated 29th December 2017 for the A. Y. 2015-16 was also passed at Cuttack. - e should not entertain this writ application and relegate the writ applicant to file an appropriate writ application before the High Court of Orrissa at Cuttack. - HC
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• Pr. CIT can't revise assessments u/s 263 just to substitute their judgment for Assessing Officer's decision.

  Case-Laws - AT : Revision u/s 263 - When the Assessing Officer after exhaustive deliberations had accepted the explanation of the assessee and refrained from drawing any adverse inferences in its hand qua the issue in question i.e. contents of the seized loose sheet, therefore, the Pr. CIT in the garb of exercise of his revisionary jurisdiction u/s.263 of the Act could not have sought for substitution of his view as against that arrived at by the Assessing Officer. - AT
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• Income Tax Penalty Invalidated: Section 271(1)(c) Charges Unsustainable Due to Defective Notice and Section 274(1) Violation.

  Case-Laws - AT : Penalty u/s 271(1)(c) - Non specification of charge - defective notice - as the A.O had clearly failed to discharge his statutory obligation of fairly putting the assessee to notice as regards the default for which he was being proceeded against, therefore, the penalty under Sec. 271(1)(c) imposed by him being in clear violation of the mandate of Sec. 274(1) of the Act cannot be sustained. - AT
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• Cooperative Bank Claims Bad Debt Provision and Overdue Interest u/s 36(1)(viia) and Section 43D Income Rules.

  Case-Laws - AT : Addition u/s. 36(1)(viia) - maintainability of the provision for bad and doubtful debts, as well as for overdue interest, as claimed by the assessee, a cooperative bank - The assessee having credited the interest income in its’ accounts for the relevant year/s, the same, even though not received, is to be, in terms of s. 43D itself, regarded as the income for the relevant year/s, i.e., the year/s in which it stands recognized as income by crediting the same to its’ P&L A/c. - AT
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• No Transfer Pricing Adjustment Needed for Corporate Guarantee in Holding-Subsidiary Transaction; Margin Money Placement Irrelevant.

  Case-Laws - AT : TP Adjustment - TP Adjustment on corporate guarantee - As it is a case of holding company and subsidiary company transaction, we do not think any reason to consider the placement of margin money for the purpose of bank guarantee. - AT
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• Compensation for Business Property Damage Considered Revenue Receipt; Includes Interest from Insurance Claims.

  Case-Laws - AT : Characterization of receipt - in respect of business exigencies the compensation specially in respect of damage to properties through fire or any other activities, the businessman ensures his business equipment as well as assets. While claiming the compensation, the assessee was very well aware about the business loss and has given a treatment of the receipts as revenue receipts. Thus, the colour of the receipts in respect of the interest received on compensation amounts to a revenue receipt - AT
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• Excess Stock Found in Survey u/s 133A Taxed as Business Income Due to Direct Business Connection.

  Case-Laws - AT : Excess stock found during survey - search conducted u/s 133A - the excess stock found during search is nothing but business stock carried on by assessee which is not declared in the books. Since there is a direct nexus with the type of stock found during survey and the business carried on by the assessee, these excess stock in only be treated as chargeable to tax under the head income from business not under the head income from other sources. - AT
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Customs

• Tribunal Affirms Customs House Agent License Revocation and Penalty Due to Insufficient Retraction u/s 108.

  Case-Laws - HC : Revocation of CHA License - forfeiture of security deposit - levy of penalty - while submitting the reply a faint attempt has been made by the appellant to retract the so called statement. Therefore, we hold that the authority rightly rejected the so called retraction and proceeded to adjudicate the matter taking note of the statement recorded under Section 108 of the Act. The learned Tribunal on its part also examined this aspect and rightly affirmed the view of the Commissioner. - HC
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Indian Laws

• Drawee Can Choose Civil or Criminal Action for Dishonored Security Cheque; Drawer Cannot Dictate Litigation Type.

  Case-Laws - HC : Dishonor of Cheque - when a cheque has been issued as a security, the consequences flowing therefrom is also known to the drawer of the cheque, and in the circumstances, if the cheque is presented and dishonoured, the holder of the cheque/drawee would have the option to initiate civil proceedings for recovery or criminal proceedings for punishment in a fact situation. But, in any event, it is not for the drawer of the cheque to dictate terms with regard to the nature of litigation. - HC
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• Court Orders 15% Interim Compensation for Cheque Dishonor u/s 138 of Negotiable Instruments Act.

  Case-Laws - HC : Dishonor of cheque - payment of interim compensation - direction to deposit 15% amount - Insofar as the present facts are concerned, the period of 15 days from the date of giving notice under the proviso (c) to Section 138 of the NI Act had expired on 04.09.2018 and whereas it is upon non-payment of the cheque amount by the drawer (petitioners-accused) till the said date that the offence under Section 138 of the NI Act could be stated to be committed. The said date being later than the date on which the amended Section 143A came into force i.e. on 01.09.2018, the provisions of the said amended Section would be applicable to the complaint in question. - HC
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IBC

• Court Examines Electricity Supply Restoration Under IBC Section 238; Electricity Dues Extinguished Post-Resolution Plan Approval.

  Case-Laws - HC : Prayer for immediate restoration of the petitioner’s electricity supply - Section 238 of the IBC - dues of electricity supply to be cleared - This is not a case of ouster of the powers of the licensee conferred by the 2003 Act. Even if such powers under Section 56 of the 2003 Act remain intact, those become illusory in view of the dues themselves having been extinguished on the approval of the Resolution Plan, by independent operation of the IBC. - HC
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SEBI

• SEBI Circular Mandates System and Network Audits for MIIs to Protect Investors and Enhance Securities Market Integrity.

  Circulars : System and Network Audit of Market Infrastructure Institutions (MIIs) - to protect the interest of investors in securities market and to promote the development of, and to regulate the securities market. - Circular
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Central Excise

• Ambiguity in Section 4A Valuation Method for Goods Sold to Industrial Consumers Raises Questions on Consistent Treatment.

  Case-Laws - AT : Method of Valuation - MRP Value u/s 4A - Industrial Consumer - there is an ambiguity in the treatment of the impugned goods by the department. It is the very same goods that are sold directly to the industrial consumers and also through channel partners. It is found that such a treatment by the department defies logic as the nature of the goods is not changed just by the way they are sold. The characteristics, the usage and the users are not changed. - AT
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Case Laws:

• GST

• 2022 (5) TMI 239
  Maintainability of petition - availability of statutory remedy of appeal under Section 107 of U.P. Goods and Service Tax Act, 2017 - petitioner had not responded - violation of principles of natural justice - HELD THAT:- Without entering into the issue as to whether the show cause notice was served and the petitioner was given opportunity of hearing or not, the said ground being urged by the learned counsel for the petitioner before us in these proceedings can very well be taken up before the Appellate Authority by preferring appeal under Section 107 of U.P. Goods and Service Tax Act, 2017. This writ petition is disposed off with the liberty to the petitioner to file a statutory appeal under Section 107 of U.P. Goods and Service Tax Act, 2017 or to take recourse of any other legal remedy available to him - petition disposed off.

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• 2022 (5) TMI 238
  Seeking prayer for three-month moratorium of the payment to be made in terms of the order dated December 7, 2021 as modified on March 23, 2022 - petitioning assessee seeking order not to make the installment payments in the month of April, 2022 for which the assessee is already in default and for the months of May and June, 2022 - HELD THAT:- In view of the apparent damage to the petitioning assessee s manufacturing facility, a moratorium for a period of two months is granted. That is to say that the payment that was due in April, 2022 will not be deemed to have been defaulted and the payment due in May, 2022 need not be paid by the 15th day of this month. The amount due in April, 2022 must be paid along with the amount due in June, 2022 and the amount due in May, 2022 must be paid along with the installment due in July, 2022. The prayer for spreading out the overdue amount over the rest of the installments is expressly declined. The amounts for the months of April and May, 2022 will have to be made good in the manner indicated. Upon the first default of the petitioning assessee in making the payment in terms of this order and without further reference to this Court or other authority, it will be open to the Department to take immediate appropriate steps in accordance with law and the petitioning assessee will be deemed to be in default of the entire amount then due. Petition disposed off.

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• 2022 (5) TMI 237
  Revocation of cancellation of GST registration of petitioner - HELD THAT:- Clearly, when the first impugned order i.e., order dated 09.12.2020 was passed, the concerned officer had with him the reply dated 23.11.2020. There is no reference to the said reply or the reasons set out therein, in the order dated 09.12.2020. The order whereby the application for revocation was rejected which is, as noticed above, the order dated 18.12.2021, shows that an inspection was carried out on the premises of the petitioner. It is not in dispute that although, Rule 25 requires inspection to be done in the presence of the person whose property is being inspected, it was not done as the petitioner had no notice of the inspection - the perusal of the order dated 09.12.2020 clearly discloses that there is no tax outstanding qua the petitioner. The order of cancellation set aside - The respondents will ensure that the petitioner s registration is revived.

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• 2022 (5) TMI 236
  Constitutional Validity of Section 103(1)(b) of the GST Acts - applicability of advance ruling appellate orders passed in the case of other taxable persons having identical facts and circumstances are binding on all authorities who are subordinate to the Chief Commissioners of CGST and SGST which constitute the advance ruling appellate authority - classification of goods - papad of different shapes and sizes - classifiable under Entry No.96 of the exemption notification no. 2/2017 Central Tax (Rate) dated 28.06.2017 or not - validity of initiation of proceedings against the Petitioners under Section 74 of the GST Acts - HELD THAT:- It appears that the Appellate Authority took the view that the Papad are known in the market as fryums and not Papad . The observations or the view taken by the Appellate Authority for Advance Ruling, as above, will have some bearing on this litigation. There is a further challenge to the constitutional validity of Section 103(1)(b) of the GST Act on the ground that the same is manifestly arbitrary and violative of Articles 14 and 19(1)(g) respectively of the Constitution - Let Notice be issued to the respondents, returnable on 15.06.2022.

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• Income Tax

• 2022 (5) TMI 240
  Reopening of assessment u/s 147 - Scope of new provision section 148A - Validation of notices after quashed by various High Courts - conducting of enquiries or issuance of show-cause notice or passing of order under section 148A - Scope of amendment by the Finance Act, 2021 which has amended Income Tax Act by introducing new provisions i.e. sections 147 to 151 w.e.f. 1st April, 2021 - HELD THAT:- The judgments of the several High Courts would result in no reassessment proceedings at all, even if the same are permissible under the Finance Act, 2021 and as per substituted sections 147 to 151 - Revenue cannot be made remediless and the object and purpose of reassessment proceedings cannot be frustrated. It is true that due to a bonafide mistake and in view of subsequent extension of time vide various notifications, the Revenue issued the impugned notices under section 148 after the amendment was enforced w.e.f. 01.04.2021, under the unamended section 148. In our view the same ought not to have been issued under the unamended Act and ought to have been issued under the substituted provisions of sections 147 to 151 as per the Finance Act, 2021. There appears to be genuine non-application of the amendments as the officers of the Revenue may have been under a bonafide belief that the amendments may not yet have been enforced. Therefore, we are of the opinion that some leeway must be shown in that regard which the High Courts could have done so. Therefore, instead of quashing and setting aside the reassessment notices issued under the unamended provision of IT Act, the High Courts ought to have passed an order construing the notices issued under unamended Act/unamended provision of the IT Act as those deemed to have been issued under section 148A of the IT Act as per the new provision section 148A and the Revenue ought to have been permitted to proceed further with the reassessment proceedings as per the substituted provisions of sections 147 to 151 of the IT Act as per the Finance Act, 2021, subject to compliance of all the procedural requirements and the defences, which may be available to the assessee under the substituted provisions of sections 147 to 151 of the IT Act and which may be available under the Finance Act, 2021 and in law There is a broad consensus on the aforesaid aspects amongst the learned ASG appearing on behalf of the Revenue and the learned Senior Advocates/learned counsel appearing on behalf of the respective assessee. We are also of the opinion that if the aforesaid order is passed, it will strike a balance between the rights of the Revenue as well as the respective assesses as because of a bonafide belief of the officers of the Revenue in issuing approximately 90000 such notices, the Revenue may not suffer as ultimately it is the public exchequer which would suffer. Therefore, we have proposed to pass the present order with a view avoiding filing of further appeals before this Court and burden this Court with approximately 9000 appeals against the similar judgments and orders passed by the various High Courts, the particulars of some of which are referred to hereinabove. We have also proposed to pass the aforesaid order in exercise of our powers under Article 142 of the Constitution of India by holding that the present order shall govern, not only the impugned judgments and orders passed by the High Court of Judicature at Allahabad, but shall also be made applicable in respect of the similar judgments and orders passed by various High Courts across the country and therefore the present order shall be applicable to PAN INDIA. The present order shall be applicable PAN INDIA and all judgments and orders passed by different High Courts on the issue and under which similar notices which were issued after 01.04.2021 issued under section 148 of the Act are set aside and shall be governed by the present order and shall stand modified to the aforesaid extent. The present order is passed in exercise of powers under Article 142 of the Constitution of India so as to avoid any further appeals by the Revenue on the very issue by challenging similar judgments and orders, with a view not to burden this Court with approximately 9000 appeals. We also observe that present order shall also govern the pending writ petitions, pending before various High Courts in which similar notices under Section 148 of the Act issued after 01.04.2021 are under challenge. The impugned common judgments and orders passed by the High Court of Allahabad and the similar judgments and orders passed by various High Courts, more particularly, the respective judgments and orders passed by the various High Courts particulars of which are mentioned hereinabove, shall stand modified/substituted to the aforesaid extent only.

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• 2022 (5) TMI 235
  Reopening of assessment u/s 147 - cause of action - jurisdiction to this High Court - Appropriate High Court - HELD THAT:- Just because a notice under Section 143(2) of the Act, 1961 came to be issued to the writ applicant at his residential address at Ahmedabad, State of Gujarat, by itself, will not confer jurisdiction to this High Court, more particularly, when the writ applicant is being assessed to tax consistently at Cuttack. The writ applicant has a PAN card at such place. The impugned notice under Section 148 of the Act, 1961 was also issued at Cuttack. The return of income for the A. Y. 2015-16 was also filed at Cuttack. The final assessment order dated 29th December 2017 for the A. Y. 2015-16 was also passed at Cuttack. We are of the view that we should not entertain this writ application and relegate the writ applicant to file an appropriate writ application before the High Court of Orrissa at Cuttack.

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• 2022 (5) TMI 234
  Reopening of assessment u/s 147 - Non disposal of objections against reopening - HELD THAT:- The Supreme Court in GKN Driveshafts (India) Ltd. [ 2002 (11) TMI 7 - SUPREME COURT] has held that when a notice under Section 148 of the Act is issued, the proper course of action for the noticee is to file a return and if he so desires, to seek reasons for issuing notices. The Assessing Officer is bound to furnish reasons within a reasonable time. On receipt of reasons, the noticee is entitled to file objections to issuance of notice and the Assessing Officer is bound to dispose of the same by passing a speaking order. In the present case, from the documents on record, it is apparent that the petitioner-assessee had filed his return of income for the Assessment Year 2013-14 on 27th April, 2021. However, the reasons for reassessment were supplied to the petitioner-assessee for the first time as late as 26th March, 2022. Thereafter even when the petitioner-assessee had filed his objections, the same were disposed of prior to passing of the impugned assessment order. It is apparent that the impugned assessment order has been passed contrary to the procedure stipulated by the Supreme Court in GKN Driveshafts (India) Ltd. (supra). Accordingly, the impugned assessment order, demand notice and penalty notice all dated 30th March, 2022, are set aside and the Assessing Officer is directed to decide the objections dated 28th March, 2022 filed by the petitioner-assessee in accordance with law within ninety days.

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• 2022 (5) TMI 233
  Recovery proceedings - attachment of property - auction notice on the strength of Rule 68B of the IInd Schedule to the Income Tax Act, 1961 - Case of the petitioner is that the property was attached on 17.02.2004 and therefore, the sale of the attached property should have been made within three years from the date specified in Rule 68b of the IInd schedule to the Act, whereas the impugned attachment order is dated 28.03.2014 in ITCP-13 - HELD THAT:- The property which was sought to be attached is the property, which has come in the hands of the petitioner pursuant to a partition deed dated 23.10.2000. This was after the search on 07.07.1999. The tax that was demanded from the petitioner is for the block assessment period ie., from 08.07.1999 to 23.10.2000. Rule 4 of the IInd Schedule to the Income Tax Act, 1961 makes it clear one of the alternate method for recovering the tax. Apart from attaching the property and bringing the property for sale, the Department can also arrest the defaulters and detain such person in prison or appoint a Receiver for the management of the defaulter s property both movable and immovable property. The tax liability of the petitioner does not get effaced by efflux of time. The Department can attach the property under Rule 48 r/w Rule 60 and bring the same property for sale in terms of the provisions of the IInd schedule to the Income Tax Act, 1961. Even if Rule 68(b) contemplates no sale beyond the period of limitation specified therein ie., 3 years during the period when the impugned proclamation of sale was issued on 28.03.2014 in Form ITCP-13 does not mean that the Department cannot issue a fresh order of attachment of the property. There are also other methods available under the Rules for recovering the tax due together with interest. Therefore, while I am inclined to allow this writ petition in the light of the limitation prescribed in Rule 68(b) of the IInd schedule to the Income Tax Act, 1961, while giving liberty to the respondents to initiate proceedings to recover the tax due and the interest thereon from the petitioner in terms of the other provisions of the aforesaid Rules including a fresh proceeding for attaching the subject property. WP allowed.

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• 2022 (5) TMI 232
  Assessment Order 147 read with Section 144B - violation of principle of natural justice as despite making a request for grant of personal hearing, the same was not provided by the respondent - HELD THAT:- Having heard learned counsel for the parties, this Court is of the view that the issue involved in the present writ petition is no longer res integra. This Court in the case of Bharat Aluminium Company Ltd. vs. Union of India Ors. [ 2022 (1) TMI 658 - DELHI HIGH COURT] has held that the use of the expression may in Section 144B(7)(vii) is not decisive. Where a discretion is conferred upon a quasi-judicial authority whose decision has civil consequences, the word may which denotes discretion should be construed to mean a command. Consequently, requirement of giving an assessee a reasonable opportunity of personal hearing is mandatory. It was further held that the classification made by the Respondent between the matters involving disputed questions of fact and questions of law by way of the Circular dated 23rd November, 2020 is not legally sustainable. Accordingly, the impugned assessment order passed under Section 147 read with Section 144B for the assessment year 2016-17 is quashed and the matter is remanded back to Respondent for passing a fresh order in accordance with law after giving an opportunity of personal hearing.

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• 2022 (5) TMI 231
  Reopening of assessment u/s 147 - Scope of Section 148A as newly inserted - Comparison between old and new provisions for reassessment - Individual identity of Section 148 as prevailing prior to amendment - applicability of the newly inserted provisions of Section 148A and the amendments brought inter alia w.e.f. 1.4.2021 - identity of Section 148 as prevailing prior to amendment and insertion of section 148A - Whether after introduction of new provisions for reassessment of income by virtue of the Finance Act, 2021 with effect from 01.04.2021, substituting the then existing provisions, would the substituted provisions survive and could be used for issuing notices for reassessment for the past period? - HELD THAT:- As relying on SUDESH TANEJA WIFE OF SHRI CP TANEJA [ 2022 (1) TMI 1212 - RAJASTHAN HIGH COURT] no notice under Section 148 would be issued for the past assessment years by resorting to the larger period of limitation prescribed in newly substituted clause (b) of Section 149(1). This would indicate that the notice that would be issued after 01.04.2021 would be in terms of the substituted Section 149(1) but without breaching the upper time limit provided in the original Section 149(1) which stood substituted. Under no circumstances the extended period available in clause (b) of sub-section (1) of Section 149 which we may recall now stands at 10 years instead of 6 years previously available with the revenue, can be pressed in service for reopening assessments for the past period. This flows from the plain meaning of the first proviso to sub-section (1) of Section 149. In plain terms a notice which had become time barred prior to 01.04.2021 as per the then prevailing provisions, would not be revived by virtue of the application of Section 149(1)(b) effective from 01.04.2021. All the notices issued in the present cases are after 01.04.2021 and have been issued without following the procedure contained in Section 148A of the Act and are therefore invalid. By virtue of notifications dated 31.03.2021 and 01.04.2021 issued by CBDT substitution of reassessment provisions framed under the Finance Act, 2021 were not deferred nor could they have been deferred. The date of such amendments coming into effect remained 01.04.2021. In the result we find that the notices impugned in the respective petitions are invalid and bad in law. The same are quashed and set aside. The learned Single Judge committed no error in quashing these notices. All the writ petitions are allowed. Appeals of the revenue are dismissed.

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• 2022 (5) TMI 230
  Claim of depreciation on units leased to assessee - assessee company has taken the units on lease for a period of 95 years from SEEPZ Authority - HELD THAT:- Being a perpetual lease i.e. 95 years + 95 years, the assessee is nothing less than an owner of the units allotted to it. Therefore, the consideration paid by the assessee can reasonably include not only the cost of construction of the building but also the cost of proportionate land. This conclusion is also supported by the clause of sub lease referred herein above, which specifically provides that the said 4 units were allotted to the assessee together with the proportionate land under the Tower No.II in Seepz++. Nominal yearly ground rental of Re.1/- charged to the assessee is at concessional rate in order to promote export industries in India. Otherwise, property having such an area i.e. 26168 sq.ft. at SEZ location fetch a very high rent. The reliance placed by the learned A.R. on judicial precedents to support its submission that the agreement should be read as a whole rather supports the fact that the consideration paid by the assessee was not only for the cost of construction of the 4 units but the same also included cost of proportionate land. To this extent, we do not find any infirmity in the impugned order passed by the learned CIT(A). Further, for bifurcating the consideration amongst the aforesaid two components, the learned CIT(A) has placed reliance on the stamp duty rate of proportionate land during the relevant period of acquisition of the said 4 units, which also we find to be quite reasonable, as only about 35% of the consideration was treated as cost of proportionate land. In view of the above, we find no infirmity in the order passed by the learned CIT(A) granting partial depreciation to an extent of Rs. 48,17,491 as against Rs. 65,61,664 claimed by the assessee. As a result, grounds raised by the assessee in appeal for assessment year 2010 11 are dismissed.

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• 2022 (5) TMI 229
  Unexplained investment on account of difference in source of investment while buying new residential property vis- -vis old residential property - On the strength of cash flow statement the assessee contends that he would be able to discharge the burden of proving the source of investment as well as that of stamp duty and registration also - HELD THAT:- We find that these documents were not filed before the Ld CIT(A) because at that time, the assessee s wife was suffering from cancer and the assessee was looking after her treatment and unfortunately, she expired on 30/10/2020. So we find that there was sufficient cause for not presenting the detail / cash flow statement before the Ld.CIT(A), which occasioned the Ld.CIT(A) confirming Rs.37,43,100/-. AR undertakes before us that given an oppurtunity, the assessee is ready to go before the AO and explain the source of investment not only to the tune of Rs.37,43,100/- but also in respect of the value of stamp duty and registration which approximately comes to Rs.55 lakhs. Since it is a factual aspect, which requires verification, we remand the issue to the AO for the limited purpose of verifying the source of investment not only to the tune of Rs.37,43,100/- but also in respect of the value of stamp duty and registration [which approximately comes to Rs.55 lakhs]. And if the AO finds after verifaication, the the explanation given by the assessee to be satisfactory, then no addition is warranted on this issue. Addition disbelieving the gift received by the assessee - HELD THAT:- It is noted that the assessee had filed the copy of the gift letters of both the donors and also the respective bank statements - However, we note that these facts could not be placed before the Ld. CIT(A) because, she was undergoing treatment for cancer which eventually took her life on 30.10.2020. So the Ld.CIT(A) confirmed Rs.26 lakhs. We note that the assessee had reasonable cause for not submitting the aforesaid evidence before the Ld.CIT(A), therefore, the impugned confirmation was made by the Ld.CIT(A) to the tune of Rs.26 lakhs. However, since these facts need to be verified, for the ends of justice, the issue is also remanded to the file of the Assessing Officer for verification in accordance with law.

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• 2022 (5) TMI 228
  Revision u/s 263 - Validity of search proceedings return of income was filed by the assessee u/s.153A - as per CIT Satisfaction that the approval given under section 153D was also erroneous,while revising the order passed under section 153A r.w.s. 143(3) - HELD THAT:- Incriminating document found and seized in the course of the search proceedings from the residential premises of Dr. Chandrashekhar Pakhmude (supra) read a/w the latters statement recorded u/s 132(4) of the Act in the course of the search proceedings referred to a cash payment of Rs.70 lacs (supra) over and above those made through cheque, the Assessing Officer had vide his letter dated 12.10.2017 called upon the assessee to put forth an explanation as to why the aforesaid amount may not be added to his unaccounted income for the respective years When the Assessing Officer after exhaustive deliberations had accepted the explanation of the assessee and refrained from drawing any adverse inferences in its hand qua the issue in question i.e. contents of the seized loose sheet No.50/Bundle No.1, therefore, the Pr. CIT in the garb of exercise of his revisionary jurisdiction u/s.263 of the Act could not have sought for substitution of his view as against that arrived at by the Assessing Officer. We, thus, not being able to persuade ourselves to subscribe to the exercise of the revisionary jurisdiction by the Pr. CIT u/s.263 of the Act set-aside his order and restore the order passed by the Assessing Officer u/s.143(3) r.w.s. 153A - Decided in favour of assessee.

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• 2022 (5) TMI 227
  Addition u/s 68 - unexplained cash credits - HELD THAT:- Both the tax authorities have perfunctory arbitrarily brushed aside the submissions of the appellant, and without articulating the insufficiency of explanation tendered, merely carried way for personal appearance of the creditors and concluded the proceedings capriciously under surmise, conjecture and guesswork, which is bad in law, thus the addition made u/s 68 finds no merits, and consequently deserves to be deleted. - Decided in favour of assessee.

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• 2022 (5) TMI 226
  Deduction u/s 10(38) - Long Term Capital Gain earned from sale of 50000 shares of M/s Kailash Auto Finance Limited - Denial of deduction as assessee has earned a return of approximately 3763% over a very short period of just over 15 months and the financial results of M/s Kailash Auto Finance Limited are not very good - HELD THAT:- As in the case of Vidhi Malhotra vs ITO [ 2019 (2) TMI 226 - ITAT DELHI] where identical issue was the subject matter before the Tribunal. We find the Tribunal after considering the final order of SEBI revoking the ban on M/s Kailsh Auto Finance Ltd. has allowed the claim of Long Term Capital Gain u/s 10(38) of the Act on account of sale of shares of M/s Kailash Auto Finance Ltd. Thus we set-aside the order of the Ld. CIT(A) and direct the AO to delete the addition made by him rejecting the claim of deduction u/s 10(38) - Decided in favour of assessee.

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• 2022 (5) TMI 225
  Penalty u/s 271(1)(c) - Non specification of charge - defective notice - failure to specify the charge in the Show cause - HELD THAT:- Failure on the part of the A.O to clearly put the assessee to notice as regards the default for which penalty under Sec. 271(1)(c) was sought to be imposed on him by specifying the default in the SCN , dated 27.12.2010, had left the assessee guessing of the default for which he was being proceeded against. In the backdrop of our aforesaid observations, we are of a strong conviction, that as the A.O had clearly failed to discharge his statutory obligation of fairly putting the assessee to notice as regards the default for which he was being proceeded against, therefore, the penalty under Sec. 271(1)(c) imposed by him being in clear violation of the mandate of Sec. 274(1) of the Act cannot be sustained. We, thus, for the aforesaid reasons not being able to persuade ourselves to subscribe to the imposition of penalty by the A.O, therefore, set-aside the order of the CIT(A) who had upheld the same. The penalty imposed by the A.O u/s 271(1)(c) is quashed - Decided in favour of assessee.

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• 2022 (5) TMI 224
  Addition u/s. 36(1)(viia) - maintainability of the provision for bad and doubtful debts, as well as for overdue interest, as claimed by the assessee, a cooperative bank - HELD THAT:- All that is relevant is that the provision made in books for bad and doubtful debts is to be allowed in full, subject to it not exceeding the sum worked out with reference to the formula specified in s. 36(1)(viia) (read with provisos thereto). Nothing more, and nothing less. Any loss arising on account of a bad debt is to be adjusted (set-off) against this provision, which is revisited each year-end, making good the shortfall therein, i.e., the provision outstanding in books, as worked out with reference to its assessment (as per the applicable norms) thereat. Alternatively, the provision as made (as at the year-end) is reversed in full on the first day of the following year, increasing the profit (or decreasing the loss) for that year to that extent, which is then made in full at the following year-end. Any bad debt arising during this, following, year is charged to the operating statement (P L A/c). Both the methods are equivalent and equally valid, yielding the same result. The disallowance in respect of provision qua standard assets has, in our view, been therefore rightly deleted by the ld. CIT(A). We decide accordingly. Provision against overdue interest, i.e., the unrealized interest on NPA A/cs, provided for at the whole of the said interest, relief stands allowed by the ld. CIT(A) with reference to sec. 43D - Even granting applicability of sec. 43D, i.e., for the sake of argument, the same would be of little assistance to the assessee in the facts and circumstances of its case. This is as all that it says is for the interest being recognized as income for the year of credit or the year of receipt, whichever is earlier. The assessee having credited the interest income in its accounts for the relevant year/s, the same, even though not received, is to be, in terms of s. 43D itself, regarded as the income for the relevant year/s, i.e., the year/s in which it stands recognized as income by crediting the same to its P L A/c. This would also meet the assessee s reliance on some decisions by Hon ble Courts, referred to by CIT(A), whose orders are sans any reference to this aspect of the matter. In fine, the claim is bizarre, and without reference to the legislative history of the provision, which stands amended retrospectively so that there has been clearly due consideration of its retrospectivity, by FA, 2018; the provision itself, as well as the facts of the case. Reliance on sec. 43D, whichever way one may look at it, thus, does not therefore help the assessee s case. As the total provision (P1 + P2) made in accounts does not exceed that exigible u/s. 36(1)(viia) (P3), the claim is admissible u/s. 36(1)(viia) itself, as the provision for overdue interest is also in the nature of provision for bad and doubtful debts - The adjustment, nevertheless, is to be restricted to that relating to the current years interest, so that irrespective of the accounting entries passed in respect of the opening provision, it is only Rs. 4000, being the unrealized interest for the current year, which would stand to be allowed, disallowing the balance Rs. 2000 outstanding as provision for bad doubtful debts. The assessee, assuming such to be the case, may do well to pass transfer entries, so that the correct position is reflected in accounts. There could though be circumstances where the provision for overdue interest, eligible for being allowed or, correspondingly, disallowed, for a year, is also impacted by the opening provision, as where the same, instead of being adjusted (through receipt of interest), continues to obtain and, in fact, increased (as at the relevant year-end) due to re-categorization of the corresponding asset, as, say, from a doubtful asset to a loss asset , qualifying for provision @ 100%, increasing the provision (on this unrealized interest) as at the year-end, going by the same example, from Rs. 2000 to Rs. 4000. This excess provision arising for the reason that unrealized interest on a doubtful asset stands accounted as income in the first place, would therefore need to be excluded. There could be a reverse case as well, as where an account is upgraded, reducing the provision now required in its respect. We understand all this to be no mean task, but the same has arisen directly as a result of, as it appears, a faulty accounting, inconsistent with the standard accounting prescription of not recognizing income on NPAs, so that the borrower account balance is not increased by this sum. The interest, though worked out, is kept in shadow accounts or in memoranda accounts. AO shall, upon due verification, decide in accordance with law, i.e., in conformity with what stands stated by us, per a speaking order, issuing clear and definite findings. We decide accordingly. Validity of reopening of assessment u/s 147 - Claim of provision for bad and doubtful debts, comprising provision for bad and doubtful debts (i.e., toward principal debt due) and for overdue interest - HELD THAT:- The assessee claims the same to be a part of the debt due, justifying provisioning in its respect as toward bad and doubtful debts and, in any case, equivalent to non-recognition of income on the interest - The argument is self-contradictory inasmuch as only an amount accrued could form part of the debt/debt due, while the non-recognition of interest is only for the reason that the same has, in the given facts and circumstances, not accrued. Further, the claim of equivalence is a matter of verification, i.e., as to whether the accounting treatment by the assessee is indeed and, in effect, equivalent to not recognising the unrealized income on NPA borrower accounts at all. As explained in Raymond Woollen Mills Ltd. vs. ITO [ 1997 (12) TMI 12 - SUPREME COURT] what is material is a prima facie, honest reason to believe. That the amount believed to have escaped assessment has not been finally added in assessment is another aspect, a matter subsequent, but that would not operate to disturb the bona fide belief as to the escapement of income chargeable to tax for the relevant year, and on the basis of which reassessment stands initiated. Why, in the facts and circumstances of the instant case, the said verification in fact survives even the assessment/s, with we, at the second appellate stage, considering it proper to restore the matter back for the purpose. Rather, inasmuch as it may result in extra provision against overdue interest, as is apparently so on the basis of the admitted facts the provision for overdue interest may have to be disallowed, so that the accounting treatment followed is not, as claimed, equivalent, i.e., in effect. We may though hasten to add that we are not pre-determining the issue, nor be construed as having issued any finding in the matter, but are only justifying the reason recorded on that basis, i.e., as being a genuine reason, held bona fide. The said Ground is thus a valid ground for reopening, even if no disallowance on that count finally materializes in assessment (Central Provinces Manganese Ore Co. Ltd. v. CIT [ 1991 (8) TMI 4 - SUPREME COURT] In fact, in our view, the provision for overdue interest disallowed in assessment that may finally stand to be justified, as also explained hereinabove, is only toward the extra (additional) provision in its respect, i.e., to the extent the interest forms part of the borrowers principal balance and, thus, as provision there-against. The assessee s challenge on this ground, therefore, fails, even as for the other two reasons we are in agreement with Sh. Ganguly as not being valid reasons, nor their sum considered for which the approval u/s. 151 stands obtained.

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• 2022 (5) TMI 223
  Bogus purchases - HELD THAT:- AO has raised categorical point that the suppliers of the goods M/s Neelanchal Sales Suppliers Pvt. Ltd. did not have any godown. We find that in all the invoices, delivery is shown from La Trendz Fabrica Private Ltd., Kolhapur to Banbury Export at Tarapur. Thus, the goods were delivered to the assessee from the party who sold goods to Neelanchal Sales Suppliers Pvt Ltd. Therefore, not having any godown facility by M/s Neelanchal Sales Suppliers Pvt. Ltd. cannot make sales to assessee bogus . Further, during the course of hearing before us, the learned Departmental Representative could not produce any other evidence to show that purchases are not genuine. - Decided against revenue.

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• 2022 (5) TMI 222
  Rejection of books of accounts - HELD THAT:- We find that no specific submission against rejection of books of account was made by learned AR of the assessee. Thus, the rejection of books of account is affirmed. Bogus purchases addition to the extent of 5% - HELD THAT:- It is a settled law that in case of disputed purchases shown from such hawala dealer s only profit element embedded in such transaction is to be disallowed, to avoid the possibility of revenue leakage and not the substantial part of transaction. No doubt, the Assessing Officer identified the purchases of Rs. 2.15 crores shown from hawala dealers, the assessee may have shown other transaction with some other parties. However, the assessee has offered a meagre income of Rs. 17,76,610/- for taxation, thus the assessee was shown an extremely low profit. The combination of this bench in other similar cases wherein the purchases are shown from Bhanwarlal Jain or Rajendra Jain or Gautam Jain group have restricted or enhanced the addition to the extent of 6% of such amount or disputed purchases. Therefore, taking a consistent view, the disallowance which was restricted to the extent of 5% by learned CIT(A) are increased to 6% of the impugned purchases of Rs. 2.15 Crores. Assessee appeal dismissed.

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• 2022 (5) TMI 221
  Levy of fee u/s 234E as intimation issued u/s 200A(1) for the period prior to 01.06.2015 - whether clause (c) of section 200A(1), as substituted by Finance Act, 2015, w.e.f. 01.06.2015, whereby the A.O. was enabled to compute the fee under section 234E of the Act while processing of statement of tax deducted at source, is prospective in nature? - HELD THAT:- As in Fatheraj Singhvi v/s Union of India[ 2016 (9) TMI 964 - KARNATAKA HIGH COURT] whereby the Hon ble High Court held that such an amendment is prospective in nature and thus intimation issued under section 200A of the Act for computation and intimation of payment of fee under section 234E of the Act relating to the period of tax deduction prior to 01.06.2015 was not maintainable. We also find that the Co ordinate Bench of the Tribunal in Permanent Magnets Ltd. v/s DCIT [ 2019 (8) TMI 1049 - ITAT MUMBAI] following the aforesaid decision of the Hon ble Karnataka High Court in Fatheraj Sanghvi (supra) directed deletion of fee under section 234E of the Act levied vide intimation under section 200A of the Act for the period prior to 01.06.2015. It is well established that rules of procedure are handmaid of justice. Further, when substantial justice and technical considerations are pitted against each other, cause of substantial justice deserves to be preferred. Thus, in view of the above, as the learned CIT(A) has dismissed the appeals filed by the assessee, on delay and on defects in filing the appeal, without dealing with merits of the case, we in the substantial interest of justice deem it appropriate to restore the appeals before the learned CIT(A) for adjudication on merits after condoning the delay in filing the appeals. The assessee is also directed to obtain the copy of intimation issued under section 200A(1) for financial years under consideration from the AO(TDS) and provide the same to the learned CIT(A) for adjudication of its appeals. Appeals by the assessee are allowed for statistical purpose.

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• 2022 (5) TMI 220
  TP Adjustment - computing Gross Profit margin while applying TNMM - whether the computation of the margin of gross profit by the assessee supporting the internal transactional net margin method is the correct approach or not.? - HELD THAT:- We find that the rule 10 B of The Income Tax Rules defines the determination of arm s-length price u/s 92C of the act with respect to the several methods. In rule 10 B (1) (e), transactional net margin method is required to be computed with respect to the Net Profit Margin Only. We do not find that rules subscribe to the view taken by the assessee of computing Gross Profit margin while applying TNMM. Therefore as assessee has taken only the gross profit margin and stated that it has adopted internal transactional net margin method is an incorrect approach not supported by the income tax rules. In view of this, the benchmarking methodology adopted by the assessee taking the gross profit margin is correctly rejected by the revenue authorities. As we have already held that transactional net margin method comparing the net profit is the correct methodology in accordance with the income tax rules, we reject the contentions of the assessee that there are no expenses incurred by the assessee or even if those are incurred the may be spread in the same ratio to arrive at the net profit. Whether the learned transfer-pricing officer has taken the correct comparables or not? - Balmer Lawrie - The assessee has not shown that there are significant related party transactions in the logistics segment of this comparable company. Further, merely because a comparable company has a shareholding of government of India it does not become non-comparable only because of this factor that part of the shareholding is owned by government of India. If such logic were accepted then all the Navratna companies, who are leaders in their own business, would be excluded from the comparability analysis. Therefore, we reject the contention of the assessee for exclusion of Balmer Lawrie Co Ltd (logistics segment). Hindustan cargo Ltd - There is a difference in the accounting period of the comparable company with the assessee company. It is also not shown before us that Hindustan cargo Ltd is a listed entity and it is publishing its quarterly results. Therefore, we find that the learned transfer-pricing officer has erred in including Hindustan cargo Ltd as a comparable company. Therefore, we direct the learned TPO to exclude the same. Disallowance u/s 14A r.w.r. 8D - Suo moto disallowance - HELD THAT:- We find that during the year exempt income earned by the assessee is not 11, 30,945 but Rs. 7,778,110/ . The assessee itself has given a working where the disallowances required to be restricted at Rs. 192,920/ . Looking to the amount of exempt income earned during the year compared to the previous year the amount of disallowance deserves to be upheld to the extent of Rs. 192,920/ . Accordingly, the learned assessing officer is directed to retain the disallowance to that extent only. Accordingly, ground number 6 of the appeal is allowed. TP Adjustment on corporate guarantee - HELD THAT:- We find that the learned CIT A correctly held that companies and cannot be made between guarantee issued by a commercial bank as against a corporate guarantee issued by holding company to its subsidiary company. Therefore, the rate adopted by the learned transfer pricing officer of state bank of India rates are not proper and further a markup of 200 basis point on the same is also not proper consequently. As it is a case of holding company and subsidiary company transaction, we do not think any reason to consider the placement of margin money for the purpose of bank guarantee. In view of this we do not find any infirmity in the order of the learned CIT A in deleting the adjustment on account of guarantee commission. Addition u/s 41 (1) being provision for liability in respect of transfer charges - HELD THAT:- CIT A noted that assessee follows a policy two) the outstanding transshipment charges if the agents have not claimed the same for more than three years. Therefore the amount that has been provided and outstanding for financial year 2006 07 the assessee needs to wait till 31st of March 2010 and thereafter) the same in the books in financial year 2010 11. The assessee has followed the same and in financial year 2010 11 the financial statement shows in the miscellaneous receipt the assessee has written back such an amount. Therefore, for assessment year 2011 12 the assessee has offered this sum for taxation. We do not find any infirmity in the order of the learned CIT A in deleting the above addition looking at the consistent accounting policy adopted by the assessee and offering the same amount as income when three years have elapsed. Accordingly, ground of the appeal are dismissed.

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• 2022 (5) TMI 219
  Unexplained cash deposit u/s. 68 - HELD THAT:- We note that the assessee was working as staff member with Bharat Shah and is now retired. The assessee has submitted that he never held any account with ICICI Bank and even address mentioned in the passbook of ICICI Bank is incorrect. He further submitted that the said ICICI Bank is being operated by his formed employer by misusing his PAN as may be evident from the fact that Mr. Bharat Shah, his former employer withdrew substantial sums from the said bank account. The assessee has alleged that the assessment was framed on the basis of reply given by Deputy Branch Manager of ICICI Bank, Usmanpura Branch, Ahmedabad where according to the assessee, he never maintained any bank account. The ld. D.R. has not been able to point out any reason why the reply of Deputy Branch Manager of ICICI Bank was never furnished to the assessee and why no opportunity was granted to the assessee to rebut the same. Further, from the records of ICICI Bank, it is seen that cheques for substantial amount of money were issued to Mr. Bharat Shah and apparently there is no reasonable explanation why the assessee would issue this amount to Mr. Bharat Shah. Also, there seems to be no reasonable explanation why the passbook of ICICI Bank has mentioned incorrect address of assessee. Assessee s appeal is allowed for statistical purposes.

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• 2022 (5) TMI 218
  Addition u/s 68 - unexplained cash credit - assessee not satisfied with the genuineness of credit - addition of loan taken from BMPL as non-genuine - HELD THAT:- As decided in M/S. VENKTESH SECURITIES LTD [ 2018 (12) TMI 1684 - ITAT MUMBAI] identity is not in dispute and in its books of account sufficient fund has been reflected. The bank statement also established its credit worthiness. CIT(A) has relied upon number of cases mentioned in his order and arrived at this conclusion that the assessee has proved the identity, genuineness and credit worthiness of transaction, therefore, no addition can be raised hence allowed the claim of the assessee. The facts are not distinguishable at this stage also. There is no finding of any authority on record in which it has been held that M/s. Basant Marketing Pvt. Ltd. is not genuine company. The Department nowhere preferred the appeal against the judgment mentioned in the finding nor perverse finding is on record. Taking into account all the facts and circumstances, we are of the view that the CIT(A) has decided the matter of controversy judiciously and correctly which is not liable to be interfere with at this appellate stage. Accordingly, this issue is decided in favour of the assessee.

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• 2022 (5) TMI 217
  Revision u/s 263 by CIT - Reopening of assessment u/s 147 as high share premium - Addition u/s 68 - HELD THAT:- The assessee explained to the AO all the documentary evidences at the time of reassessment proceedings. Merely not commenting on the evidences in assessment order by the AO does not tantamount to non-application or non-verification of documents. CIT cannot exercise revisionary power in the decided issue which was specifically reopened on the very same ground and for which the assessee has submitted the details. The revisionary power u/s 263 can be issued/exercised when the assessment order is erroneous and prejudicial to the interest of the Revenue. In the present case the element of prejudicial to the interest of revenue element does not come into picture as the relevant inquiries were made by the AO. The decision relied by the Ld. DR that in case of NRA Iron and Steel Pvt. Ltd. [ 2019 (3) TMI 323 - SUPREME COURT] is not applicable in the present case as in that decisions as per the facts of that case Assessee Company - Respondent failed to discharge the onus required under Section 68 AO was justified in adding back the amounts to the Assessee s income. But in the present case, the assessee company has discharged its onus required in respect of high share premium. Thus, order under Section 263 passed by the Principal Commissioner of Income Tax is not just and proper. The appeal of the assessee is allowed.

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• 2022 (5) TMI 216
  Characterization of receipt - treatment of the damages received as revenue or capital receipt - HELD THAT:- Whether the receipt is capital or income/revenue receipt, the receipt has to be examined from a commercial point of view and also has to be examined what character of the receipt is in the hands of the receiver. One test for ascertaining as to whether what was received was a capital receipt or a revenue receipt is to find out whether the assessee suddenly changed the link of income/receipt with the profit making apparatus, that was transferred. In commercial world, in respect of business exigencies the compensation specially in respect of damage to properties through fire or any other activities, the businessman ensures his business equipment as well as assets. While claiming the compensation, the assessee was very well aware about the business loss and has given a treatment of the receipts as revenue receipts. Thus, the colour of the receipts in respect of the interest received on compensation amounts to a revenue receipt and thus, the assessing officer as well as the CIT(A) has rightly given the finding of making the said additions to the income of the assessee. Thus, the appeal of the assessee is dismissed.

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• 2022 (5) TMI 215
  Addition on account of client code modifications - HELD THAT:- NSE permits client code modification to rectify the errors /mistakes while punching the transactions. Genuine client code modifications are permissible. As per the guidelines issued by NSE, client code modifications within the relatives, as defined under the provisions of Companies Act, 1956 is allowed. The assessee has categorically stated that client code modifications in the instant case are among the family members. This fact has not been disputed by the Revenue. No material has been brought on record to show that any penal action has been taken by Stock Exchange or SEBI against the broker of the assessee for carrying out fictitious client code modifications for suppression of profits. The observations made by AO assessment order that brokers are indulging in transferring fictitious losses to different clients to reduce the tax liability, are generic. There is no specific allegation of such fictitious client code modification supported by cogent evidence to suggest that the broker of the assessee at the instance of assessee or the assessee has indulged in such nefarious activities. Assessee has pointed that during the First Appellate proceedings the assessee requested to provide copy of remand report. Despite repeated requests, the copy of remand report was not furnished to the assessee. It is a well settled principle of natural justice that before taking cognizance of any material the same should be furnished to the opposite side to rebut the same. In the instant case the CIT(A) has failed to provide opportunity to the assessee to furnish his comments on the observation made by AO in the remand report. Any material on which reliance has been placed to make the addition/confirming the addition without confronting it to the assessee would make the order void. - Appeal of assessee allowed.

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• 2022 (5) TMI 214
  Excess stock found during survey - search conducted u/s 133A - HELD THAT:- Department has found physical stock as on 07.02.2009 more than the stock declared in the books of accounts. Further, we observed that the excess stock found during survey consists of Paper and Board, the same items in which assessee also makes trading business. It clearly shows that the excess stock found is nothing but business stock. We noticed that the AO treated the above excess stock as additional income chargeable to tax under the head income from other sources. In our considered view, the excess stock found during search is nothing but business stock carried on by assessee which is not declared in the books. Since there is a direct nexus with the type of stock found during survey and the business carried on by the assessee, these excess stock in only be treated as chargeable to tax under the head income from business not under the head income from other sources. Accordingly, ground no. 4 raised by assessee is allowed. Excess stock found during survey as part of business stock and accordingly re-computed and claimed the remuneration to partners as per the Section 40(b) - Since, we already adjudicated ground no. 4 in favour of the assessee that the excess stock found during survey is chargeable to tax under the head business income, therefore, the profit determined by the assessee under the head business income is proper and it is fact on record that the assessee is eligible to claim remuneration to the partners as per provisions of section 40(b) of the Act, therefore, the AO cannot deny the benefit available to the assessee as per Section 40(b) of the Act, therefore, we are inclined to allow the ground no. 5 raised by assessee.

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• 2022 (5) TMI 213
  Revision u/s 263 - Weighted deduction u/s 35(2AB) - assessee has argued that no opportunity of being heard was given to the assessee, therefore, there is a violation of the principles of natural justice, hence, the order is not liable to be sustainable in the eyes of law - HELD THAT:- On appraisal of the order dated 22.03.2021 in question, we noticed that the PCIT has issued the notice to the assessee on 16.03.2021 and passed the order in a very short interval on 22.03.2021. However, it is specifically mentioned in the order that the assessee failed to reply to the notice. There is no iota of evidence on record to which it can be assumed that the notice dated 16.03.2021 was ever served upon the assessee. No acknowledgement of service of notice is on record. After the issuance of notice, the order u/s 263 of the Act passed within the period of seven day s which is in very short interval. Nothing came on record that the sufficient opportunity was given to the assessee. However, the order in question dated 22.03.2021 is also non speaking on account of service of notice. Observing the violation of principles of natural justice by not providing the reasonable opportunity of being heard to the assessee, we are of the view that the order in question is not liable to be sustainable in the eyes of law, therefore, we set aside the same. Accordingly, the present appeal is hereby allowed.

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• 2022 (5) TMI 212
  Addition u/s 68 - Unexplained share capital/premium received - scope of amendment in Section 68 by Finance Act, 2012 w.e.f. 01.04.2013 - HELD THAT:- It is an undisputed fact that parties to the Share Capital/Share Premium had responded to the enquiries made by the Assessing Officer u/s 133(6) as per the evidences placed in the paper book and reproduced as above. The identity of the parties have been established and their PAN have also been provided and nothing adverse have been pointed out by the Assessing Officer/CIT(A). Even the existence of the parties have been proved by the voluminous documents submitted by such subscribers to the Registrar of Companies like Certificate of Incorporation , Memorandum of Association , Form No. 23AC and thus, identity of the subscribers to the Share Capital stands established. Following the judgment of the Hon ble Bombay High Court in case of Gagandeep Infrastructure [ 2017 (3) TMI 1263 - BOMBAY HIGH COURT] and Paradise Inland Shipping Pvt. Ltd. [ 2017 (3) TMI 1263 - BOMBAY HIGH COURT] and we hold that the said amendment to Section 68 cannot be said to be retrospective in nature and it has to be prospective i.e. from AY 2013-14. The judgements of the Hon ble Apex Court in the case of G. S. Homes Hotels Pvt. Ltd. [ 2016 (8) TMI 613 - SC ORDER] and case of Apeak Infotech [ 2017 (9) TMI 1590 - BOMBAY HIGH COURT] read with Vodafone India Services P. Ltd. [ 2014 (10) TMI 278 - BOMBAY HIGH COURT] are quite apt to the issue that share capital and share premium are on capital account and cannot be considered as income of the assessee. Accordingly, the addition as made by the Assessing Officer and confirmed by the CIT(A) deserves to be deleted and as such, we delete the addition made u/s. 68 - Decided in favour of assessee.

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• 2022 (5) TMI 194
  Addition u/s 56(2)(vii)(c) read with section 2(24)(xv) - Applicability of provisions of section 56(2)(vii)(c) applicable to the bonus shares - Whether allotment of bonus shares cannot be considered as received for an inadequate consideration and therefore, it is not taxable as income from other sources u/s 56(2)(vii)(c)? - HELD THAT:- We find that even the CBDT Vide Circular No. 06/2014 issued on dated 11.02.2014 clarified that bonus units at the time of issue would not be subjected to additional income tax u/s 115R of the Act, since issue of bonus units is not akin to distribution of income by way of dividend. This may be inferred from provisions of section 55 of the Act which prescribed that cost of acquisition of bonus units shall be treated as Nil for purposes of computation of capital gains tax. CBDT vide circular 717 dated 14.08.1995 clarified that in order to overcome the problem of complexity, a simple method has been laid down for computing of cost of acquisition of bonus shares. For the sake of clarity and simplicity, the cost of bonus shares is to be taken as Nil while the cost of original shares is to be taken as the amount paid to acquire them. This procedure will also applicable to any other security where a bonus issue has been made. The issue under consideration has been elaborately considered by the Hon ble Tribunal in various cases such as Rajan Pai Bangalore Vs. Department of Income Tax [ 2016 (5) TMI 216 - ITAT BANGALORE] and Sudhir Menon HUF [ 2014 (3) TMI 534 - ITAT MUMBAI] and even by the Hon ble Apex Court in the case of CIT v. Dalmia Investment Co. Ltd. [ 1964 (3) TMI 17 - SUPREME COURT] as relied upon by the Ld. Commissioner while holding that the provisions of section 56(2)(vii)(c) of the Act are not applicable to the bonus shares. Even otherwise we do not find any material and reason to controvert the findings of the ld. Commissioner on the issue under consideration, therefore in view of aforesaid analysis and respectfully following the Judgments referred above of the Hon ble Apex Court and the Hon ble tribunal and the Circulars issued by the CBDT, the appeal of the revenue is liable to be dismissed.

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• 2022 (5) TMI 193
  Disallowance of belated payment of employee s contribution towards ESI/PF - HELD THAT:- This issue is covered in favour of the assessee by the judgment CIT Vs. AIMIL Ltd. [ 2009 (12) TMI 38 - DELHI HIGH COURT] as also the judgment in the case M/s Pro Interactive Services (India) Pvt. Ltd. [ 2018 (9) TMI 2009 - DELHI HIGH COURT] wherein held hat the amount paid is allowed as an expenditure only when payment is actually made. We do not think that the legislative intent and objective is to treat belated payment of employee s provident fund (EPD) and employee s State Insurance Scheme (ESI) as deemed income of employer under section 2(24)(x) - Decided in favour of assessee.

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• 2022 (5) TMI 192
  Assessment of trust - Allowability of depreciation on the value of assets, where the full acquisition cost such assets claimed as application u/s 11 - HELD THAT:- As the allowability of depreciation on assets where the full value of assets was on the previous occasion claimed as application of income , we are mindful to elucidate that, even in the present case, the assessee had claimed the cost of asset as application of income u/s 11 of the Act in any of the previous year or years up to AY 2014-15 and is allowed in the light of judicial precedents, the claim of depreciation thereagainst for the year under consideration is not hit by the amended provision of section 11(6) of the Act, as the amended provision of section 11(6) de future prospective in nature and effective from AY 2015-2016 as held in the case of DIT V/s Al-Ameen Charitable Fund Trust [ 2016 (3) TMI 462 - KARNATAKA HIGH COURT] . Ergo, in the light of judicial precedents stated herein above hold that, the appellant Society is eligible for depreciation up to the AY 2014-2015, consequently we direct the Ld. AO to delete the disallowance of depreciation. - Decided in favour of assessee.

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• 2022 (5) TMI 191
  Assessment u/s 153A - Addition of bogus purchases - HELD THAT:- It is an undisputed fact that in the case of the assessee assessment u/s 143(3) was already made and case of the assessee was unabated for the purpose of making assessment u/s 153A of the Act. In this regard, no addition can be made in respect of unabated assessment which have become final if no incriminating material is found during search. The revenue could not prove contrary that there was incriminating seized material in the case of the assessee and could not disprove the contention of the assessee that material referred in the assessment order was the copy of ledger account of the assessee which was regularly accounted in the books of account of the assessee. Therefore, in the light of the above facts and circumstances we consider that when assessment in the case of the assessee already had been completed prior to date of search in such circumstances in the absence of any incriminating material the addition made by the A.O is not justified, therefore, this ground of appeal of the assessee is allowed.

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• 2022 (5) TMI 190
  Delayed payment of employee contribution of PF and ESI - Deposits before due date of filing of the return of income u/s 139(1) - HELD THAT:- As in the case of M/s. Shakuntala Agarbathi Company [ 2021 (10) TMI 1196 - ITAT BANGALORE] by following the dictum laid down in the case of Essae Teraoka Pvt. Ltd[ 2014 (3) TMI 386 - KARNATAKA HIGH COURT] had held that the assessee would be entitled to deduction of employees contribution to PF and ESI provided that the payments were made prior to the due date of filing of the return of income u/s 139(1) of the I.T.Act. It was further held by the ITAT that amendment by Finance Act, 2021, to section 36[1][va] and 43B of the Act is not clarificatory. The amended provisions of section 43B as well as 36(1)(va) of the I.T.Act are not applicable for the assessment years under consideration. - Decided in favour of assessee.

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• 2022 (5) TMI 189
  Addition u/s 68 - unsecured loans received in from of gold and jewellery and unsecured loans treated as alleged unexplained and non-genuine - Assessee submitted additional evidence - HELD THAT:- As additional evidences/ documents, are available on public domain, however, the assessing officer did not get opportunity to examine the veracity of these additional evidences/documents. Since the assessing officer has not examined these additional evidences/documents, therefore principle of natural justice requires that it would be fair to remit this issue back to the file of the assessing officer for his examination. We note that these additional evidences/documents, (although some of them are from public domain), were neither examined by the assessing officer nor by ld CIT(A). Therefore, in the interest of justice and fair play for both the parties, we set aside the order of ld. CIT(A) and remit the matter back to the file of Assessing Officer for de novo adjudication, and to decide the matter in accordance to law after giving opportunity of being heard to the assessee. Assessee appeal allowed for statistical purposes.

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• 2022 (5) TMI 188
  Denying deduction u/s. 80P(2)(c) available to a cooperative society - Whether CIT(A) has erred in affirming with the Ld. AO in considering income earned by the society in normal course of business as income from other sources and denying deduction u/s 80P(2)(a)(i) - HELD THAT:- As regard ground for interest from banks the same is covered in favour of the assessee by the ITAT decision in the case of State Bank of India Employees M.S. Patel Co-operative Credit Society Ltd. [ 2017 (7) TMI 1417 - ITAT MUMBAI] - thus we allow the assessee s appeal, qua interest earned. Insurance commission receipt - The society to safeguard the interest of the society has taken life insurance and mediclaim insurance policies for the members and staff, their family members and also general insurance policies for the hypothecated pledged properties, debtors and goods of the borrowers of the society. That the insurance premium paid by the society is charged and recovered from the respective members and staff. That these services are part and parcel of the business of the society. That rendering the above services insurance companies pay the society insurance commission instead of paying to the agents of the insurance company. Hence it has been pleaded that the insurance commission is part of business and hence eligible for deduction under section 80P(2)(a)(i) of the Act. Alternatively it has been pleaded that the proportionate expenses should be allowed. Commission income disallowed by learned CIT(A) on the ground that for the said income there absence of mutuality - The assessee submissions are not with respect to the same. They are with regard to the same being in the nature of business. Hence, there is lack of appropriate appreciation, hence in the interest of justice we remit this issue to the file of learned CIT(A). Learned CIT(A) shall consider the issue in the light of the submissions made by the assessee. Needless to add the assessee should be given adequate opportunity of being heard. As regard the ground of denial of deduction u/s. 80P(2)(c) of Rs. 50,000/- learned CIT(A) has mentioned that this was not arising out of the order of the Assessing Officer. That it is also not clear that this was claimed by the assessee in the beginning. In this regard learned CIT(A) noted that it is not forthcoming whether such a claim for deduction u/s.80P(2)(c) was made in the return of income filed. Hence, in the interest of justice I remit this issue to the file of the learned CIT(A). Learned CIT(A) shall consider the same as ground for adjudication after giving the assessee proper opportunity of being heard. Appeals of the assessee stands partly allowed for statistical purposes.

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• Customs

• 2022 (5) TMI 211
  Revocation of CHA License - forfeiture of security deposit - levy of penalty - revocation by solely relying upon statement given by the Managing Director of the petitioner without taking into consideration the other part of the evidence available on record - whether collateral proceeding will not be taken into consideration for adjudicating a case when the background and genus of the offence committed is same in both the cases? - Doctrine of proportionality - HELD THAT:- There is no material or any other reference made to support the stand that the Managing Director was forced to give a statement. The statements were recorded on two dates, 18.11.2008 and 27.04.2009. If the stand taken by the appellant were to be true, any prudent person would retract the statement at the earliest point of time. The appellant/ Managing Director did nothing after 18.11.2009 but chose to cooperate in the investigation by responding to another summons and also recording another statement on 27.04.2009. Even, thereafter there is no valid retraction or a whisper about the veracity of the statement. For the first time, after the show-cause notice dated 14.08.2009 was issued, while submitting the reply a faint attempt has been made by the appellant to retract the so called statement. Therefore, we hold that the authority rightly rejected the so called retraction and proceeded to adjudicate the matter taking note of the statement recorded under Section 108 of the Act. The learned Tribunal on its part also examined this aspect and rightly affirmed the view of the Commissioner. Waiver of penalty proceedings initiated under Section 114 of the Act - HELD THAT:- The Commissioner did not totally exonerate the appellant from the charge against them but what weighed in the mind of the Commissioner to drop the penalty proceedings was because the appellant themselves stated that mere involvement as a CHA cannot be a ground to take penal action under the Customs Act but at best they can be proceeded under the relevant Regulation. That apart, the Commissioner also found that there is no evidence linking the Customs officers. Therefore, the Commissioner though fit to drop the penalty proceedings. The order nowhere exonerates the appellant from the allegations which were the basis for issuance of the show cause notice. In the opinion of the Commissioner penal action under the Customs Act was not warranted. More so because, the appellant themselves reconciled to the fact that they can be proceeded under the relevant Regulations (CHALR). Therefore, placing reliance the proceedings of the Commissioner dropping the penalty proceedings can in no manner impact the order revoking the license granted to the appellant. The Commissioner on remand has rightly understood the scope of remand and the purport and import of the order-in-original dated 05.01.2012. There is a categorical finding on fact which could not be assailed by the appellant, to the effect that the appellant did not know who the exporter was and the appellant did not directly receive the export order or the consignment from the exporter. This having been admitted, it would clearly show that they have failed to discharge their statutory obligations under Regulation 13 (b) and 19 (8) of the CHALR - the order passed by the tribunal does not suffer from any illegality or perversity for us to interfere and consequently the substantial questions of law have to be answered against the appellant. Doctrine of proportionality - HELD THAT:- The appellant has not been completely exonerated by the Commissioner while dropping the penal action under the Customs Act. The admitted fact is that the appellant did not receive the export order from the exporter which is mandatory under the Regulations. Merely by placing reliance on the Let Export Order said to have been given by the Customs authorities at the first instance cannot exonerate the appellant nor can it in any manner waive or dilute the obligations of the appellant as the CHA as specified under the Regulations - the wordings in the letter of authorization dated 07.11.2008 alleged to have been given by the exporter is curiously worded. If the exporter Himalayan Tour and Travels was a genuine exporter, there would be no necessity to give any undertaking that the Cargo does not contain any contraband. The letter does not specify as to from where the cargo has been procured more importantly the exporter claims himself to be a tour operator as well as an importer-exporter. There was nothing placed on record by the exporter to indicate that he was a regular exporter of sponge iron or any other product. The letter given by the exporter dated 07.11.2008 is a document which has been created so as to enable the appellant to wriggle out of the conspiracy which was hatched. Therefore, the adjudicating authority as well as the tribunal rightly did not give any credence to the letter dated 07.11.2008. The revocation of the CHA license granted to the appellant and forfeiture of the security deposit upheld - substantial questions of law are answered against the appellant - appeal dismissed.

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• Corporate Laws

• 2022 (5) TMI 210
  Sanction of scheme of amalgamation - seeking an order to dispense with convening the meeting of the Shareholders, Secured Creditors and Unsecured Creditors of the Applicant Companies - Sections 230 to 232 of the Companies Act, 2013 read with Rule 3 of the Companies (Compromises, Arrangements and Amalgamation) Rules, 2016 - HELD THAT:- Directions with regard to holding, convening and dispensing with various meetings issued - the scheme is approved - application allowed.

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• 2022 (5) TMI 209
  Sanction of Scheme of Amalgamation - Section 230 to 232 of the Companies Act, 2013 - HELD THAT:- The Tribunal, in view of the settled law, is empowered to dispense with the meeting of shareholders if they have given their consent. Further, in view of Section 230(9) of the Companies Act, 2013, the Tribunal is empowered to dispense with calling of a meeting of creditors or class of creditors where such creditors or class of creditors, having at least ninety per cent value, agree and confirm, by way of affidavit, to the scheme of compromise or arrangement. The scheme is approved - application allowed.

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• Insolvency & Bankruptcy

• 2022 (5) TMI 208
  Prayer for immediate restoration of the petitioner s electricity supply - Section 238 of the IBC - dues of electricity supply to be cleared - HELD THAT:- In the present case, there does not arise any question of the power purchase agreement itself being terminated. Section 238 of the IBC clearly provides that the provisions of the said Act shall have effect, notwithstanding anything inconsistent therewith contained in any other law for the time being in force or any instrument having effect by virtue of any such law - In the present case, admittedly, the disconnection of the electricity supply of the petitioner no. 1 took place prior to the commencement of the CIRP. Section 56 further provides that the electricity supply may be discontinued until such charge or other sum, together with any expenses incurred by him in cutting off and reconnecting the supply, are paid but no longer. The expression such charge refers to the first part of the section which relates the charge to the time of disconnection. Insofar as the electricity charges and disconnection charges are concerned, those obviously refer to the juncture of disconnection. However, only the reconnection charges, by definition, are incurred at the time of restoration of connection. This is not a case of ouster of the powers of the licensee conferred by the 2003 Act. Even if such powers under Section 56 of the 2003 Act remain intact, those become illusory in view of the dues themselves having been extinguished on the approval of the Resolution Plan, by independent operation of the IBC. Thus, even if the DVC retains its powers to recover debts and/or withhold electricity supply till the dues are cleared, there remain no dues to be cleared, since all pre- CIRP debts of the petitioner no.1-company, that is, the successful resolution applicant stand extinguished - the DVC acted without jurisdiction and de hors the law in further withholding the electricity supply of the petitioner no.1. The Damodar Valley Corporation (Respondent no. 1) are directed to restore the electricity supply of the writ petitioner no. 1-company at the earliest, positively within four weeks from date, subject to payment of the reconnection charges by the petitioner no. 1 - application allowed.

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• 2022 (5) TMI 207
  Whether a public sector, i.e., State Government undertaking like appellant-Maharashtra State Electricity Distribution Company Limited (MSEDCL) is not made to fund the restructuring proposal of Lavasa Corporation Limited? - HELD THAT:- Mr. Sancheti states that during a meeting held on 22.4.2022, COC has decided not to pay anything more to MSEDCL but at the same time, Mr. Sancheti assures this Court that he will try his best to make an effort to speak to members of the COC and find out if they would be willing to change or alter the decision that they have taken on 22.04.2022. Mr. Sancheti states that COC comprises of 18 members and it would take some time to hold the meeting - In today s time and age of video conferencing one can hold meeting on emergency basis over video conferencing if they are unable to congregate at one place. COC is directed to hold a meeting not later than 9.00 a.m. on 2.5.2022 and give instructions to Mr. Sancheti. No further time will be given to COC on next date and this Court shall proceed to hear the matter and pass such orders as it deems fit. Chitra Sonawane. In reference to the request by Mr. Sancheti, matter be listed on board at 3.30 p.m. on 2.05.2022.

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• 2022 (5) TMI 206
  Dissolution of the Corporate Debtor - Section 54 of the Insolvency and Bankruptcy Code, 2016, r/w Regulations 44 and 45 of IBBI (Liquidation Process) Regulations, 2016 - HELD THAT:- It is noticed that since the liquidation process has been completed and there is nothing remaining in the corporate debtor, there appears no impediment in granting prayer of the applicant. As a consequence, through this Order it is hereby declared that this is a fit case for order of dissolution. The Corporate Debtor M/s. SAKA Limited, stands Dissolved from the date of this Order - Application allowed.

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• 2022 (5) TMI 205
  Maintainability of petition - initiation of CIRP - Corporate Debtor failed to make repayment of its dues - Operational Creditors - existence of debt and dispute or not - HELD THAT:- This Adjudicating Authority is of the view that there is an operational debt which is due from the Corporate Debtor and the Corporate Debtor has defaulted in making payment of the amount due and accepted the said default. The Corporate Debtor had, before accepting the default, contended that there exists a pre existing dispute as the terms and conditions in the agreement were one-sided, unfair and unjust towards the Respondent. However, the Corporate Debtor had himself signed the contract in the year 2014, which was subsequently extended and amended in the subsequent years. The Corporate Debtor never raised any dispute w.r.t. the terms of the contract before the filing of this petition. Therefore, in the absence of any preexistence of dispute, this tribunal admits this application and initiates CIRP on the Corporate Debtor with immediate effect. Application admitted - moratorium declared.

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• 2022 (5) TMI 204
  Seeking approval of the Resolution Plan as approved by COC - Section 30(6) and 31 of the Insolvency Bankruptcy Code, 2016 - HELD THAT:- All the requirements of Section 30(2) are fulfilled. In respect of compliances regarding CIRP Regulations especially Regulations 38 and 39, the Resolution Professional has certified in Form-H and explained in details that the Resolution Plan has complied with all the required Regulations. Resolution Plan fulfills the requirement as referred in Section 30(2) of the Code and there are sufficient provisions in the Plan for its effective implementation as required under the proviso of Section 31(1) of the Code. The Resolution Plan has been approved by CoC with 100% voting. The Resolution Plan is approved - application allowed.

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• 2022 (5) TMI 203
  Maintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its dues - Operational Creditors - Rental Dues or Lease Payment - operational debt or not - Section 5(21) of IBC, 2016 - HELD THAT:- The Hon ble Appellate Tribunal in the matter of M. RAVINDRANATH REDDY VERSUS G. KISHAN [ 2020 (2) TMI 56 - NATIONAL COMPANY LAW APPELLATE TRIBUNAL, NEW DELHI ], held that dues in the nature of rent of immovable property do not fall under the head of Operational Debt as defined under Section 5(21) of IBC. The Tribunal further held that an Operational Debt is essentially a claim in respect of (a) provision of goods; (b) provision of services, including employment; or (c) a debt arising under any statute and payable to Government/local authority. If the claim by way of debt does not fall under any of these three categories, the claim cannot be categorised as an operational debt, even though there may be a liability or obligation due from the corporate debtor to the creditor and, hence, such a creditor disentitled from maintaining an application for initiation of corporate insolvency resolution process of the corporate debtor. The case of PROMILA TANEJA W/O SHRI RAJESH TANEJA VERSUS SURENDRI DESIGN PVT. LTD. THROUGH ITS DIRECTOR SHRI YOGESH CHAUDHARY [ 2020 (11) TMI 545 - NATIONAL COMPANY LAW APPELLATE TRIBUNAL, NEW DELHI ] is subject matter of appeal before the Hon ble Supreme Court wherein the judgment of the Hon ble NCLAT is under challenge. The judgment of Hon ble Supreme Court is awaited in this regard however no stay has been granted by the Apex Court in the appeal and only notice was ordered on 28.01.2021. Being the latest judgment, and since no stay was granted by the Hon ble Apex Court, Promila Taneja decision is binding on this Tribunal, as on date. This Tribunal is of the considered opinion that the rental dues arising from the use of office space cannot be treated as an operational debt under Section 5(21) of IBC, 2016 - petition dismissed.

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• Service Tax

• 2022 (5) TMI 202
  Levy of service tax - If service tax was not leviable by the respondent during the relevant period, should not the money be returned to the flat buyers, if they are identifiable? - HELD THAT:- This aspect of the matter has not been examined by the Tribunal. Issue notice - List the matter on 23.05.2022.

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• Central Excise

• 2022 (5) TMI 201
  CENVAT Credit - common inputs and input services used for taxable as well as exempt goods - non-maintenance of separate accounts in respect of clearances of 5 numbers of Aircraft Towing Tractors (on which exemption from payment of duty was available - contravention of Explanation-II to Rule 6(3) of the Cenvat Credit Rules, 2004 - time limitation - HELD THAT:- It is not forthcoming from the records, as to whether the appellants have specifically raised any objection or filed any protest letter while making payment of such amount. However, it is only clear from the order that the amount so paid had already been ordered for appropriation. Since, the amount in question had been paid by the appellant, protest if any registered by the appellant vis-a-vis this particular aspect needs to be verified from the available records with the adjudicating authority or with the appellants. This assumes significance as the appellants having paid the amount are raising the issue of protest and the question of limitation before the Tribunal. It is not clear whether this issue was agitated at the time of adjudication of the matter. Moreover, it is also not coming forth with clarity as to the reason for payment of such amount by the appellants. The issue should travel back to the original authority for proper examination considering all the facts of the case and submissions of the appellants. Needless to say that the imposition of penalty should also be looked into afresh. Availment of Cenvat credit on inputs, which were exclusively used in the manufacture of exempted goods viz. Tatra Trucks and Tatra Engines - HELD THAT:- The impugned order has also recorded that against the liability of Rs.1,94,104/-, the appellants had accepted the demand to the extent of Rs.14,664/- and contended that the balance amount is under scrutiny for taking appropriate action in the matter within a short period. It has further been stated that the appellants have not come forward with any further details regarding the balance amount. Since, the appellants did not submit the proof regarding non-reversal of Cenvat credit for the balance amount, the matter cannot be decided at this end as to whether proceedings initiated for recovery of such amount and confirmation of the demand under Rule 14 ibid read with proviso to Section 11A(1) is in conformity with the statutory provisions - as the adjudicating authority is required to have a relook at the case on merits, it will not be fair to conclude the issue as far as penalties - matter on remand. Demand amounting to Rs.7,78,03,800/- confirmed in the impugned order - appellants had not maintained separate accounts and had not followed the procedures laid down under Rule 6(3)(i) ibid. - HELD THAT:- The matter should be looked into afresh by the original authority for a decision, whether the proportionate Cenvat credit had actually been reversed by the appellants or not. Demand of Rs.2,97,56,551/- on the appellants, assigning the reasons that the formula prescribed under Rule 6(3)(i) have not been complied with - HELD THAT:- Since, the appellants claimed that they had maintained separate records for use of input and input services in the manufacture of dutiable and exempted goods, such aspect regarding maintenance of records need to be examined by the original authority. Time Limitation - HELD THAT:- The original authority should also examine the aspect of limitation and to such extent, should rely upon the submissions made by the appellants, as recorded - matter on remand. Appeal allowed by way of remand.

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• 2022 (5) TMI 200
  Method of Valuation - Air Circuit Breakers - MCCB - Switch Fuse unit - classifiable under Chapter Heading 8536 2010, 8536 2020 and 8536 5090 meant for industrial consumers and weighing more than 25 kgs. are to be valued according to the transaction value under Section 4 of the Central Excise Act, 1944 or the MRP Value under Section 4A of the Central Excise Act, 1944? - Extended period of limitation - HELD THAT:- In the instant case, it is found that it is not disputed by the either parties that the goods are excisable; sold in the package, the goods are specified vide Notification No.14/2008-CE (NT) dated 1.3.2008 as amended and N/N. 49/2008-CE (NT) dated 24.12.2008 to fall under Section 4A. However, the dispute appears to be regarding the definition of Industrial Consumer . Whereas the definition of Industrial Consumer at the relevant point of time meant industrial consumers who buy packaged commodities directly from the manufacturer for use by that industry. The dealer is not a individual consumer and the goods are routed through them to the industrial consumers. The department had no objection in case of very same goods cleared directly to the industrial consumers. Thus, there is an ambiguity in the treatment of the impugned goods by the department. It is the very same goods that are sold directly to the industrial consumers and also through channel partners. It is found that such a treatment by the department defies logic as the nature of the goods is not changed just by the way they are sold. The characteristics, the usage and the users are not changed. Invocation of longer period - HELD THAT:- The appellant s contentions are acceptable and the department has not made out any case for invocation of extended period. The impugned goods, in packages having weight more than 25 kg are not chargeable to duty under Section 4A, only for the reason that they are sold through channel partners; differential duty demanded on this count is set aside - All other demands, if any, within normal period are confirmed - Penalty is set aside.

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• CST, VAT & Sales Tax

• 2022 (5) TMI 199
  Maintainability of petition - deemed assessment - large scale purchase omissions - Section 27 of TNVAT Act - HELD THAT:- In the case on hand, the writ petitioner has approached this Court nearly two years after the impugned order. The impugned order is dated 14.01.2020, it has admittedly been served on the writ petitioner in February 2020 (though the exact date is not readily available with the learned counsel) but the writ petition has been filed only on 04.01.2022. This delay remains unexplained (other than faintly saying that there was Corana Virus pandemic). This is hardly an explanation as the Court continued to function over the last two years in virtual, hybrid and some time personal modes also. This Court is also of the considered view that a tax liability case cannot be kept lingering in the first tier before assessing officer when a writ is filed two years post impugned order and when delay remains unexplained. The sequitur is captioned writ petition fails and the same is dismissed.

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• Indian Laws

• 2022 (5) TMI 198
  Dishonor of Cheque - cheque has been issued as a security - funds insufficient - legally enforceable debt or other liability or not - rebuttal of presumption - Section 138 of NI Act - HELD THAT:- A perusal of Section 138 of the Act, 1881 goes to show that the expression debt or liability means a legally enforceable debt or other liability. If the cheque has been issued in discharge of any debt or liability, presumption under Section 139 of the Act, 1881 would come into operation. In other words, when once a cheque has been issued, the presumption has to be drawn to the effect that the cheque has been issued to discharge a legally enforceable debt or other liability - It is evident from the record that there is a contract between 2nd respondent/complainant and the petitioner/ accused. In terms of the said contract, the subject cheque has been issued. By any stretch of imagination, it is too premature for this court to come to a conclusion that the subject cheque was issued for the purpose of security. Whether the subject cheque was issued as a security or not would constitute a defence and the same has to be established in the course of trial. When a cheque has been issued, there cannot be any hard and fast rule that the cheque which is issued as a security, can never be presented by the drawee of the cheque. If such is the understanding, a cheque would also be reduced to an on demand promissory note and in all circumstances, it would only be a civil litigation to recover the amount, which is not the intention of the statute. Therefore, when a cheque has been issued as a security, the consequences flowing therefrom is also known to the drawer of the cheque, and in the circumstances, if the cheque is presented and dishonoured, the holder of the cheque/drawee would have the option to initiate civil proceedings for recovery or criminal proceedings for punishment in a fact situation. But, in any event, it is not for the drawer of the cheque to dictate terms with regard to the nature of litigation. The defences that are raised by the learned counsel for the petitioner are all questions of fact that have to be decided in the course of trial - Petition dismissed.

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• 2022 (5) TMI 197
  Dishonor of cheque - payment of interim compensation - direction to deposit 15% amount of the dishonoured cheque within eight weeks from the date of receipt of order concerned - Section 143-A of NI Act 1881 - HELD THAT:- The Hon ble Apex Court in DASHRATH RUPSINGH RATHOD VERSUS STATE OF MAHARASHTRA ANOTHER [ 2014 (8) TMI 417 - SUPREME COURT] , inter alia observed that the situs or venue of judicial inquiry and trial of the offence must logically be restricted to where the drawee bank is located. In the considered opinion of this Court, the observations of the Hon ble Apex Court with regard to offence under Section 138 of the Negotiable Instruments Act, were in relation to reaching the conclusion as to where the judicial inquiry and trial of the offence be held and it is in this context the Hon ble Apex Court has observed that the offence under Section 138 is committed no sooner the drawee bank returns the cheque unpaid and whereas ultimately it is the place where the drawee bank is located, had been decided as the venue of the judicial inquiry and trial of offence - the Hon ble Apex Court has inter alia observed that an offence under Section 138 of the NI Act, 1881 is committed no sooner a cheque drawn by an accused is returned unpaid. The Hon ble Apex Court has further observed that cognizance of any such offence is however forbidden under Section 142 of the NI Act, except a complaint in writing by the payee or holder in due course - The observations at Para 21 in the said case makes it abundantly clear that the Hon ble Court had made all the observations in context of deciding where a complaint under Section 138 of the Negotiable Instruments Act could be filed. In the considered opinion of this Court, all the observations of the Hon ble Apex Court including observations at Para 58, have to be read in context of the question which was under consideration of the Hon ble Apex Court. In the considered opinion of this Court, the observations of the Hon ble Apex Court in YOGENDRA PRATAP SINGH VERSUS SAVITRI PANDEY ANR. [ 2014 (9) TMI 1129 - SUPREME COURT] , more particularly the observations referred to hereinabove leave nothing to doubt that the intent of the Hon ble Apex Court was to clarify on the issue and whereas the aspect of the offence under Section 138 being committed upon all the five ingredients being satisfied was clearly clarified. Under such circumstances, in the considered opinion of this Court, while at first blush, it appears that the decisions in Dashrath Rupsing Rathod and Yogendra Pratap Singh, are mutually irreconcilable, but viewed from the perspective of the issue in consideration before the Hon ble Apex Court in both the judgments, it becomes clear that the decisions, are in separate spheres and there is no mutual irreconcilability of the said decisions. Insofar as the present facts are concerned, the period of 15 days from the date of giving notice under the proviso (c) to Section 138 of the NI Act had expired on 04.09.2018 and whereas it is upon non-payment of the cheque amount by the drawer (petitioners-accused) till the said date that the offence under Section 138 of the NI Act could be stated to be committed. The said date being later than the date on which the amended Section 143A came into force i.e. on 01.09.2018, the provisions of the said amended Section would be applicable to the complaint in question. This Court is of the considered opinion that no error on facts as well as on law has been committed by the Courts below while passing the orders impugned, hence no interference is warranted - Petition dismissed.

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• 2022 (5) TMI 196
  Dishonor of Cheque - tampered cheque - date overwritten in the cheque - existence of legally enforceable liability or not - Section 138 N.I. Act - HELD THAT:- From the perusal of the order sheet it appears that after hearing the parties arguments at some length, this court on 20.2.2019 has held that all the ingredients of Section 138 N.I. Act as considered by he Apex Court in the case of JUGESH SEHGAL VERSUS SHAMSHER SINGH GOGI [ 2009 (7) TMI 1143 - SUPREME COURT] has been made out in cumulative. The conclusion of the learned counsel for the applicant that since it was a post dated cheque the liability was a future liability and it had not accrued on the date of presentation of the cheque is misconceived. It is also mentioned in the aforesaid order that at this stage learned counsel for the applicant submitted that an opportunity be provided to the applicant to repay the money to discharge his liability. So this defence has already been considered and rejected by this court. From the material on record, it is clear that this case does not come under any of the categories as mentioned by the Hon ble Apex Court in the aforesaid case. There is nothing on record to show that the continuation of the proceedings is an abuse of the process of the court. There is no illegality in the impugned summoning order. Application dismissed.

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• 2022 (5) TMI 195
  Maintainability of revision petition - Dishonor of Cheque - petitioner herself admitted in the insolvency petition No. 9/2016 filed by her in the City Civil Court that she was indebted to many persons including the respondents, and that she owed a sum of Rs.32,00,000/- to the respondents - HELD THAT:- On perusal of the Judgment of the Trial Court as well the Appellate Court, it is opined that the petitioner has not made out any good ground to admit these revision petitions. The findings on facts cannot be disturbed. The Trial Court has not awarded sentence of imprisonment. In all these cases the petitioner has been directed to undergo simple imprisonment in case she defaults in paying the fine amount. Therefore, if she is serving the default sentence, it is always consecutive and therefore, benefit under Section 428 of Cr.P.C. cannot be granted. There are no merits in the petition - petition dismissed.

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