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Newsletter: Where Service Meets Reader Approval. TMI Tax Updates - e-Newsletter May 7, 2021 Case Laws in this Newsletter: GST Income Tax Corporate Laws Insolvency & Bankruptcy FEMA PMLA Central Excise Wealth tax Articles RIGHT TO MAKE REQUEST FOR RESERVATION OF FLAT INCLUDES TO WITHDRAW SUCH REQUEST FOR RESERVATION OF FLAT Will Recipients Be Obliged To Reverse ITC In Case Suppliers Do Not Pay their taxes News Exchange Rate Notification No.46/2021 - Customs (N.T.) Revenue Deficit Grant of ₹ 9,871 crore released to 17 States Notifications Customs G.S.R. 321(E) - dated 5-5-2021 - Cus Corrigendum - Notification No. 29/2021-Customs, dated the 30th April, 2021 46/2021 - dated 6-5-2021 - Cus (NT) Exchange rates Notification No.46/2021-Cus (NT) dated 06.05.2021 Income Tax 55/2021 - dated 5-5-2021 - IT Central Government specifies the sovereign wealth fund, namely, the Chiswick Investment Pte. Ltd. 54/2021 - dated 5-5-2021 - IT Central Government specifies the sovereign wealth fund, namely, the Stretford End Investment Pte. Ltd. 53/2021 - dated 5-5-2021 - IT Central Government specifies the sovereign wealth fund, namely, the Dagenham Investment Pte. Ltd. 52/2021 - dated 5-5-2021 - IT Central Government specifies the sovereign wealth fund, namely, the Anahera Investment Pte. Ltd 51/2021 - dated 5-5-2021 - IT Central Government specifies the sovereign wealth fund, namely, the Bricklayers Investment Pte. Ltd. SEBI SEBI/LAD-NRO/GN/2021/22 - dated 5-5-2021 - SEBI Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) (Second Amendment) Regulations, 2021. Highlights / Catch Notes GST Validity of attachment order - Seeking interim relief sought, that is for lifting of attachment of bank account pending appeal - The same cannot be considered as the details in relation to the balance available in the bank account are not placed. Had the same been produced, there could have been a direction to the authorities to set aside a portion of amount in satisfaction of the dues and permit operation of the bank account. Let the petitioner approach the first appellate authority with an application for interim protection - HC Visit to Get Source Grant of Bail - issuance of fake invoices of other firms without accompanying the goods - No previous involvement of accused in any similar offence has been brought on record which implies that it is his first offence and he is not a habitual offender. It is also to be seen that accused is not at a flight risk and no submissions have been made to this effect. - Bail granted subject to conditions - DSC Visit to Get Source Income Tax Validity of order of Settlement Commission u/s 245C - When the prerequisite condition contemplated in the provision stipulates that the person approaching the second respondent- Settlement Commission should come out with true and full disclosure of income and the Department could able to establish that there are many discrepancies in the matter of such disclosure made by the first respondent-assessees, then, there is no other reason whatsoever to settle the issues under the provisions of the Act and the mater must be placed before the Assessing Officer for assessment. - HC Visit to Get Source Capital Gains - cost of acquisition - As regards the details of the expenditure furnished of the assessee which are being sought as exempt by the assessee, find that except for the expenditure incurred by the assessee towards electrical, water leakage problem and plumbing work, no other expenditure is required to be incurred for making the house habitable. AO is directed to allow the same as cost of improvement and allow the same, if found to be in order. - AT Visit to Get Source Penalty invoking the provisions of section 271D - Managing Director of the assessee company had extended cash to the company - loan or deposits u/s 269SS - By invoking the provisions of Section 273B, we hereby remit the matter back to the file of the Ld. AO to examine that no unexplained funds are introduced in the business of the assessee Company as loan from the Managing Director and if it found that the source of fund obtained from the Managing Director of the assessee Company is explained then delete the penalty levied invoking the provisions of section 271D - AT Visit to Get Source Addition on account of interest u/s 40(a)(ia) - ld. CIT (A) has rightly arrived at the decision that entire transaction of the assessee having been reflected in the return of income who being a chartered accountant was supposed to come up with clean hands, is a colourable device to evade the tax and the entire interest income has been rightly taxed under the head “income from other sources” in the hands of the assessee. - AT Visit to Get Source Penalty u/s.271(1)(b) - there was a reasonable cause with the assessee in not complying with the requirements of the AO in such a short period for the reasons discussed hereinabove. This being a reasonable cause has brought the case within the ambit of section 273B of the Act. - No penalty - AT Visit to Get Source Corporate Law Oppression and Mismanagement - This ‘Tribunal’ keeping in mind of the ingredients of Section 241 and 242 of the Companies Act, 2013 comes to a resultant conclusion that to achieve the object(s) for which the aforesaid provisions are enacted, without expressing any opinion on the merits of the matter, also not delving deep because of the fact that allegations of ‘Oppression and Mismanagement’ concerning mixed question of Law and fact cannot be decided at the ‘interim’, stage - AT Visit to Get Source IBC Seeking release of attached property and to restore possession - property of Corporate Debtor who is not a financial establishment as defined under Section 2(e) WBPIDFE Act - The Director of the Corporate Debtor and the property of the Corporate debtor cannot get immunity from the prosecution. Thus, the attached property, which is confiscated by the Designated Court of Economic Offences, cannot be de-attached - Now the attached property is not in possession and control of the DEO, WB. Therefore, as per the impugned order DEO, WB cannot de-attach the property which is already confiscated by the Designated Court of Economic Offences. - AT Visit to Get Source Initiation of CIRP - since the affidavit not having been notarized is only a procedural irregularity and it is a curable defect. This irregularity can be rectified by the Applicant at any point of time. It is also pertinent to note here that the proviso to Section 7(5) of IBC, 2016 states that this Adjudicating Authority before rejecting the application under sub-clause (b) of sub-section (5) of Section 7 of IBC, 2016 shall give a notice to the Applicant to rectify the defect in the application - Tri Visit to Get Source PMLA Money laundering - proceeds of crime - huge difference between the said cash deposit and the income of the petitioner - creation of benami Funds - the objective satisfaction of the guilt of the accused is required to be reduced to writing in the grounds of arrest formulated by the Investigating Officer prior to the arrest and to be furnished in writing to the arrestee at the time of arrest or immediately thereafter - the grounds of arrest are in compliance with the stipulated requirement - HC Visit to Get Source Wealth-tax Wealth tax assessment - ownership of the Gold in possession of the assessee - Limited power to deal with the Gold - Legal heirs - the Tribunal ought not to have included any consideration for the seized gold for computation of wealth tax assessment on the respective valuation dates as the gold still stands seized and not released. - HC Visit to Get Source Case Laws: GST 2021 (5) TMI 195 Uploading of an order of assessment under Section 62(1) as well as the summary thereof - HELD THAT:- The instant summary order dated 14.03.2020 must statutorily have been accompanied by a speaking order and it is only such speaking order that would be liable to be challenged, as there would be no reasoning on the basis of which the summary of order would be amenable to challenge. The counter at paragraph 13 states that the prayer for refund sought by the petitioner, for excess payment of ₹ 5,46,641/- and 1,35,584/- are found to be correct and orders had been passed by the State Tax Officer, Thiruvallur Assessment Circle on 12.02.2021, as the assessee is assessed in that circle. The aforesaid Assessing Officer has not been arrayed as a respondent and it is only the Deputy State Tax Officer, Sriperumbudur Circle, who has been arrayed as a respondent. Petition closed. 2021 (5) TMI 194 Validity of attachment order - Seeking interim relief sought, that is for lifting of attachment of bank account pending appeal - service of speaking order duly made or not - HELD THAT:- Service by e-mail is thus an accepted mode of service and in the present case, I am given to understand by the learned Government Advocate that the order has been served by e-mail. I am not inclined to go into this disputed question of fact, since the petitioner, at this juncture, would state that it wishes to file a statutory appeal challenging order of assessment. The petitioner may do so within a period of four (4) weeks from today in view of the decision of the Supreme Court in a series of judgments, viz., IN RE: COGNIZANCE FOR EXTENSION OF LIMITATION [ 2021 (3) TMI 497 - SC ORDER] and IN RE: COGNIZANCE FOR EXTENSION OF LIMITATION [ 2021 (3) TMI 497 - SC ORDER] extending the time for filing of appeal till 14.03.2021. Interim relief sought, that is for lifting of attachment of bank account pending appeal - HELD THAT:- The same cannot be considered as the details in relation to the balance available in the bank account are not placed. Had the same been produced, there could have been a direction to the authorities to set aside a portion of amount in satisfaction of the dues and permit operation of the bank account. Let the petitioner approach the first appellate authority with an application for interim protection, which may be considered, if and when filed, in accordance with law. Petition disposed off. 2021 (5) TMI 171 Grant of Bail - issuance of fake invoices of other firms without accompanying the goods - economic offence or not - huge loss to the tune of ₹ 7-8 crores - non-bailable offence or not - HELD THAT:- In the present case also in the reply itself it has been mentioned that accused has admitted of causing loss to the tune of ₹ 7-8 crores to the exchequer. Accused is in custody since 25.03.2021. To decide whether or not admit accused on bail or not abovesaid parameters as held by Hon ble Supreme Court of India have to be measured/have to be assessed. The fact that accused was straightaway sent to judicial custody is prima facie indicative of the fact that accused is not required for custodial interrogation. Further, no previous involvement of accused in any similar offence has been brought on record which implies that it is his first offence and he is not a habitual offender. It is also to be seen that accused is not at a flight risk and no submissions have been made to this effect. Keeping in view the totality of circumstances, the period of incarceration and the fact that accused is not required for any further custodial interrogation, which is otherwise also not possible as 15 days since arrest of accused have already passed, as well as no report of any previous involvement, accused is admitted in bail on his furnishing personal bond in the sum of ₹ 1,00,000/-, with one surety of equal amount, subject to the terms imposed. Application allowed. 2021 (5) TMI 170 Revocation of cancellation of registration - Rejection of application for revocation of cancellation of registration as appellant did not discharge their interest liability of ₹ 55,018/- against cash payment for delay filing of return and the reply to the show cause notice not found to be satisfactory - HELD THAT:- Central Board of Indirect Taxes Customs, New Delhi has clarified the issue vide circular No.99/18/2019-GST dated 23.04.2019 wherein it has been clarified that in terms of the second proviso to sub-rule (1) of rule 23 of the said Rules, all returns required to be furnished in respect of the period from the date of order of cancellation till the date of order of revocation of cancellation of registration have to be furnished within a period of thirty days from the date of the order of revocation. The appellant has now been complied with the said provisions, therefore, the registration of appellant may be considered for revocation by the proper officer - the appellant is ordered to file the revocation application in the prescribed form through common portal - the proper officer is ordered to consider the revocation application of the appellant subject to the verification of payment particulars, filing of returns and compliance of the provisions of CGST Act and rules made thereunder. Appeal disposed off. Income Tax 2021 (5) TMI 197 Addition u/s 68 - addition has been made on account of purported unexplained, unsecured loans - HELD THAT:- AO has not taken into account the explanation and the material placed before him by the petitioner, along with its reply. As noticed above, although, a personal hearing was sought by the petitioner, the same was not granted by the AO. Given these circumstances, we are of the view, that the petitioner has been able to establish, at least at this stage, a prima facie case in its favour. Accordingly, issue notice. Mr. Hossain accepts service on behalf of the respondents/revenue. 2021 (5) TMI 196 Validity of order of Settlement Commission u/s 245C - contention of the writ petitioner / revenue is that there is no true and full disclosure of income by the first respondent at the time of filing applications under Section 245C before the second respondent-Settlement Commission for settlement - HELD THAT:- Wherever there is a possibility of escapement or non-disclosure of certain income in a true and full manner, then the very purpose and object of the provision is to provide powers to the Assessing Officer to cull out the entire truth and proceed with regular assessment. If at all, the first respondent-assessees say that they themselves have admitted that they have not maintained any books of accounts, then it is to be construed that the regular assessment must be done in such cases. There is no possibility of providing true and full disclosure of income by the assessees. In either of the circumstances, when the Department could able to establish that the assessee has not come out with true and full disclosure of income by the assessees themselves admitted that they have not maintained any books of accounts, then in both the cases, there is no possibility of disclosure of full and true income and therefore, in such cases, the regular assessment alone would be a proper method and settlement cannot be made. The very contention raised on behalf of the first respondent that the first respondent-assessees themselves admitted the fact that they have not maintained any books of accounts is of no avail for the purpose of settling the issues and in such circumstances, all evidences collected by the petitioner-Department also to be enquired into by the Assessing Officer through a regular assessment. Perusal of the order passed by the second respondent- Settlement Commission, as rightly pointed out by the learned Senior Standing Counsel, the contentions of the Department made by the CIT(DR) in detail in respect of the income were not completely enquired into nor considered by the second respondent-Settlement Commission. Contrarily, the second respondent-Settlement Commission made a finding that the applicants have not kept proper books of accounts in all the three cases and settled the issues. Such a settlement is improper and not in consonance with the provisions of the Act. When the prerequisite condition contemplated in the provision stipulates that the person approaching the second respondent- Settlement Commission should come out with true and full disclosure of income and the Department could able to establish that there are many discrepancies in the matter of such disclosure made by the first respondent-assessees, then, there is no other reason whatsoever to settle the issues under the provisions of the Act and the mater must be placed before the Assessing Officer for assessment. This being the factum established, the petitioner- Department could able to prove that the orders impugned passed by the second respondent-Settlement Commission are not in consonance with the provisions of the Act. Thus, the impugned orders passed in Settlement Application are quashed. 2021 (5) TMI 193 Deduction u/s 80IB(10) - open terrace area should not be included in computation of built up area for purpose of deduction - HELD THAT:- Following the ratio laid down in M/S. VANDANA PROPERTIES, [ 2012 (4) TMI 54 - BOMBAY HIGH COURT] and RADHE DEVELOPERS [ 2011 (12) TMI 248 - GUJARAT HIGH COURT] , the questions of law are decided against the Revenue and in favour of the assessee. 2021 (5) TMI 192 Settlement Commission under section 245D(4) - petitioner prayed for a direction to the first respondent Settlement Commission rehear the case for a fresh - HELD THAT:- The Honourable Supreme Court while passing its order in Commissioner of Customs and Central Excise versus Gao Ispat Ltd [ 2009 (7) TMI 1225 - SC ORDER] has not not considered any of the decisions rendered in the context of territorial jurisdiction of the High Courts under Article 226 of the Constitution of India. The Honourable Supreme Court in Kusum Ingot s And Alloy versus Union of India [ 2004 (4) TMI 342 - SUPREME COURT] has observed that even though in a given case, where the original authority is constituted at one place and the appellate authority is constituted at another, a writ petition would be maintainable at both the places as order of the appellate authority constitutes a part of cause of actionnever the less ultimately held that even if a small part of cause of action arises within the territorial jurisdiction of the High Court, the same by itself may not be considered to be a determinative factor compelling the High Court to decide the matter on merits. In appropriate cases, the Court may refuse to exercise its discretionary jurisdiction by invoking the doctrine of forum conveniens . As the writ petitions have not been admitted, and since the contesting respondents have raised objection regarding the jurisdiction at the time of admission that the contesting respondents are located outside the jurisdiction of this court and within the jurisdiction of the courts in Karnataka, these writ petition are liable to be dismissed on the ground of forum conveniens. 2021 (5) TMI 188 Foreign Dividend income - CIT(A) directing the Assessing Officer to assess the foreign dividend income received on net basis - HELD THAT:- As of now, the issue is squarely covered in assessee s favor by the orders of Tribunal for AY 1995-96 as well as for AY 2000-01. In AY 2000-01, the bench following the decision of Hon ble Bombay High Court in CIT V/s Ambalal Kilachand [ 1994 (4) TMI 67 - BOMBAY HIGH COURT] decided the issue in assessee s favor. Respectfully following the binding judicial precedents, we hold that the directions of Ld. CIT(A) would not require any interference on our part, in any manner. Ground No.1 of revenue s appeal stand dismissed. Assessee received foreign interest income and offered the same net of tax. The Ld. AO did not consider the assessee s submissions. The Ld. CIT(A) directed Ld. AO apply the analogy of foreign dividend income. Aggrieved, the revenue is before us by way of Ground No.2. Since we have dismissed ground no.1, this ground would also stand dismissed since Ld. CIT(A) has followed the analogy of foreign dividend income only, which we have already confirmed. Disallowance of Software expenditure - CIT(A) opined that the software which was purchased for resale was akin to purchases of raw material and therefore the same was an allowable expenditure and the remaining expenditure was held to be a capital expenditure - HELD THAT:- Before us, it is undisputed position that software was purchased for-resale and it was akin to purchase of raw material for the business. This being the case, no fault could be found in the adjudication of Ld. CIT(A). Ground No. 3 of revenue s appeal stands dismissed. Deduction u/s 10A and deduction u/s 80HHE against software exports - whether the old units which was earlier claiming deduction u/s 80HHE could claim deduction u/s 10A in this year? - HELD THAT:- We find that this issue is covered in assessee s favor by the decision of Hon ble Bombay High Court in group concern titled as CIT V/s Tata Consultancy Services [ 2019 (4) TMI 1439 - BOMBAY HIGH COURT] as relying on DAMCO SOLUTIONS (P.) LTD. [ 2010 (10) TMI 592 - DELHI HIGH COURT] Section 80HHE of the Act pertains to deduction in respect of profits from export of computer software etc. Sub-section (5) of Section 80HHE provides that where deduction under said section is claimed and allowed in respect of the profits of the business referred to in sub-section (1) for any assessment year, no deduction shall be allowed in relation to such profits under any other provision of the Act for the same or any other assessment year. What sub-section (5) of Section 80HHE thus prohibits is the claim deduction allowed under Section 80HHE under any other provision, be it in the same assessment year or in other assessment year. In the present case, it is not even the ground of the revenue that the deduction under section 10A of the act claimed by the assessee in the present year is in relation to the profit for which the assessee was granted deduction under section 80HHE. Sub- section 5 of Section 80HHE of the Act, therefore, in the present case would have no applicability. Similar is the ratio of decision of Hon ble Delhi High Court in Pr.CIT V/s E-fund International India P. Ltd. [ 2015 (10) TMI 488 - DELHI HIGH COURT] wherein Hon ble Court observed that making of claim u/s 80HHE in one year would not preclude an assessee from claiming the benefit u/s 10A in respect of the same unit in succeeding year. The purpose of sub-section (5) of Sec.80HHE was to avoid double benefit but that would not mean that if for a particular assessment year the assessee wants to claim a benefit only under Sec.10A of the act and not u/s 80HHE, then it would be denied to the assessee. We further find that the allegations of Ld.AO that there was extension of existing business or the new units were formed by splitting or reconstruction of existing business is bereft of any positive material on record. Therefore, we do not find any infirmity in the impugned order, on this issue. Resultantly, Ground No.4 of revenue s appeal stand dismissed. Adjustment of uncollected / unrealized debtors from total turnover in denominator - HELD THAT:- Upon careful consideration of subsequent decision of Hon ble Madras High Court in Maars Software [ 2019 (3) TMI 578 - MADRAS HIGH COURT] we find that Hon ble Court has distinguished the decision in Galaxy Granites [ 2012 (9) TMI 68 - MADRAS HIGH COURT] by observing that this decision was rendered in the context of Sec.80HHC and the same would not advance the case of the revenue as far as the scheme of Section 10A or 10B was concerned. The Hon ble Court chose to follow the same principle of interpretation as followed by Hon ble Apex Court in HCL Technologies [ 2018 (5) TMI 357 - SUPREME COURT] and held that the export turnover in numerator as well as denominator could not assume two different characteristics for two parts of the same formula. Therefore, if export turnover in numerator has excluded the unrealized foreign exchange, than the same figure has to be adopted in denominator. The other decisions has cited by Ld. AR has also taken the same view. Therefore, going by the ratio of these decisions, we direct Ld. AO to reduce the unrealized debtors from total turnover in denominator while computing deduction u/s 10A / 80HHE. Correct formula to compute deduction u/s 80HHE - revenue is aggrieved by the action of Ld. CIT(A) in directing Ld. AO to consider entire profits of software business as a whole and apply the ratio of export turnover to total turnover including the total turnover of Sec.10A units - HELD THAT:- As relying on M/S SASKEN COMMUNICATION TECHNOLOGIES LTD [ 2014 (1) TMI 1538 - KARNATAKA HIGH COURT] AO is directed to deduct the profits of Sec.10A undertakings from the profit of the software business as a whole and applying the ratio of the export turnover (excluding the export turnover of 10A units) as divided by total turnover (excluding the total turnover of 10A units). AO is directed to re-compute deductions u/s 10A as well as u/s 80HHE in terms of our above order including our decision on overseas taxes, software etc. Disallowance of interest expenditure - HELD THAT:- We do not concur with the approach of Ld. CIT(A) in invoking the provisions of Sec.14A of the Act. Consequently, the interest expenditure of ₹ 246.88 Crores would be fully deductible u/s 36(1)(iii) of the Act. The various case laws as enumerated in para 10.3 relied upon by Ld. AR supports our conclusion. Accordingly, Ld. AO is directed to rework allowable deduction u/s 80M. Ground No.4 of assessee s appeal stand allowed to that extent. 2021 (5) TMI 186 Unexplained cash credit u/s 68 - HELD THAT:- The primary onus as casted on the assessee in terms of the requirement of Section 68, was duly fulfilled and the onus was on revenue to controvert the evidences furnished by the assessee. However, we find that nothing has been brought on record by the revenue to substantiate the fact that the assessee s unaccounted money was routed in the books in the garb of share capital. It is trite law that no addition could be made merely on the basis of allegation, suspicion, conjectures or surmises. Upon perusal of assessee s written submissions as placed on record, another pertinent fact to be noted is that all the 16 investor entities has sufficient net worth (shares capital + reserves surplus) to make investment in the assessee and the percentage of investment made by them in the assessee company is merely in the range of 0.47% to 5.45% of their respective net worth. As relying on own case [ 2020 (3) TMI 595 - ITAT MUMBAI] we delete the impugned additions. Consequently, the set-off of losses, as allowable under law, would be available to the assessee. 2021 (5) TMI 184 Ex-parte order - assessment as completed u/sec. 143(3) - HELD THAT:- In the instant case no doubt, the Ld. CIT(A) has given sufficient opportunities to the assessee and Ld. assessee did not respond to the notices given by the Ld. CIT(A), hence we do not appreciate the attitude of the assessee in not complying with the statutory notices. We, observe from the order of the Ld. CIT(A) that she has not passed the detailed speaking order considering all the facts mentioned in the statement of facts and the grounds of appeal. Though the Ld. CIT(A) is permitted to pass the ex-parte order, the same should be after considering the facts and merits of the case. Therefore, in the interest of justice, we, remit the matter back to the file of the ld. CIT(A) with a direction to decide the appeal afresh on merits after giving opportunity of hearing to the assessee. The assessee is directed to comply with the notices and cooperate with the department and submit the necessary details for disposal of appeal before the Ld. CIT(A). Accordingly, appeal of the assessee is allowed for statistical purpose. Appeal filed by the assessee stands allowed for statistical purpose. 2021 (5) TMI 183 Capital Gains - cost of acquisition - Deduction u/s. 54F - assessee submitted that the assessee and his mother had purchased the house along with furnitures and fixtures and therefore, the entire expenditure incurred by the assessee was towards the composite purchase of the house and furniture and should be allowed in toto - HELD THAT:- As the cost of acquisition is the price paid by the assessee for the purchase of the house and also the expenditure towards the repairs made by him to make the house habitable and no other expenditure is to be allowed u/s. 54 of the Act. As regards the details of the expenditure furnished of the assessee which are being sought as exempt by the assessee, find that except for the expenditure incurred by the assessee towards electrical, water leakage problem and plumbing work, no other expenditure is required to be incurred for making the house habitable. AO is directed to allow the same as cost of improvement and allow the same, if found to be in order. Assessee's appeal is partly allowed for statistical purposes. 2021 (5) TMI 182 Addition on account of claim charges - AO during the course of assessment proceeding that it was in the business of transporting tea on behalf of the Tea Estates to the consignees and the transit loss in weight of consignments in the course of handling tea bags had to be borne by the assessee company - expenditure claimed by the assessee on claim charges however was mainly supported only by self made vouchers - HELD THAT:- Disallowance out of claim charges was deleted by the ld. CIT(A) in assessee's own case for assessment year 2014-15 by relying inter alia on the decision of M/s. Ravi Marketing Pvt. Ltd.[ 2005 (1) TMI 20 - CALCUTTA HIGH COURT] where it was held that the expenditure claimed by the assessee could not be reduced quantitatively when it was qualitatively found to be eligible for deduction. Keeping in view the ratio of the said decision of the Hon'ble Jurisdictional High Court and having regard to the facts of the case, hold that the ad hoc disallowance made by the AO and confirmed by the ld. CIT(A) out of claim charges is not sustainable and deleting the same - Decided in favour of assessee. Disallowance of repairs and maintenance - AO Found that the said expenses involved petty amounts and the claim of the assessee was supported mainly through self made vouchers - As submitted on behalf of the assessee company before the authorities below as well as before the Tribunal, it has offices across 30 locations from where the business is conducted and the said offices, some of which are owned by the assessee and some taken on rent, are required to be maintained as offices, godowns and staff rooms and complete details of repairs and maintenance expenses incurred on the said premises used for the purpose of business were furnished before the AO and without pointing out any specific instances of unverifiable element therein, the disallowance of 10% made out of the said expenses on ad hoc basis is not sustainable - HELD THAT:- Keeping in view the ratio of the decision of Hon'ble Jurisdictional High Court in the case of M/s. Ravi Marketing Pvt. Ltd. [ 2005 (1) TMI 20 - CALCUTTA HIGH COURT] and having regard to the facts of the case that the ad hoc disallowance of 10% out of repairs and maintenance expenses has been made by the AO without pointing out even a single specific instance of the unverifiable element involved therein, I am of the view that the said disallowance is not sustainable. 2021 (5) TMI 176 Penalty invoking the provisions of section 271D - Managing Director of the assessee company had extended cash to the company - loan or deposits u/s 269SS - reasonable cause for having received cash loans from its Managing Director and granting relief to the assessee as per provision 273B - HELD THAT:- From the facts of the case, it appears that the assessee company has received cash from its Managing Director for meeting its day-to-day emergency expenses. In this situation, the decision relied by the assessee will be relevant and the assessee Company shall be entitled to relief as per the provisions of section 273B - From the order of the Ld. CIT (A) it appears that the assessee was not able to explain the genuineness of the source of funds obtained from its Managing Director. In the interest of justice, we hereby remit the matter back to the file of the Ld. AO to examine that no unexplained funds are introduced in the business of the assessee Company as loan from the Managing Director and if it found that the source of fund obtained from the Managing Director of the assessee Company is explained then delete the penalty levied invoking the provisions of section 271D of the Act. If found otherwise, the Ld. AO shall pass appropriate order in accordance with law and merit. Appeal of the assessee is allowed for statistical purposes 2021 (5) TMI 174 Undisclosed income - addition was made on the basis of the documentary evidence - CIT-A deleted the addition - HELD THAT:- We find that the ld. CIT (A) has analyzed each and every aspect of the allegations made the AO called for reports, gone through the contents of the information received, the evidences before the revenue, the explanation of the assessee and the remand reports and came to a conclusion that there is no liabilities on the part of the assessee and the revenue could not bring about any cogent material to prove the allegations. Hence, we decline to interfere with the order of the ld. CIT (A). Addition u/s 68 - unsecured loans - creditors gave the loan to the appellant either after borrowing the fund or by obtaining the share application money (in case of corporate creditors only), hence AO held that the creditors had no sufficient money of their own for giving the loan to the appellant - HELD THAT:- There is no justification to treat the Credit as Unexplained, and hence the addition made by the Assessing Officer treating this Loan as Unexplained is hereby deleted. the submission of both the parties, arguments, evidences and find that the ld. CIT (A) has given very cogent reason going through each and every creditors, the copy of ITRs, bank statement, balance sheet, receipt and repayment. No perversity or factual inaccuracies or legal in congruencies could be established. Hence, we decline to interfere with the order of the ld. CIT (A). Deduction u/s 24 - Disallowance of Interest - Miscellaneous Receipts included Rental Receipt - HELD THAT:- A perusal of the facts of the case and the legal position shows that there was no challenge to the fact that the amount was received from M/s HHG Global Pte. Ltd. as Rent, and that the appellate authorities had the jurisdiction to entertain additional claims made before them. In the instant case, the claim for Deduction u/ s 24(a) had been made before the Assessing Officer during the assessment proceedings (though not by revised Return), but by revised Computation of Income, and in view of the fact that the amount in question was basically Rental Receipt, it had to be taxed as Income from House Property and hence the Deduction allowable had to be given to the Appellant. Reliance is being placed on order of the Hon ble Apex Court in the case of Goetze India Ltd. Vs CIT [ 2006 (3) TMI 75 - SUPREME COURT ] . Hence, we decline to interfere with the order of the ld. CIT (A). Disallowance u/s 14A - HELD THAT:- We find that the assessee has not earned any exempt income and hence we direct that no disallowance is called for, as the Section 14 A will not apply if no exempt income is received or receivable during the relevant previous year. 2021 (5) TMI 173 Addition on account of interest u/s 40(a)(ia) - payment of interest expenses under the head profit gains of business or profession to VP Sons HUF - while making this payment assessee has not deducted tax at source u/s 40(a)(ia) - interest received has been shown by the assessee in the column interest income along with professional income in part in profit loss account in ITR-4 form but has not been shown in the Schedule of Other Sources of ITR - HELD THAT:- Had these investments belong to HUF it would have certainly been reflected in the return of income of HUF itself. Moreover, the assessee has made a false claim which is neither paid nor shown by the assessee as payable in the return of income which is not permissible in the cash system and mercantile system of accounting. This fact goes to prove that income as shown in the return of income by the assessee just to preempt and explain the information which is available to the Department in the form of 26AS to evade the tax. From the facts of this case, when it is proved on record that the assessee has received an amount as interest income out of which he has failed to prove that the amount as been paid to the HUF, the entire amount is to be treated as income from other sources because it is not business income of the assessee being a chartered accountant. In these circumstances, ld. CIT (A) has rightly observed that the amount is not to be made addition to the income of the assessee by invoking the provisions contained u/s 40(a)(ia) of the Act rather it is to be treated as income of the assessee from other sources So, we are of the considered view that ld. CIT (A) has rightly arrived at the decision that entire transaction of the assessee having been reflected in the return of income who being a chartered accountant was supposed to come up with clean hands, is a colourable device to evade the tax and the entire interest income has been rightly taxed under the head income from other sources in the hands of the assessee. Decided against the assessee. Addition on the basis of information received u/s 133(6) - different companies qua confirmation of interest payment to the assessee and there was a difference in the interest received and the interest declared by the assessee - HELD THAT:- As assessee contended that this addition is not sustainable as there is some reconciliation issue but we are of the considered view that when the assessee has brought before the AO all the facts regarding difference of interest received from Mahindra Mahindra which was accepted by the AO, there was no other reconciliation issue left to be addressed by the AO. Assessee has failed to bring on record any facts before the first appellate authority or before the Tribunal as to how the difference is not addressed during reconciliation. So, we are of the considered view that ld. CIT (A) has rightly confirmed the addition hence ground is determined against the assessee. Undisclosed interest income - HELD THAT:- CIT (A) has rightly directed the AO to tax the entire amount as income from other sources and not under the head business income . The present appeal has been filed by the assessee without bringing on record reasons to dislodge the findings returned by ld. CIT (A) which fact is evident from the grounds of appeal raised by the assessee which have largely challenged the order passed by the Assessing Officer but has never challenged the findings returned by ld. CIT (A). So, the assessee has failed to bring on record any perversity or illegality in the impugned order passed by the ld. CIT(A) which are findings on the facts based upon material evidence discussed in detail. 2021 (5) TMI 172 Penalty u/s.271(1)(b) - proceedings u/s.263 - AO initiated instant assessment proceedings for which notice u/s.142(1) was issued which was served upon the assessee - HELD THAT:- The relevant records were frequently moved from Nashik, Pune and Nagpur depending upon the necessity where these were required. In view of this peculiar situation, we find that it was difficult on the part of the assessee to collect different records from the scattered places in a short period of four days, which was at the disposal of the assessee for complying with the requirements of the AO. There is no doubt that the assessee did not comply with the notice issued by the AO and thus, became liable for penalty u/s.271(1)(b) of the Act. Section 273B states that wherever there is a reasonable cause in not complying with the requirements resulting into imposition of penalty including section 271(1)(b) under consideration, the penalty needs to be deleted. Adverting to the facts of the instant case, we find that there was a reasonable cause with the assessee in not complying with the requirements of the AO in such a short period for the reasons discussed hereinabove. This being a reasonable cause has brought the case within the ambit of section 273B of the Act. We, therefore, order to delete the penalty imposed by the AO and confirmed in the first appeal in respect of all the three years under consideration. - Decided in favour of assessee. Corporate Laws 2021 (5) TMI 187 Oppression and Mismanagement - Arbitral Award rendered during the pendency of the present Appeal - whether the National Company Law Tribunal was justified in passing the impugned order dated 22.01.2021 leaving the valuable properties of the First Respondent/Company unprotected, despite manifest urgency and large scale under valued sales by the Respondents? - HELD THAT:- An order on Section 241 Petition under the Companies Act, 2013 seeks reliefs with a view to end the matters complained of in the petition. Section 242 of the Companies Act, 2013 vests in the Tribunal very wide powers for granting a suitable relief to the concerned Petitioner(s). Section 242(1) of the Act gives the Tribunal an unfettered power to make such Order as it thinks fit, with a view to bringing to an end the matters complained of. Section 242(2) of the Companies Act, 2013 showers certain specific powers. Section 242(4) of the Companies Act is similar to the ingredients of Section 403 of the Companies Act, 1956. It is to be pointed out that allegations of oppression and mismanagement concerning mixed question of law and fact could not be decided at the Interim Stage - The term Oppression is any act exercised in a manner harsh, wrongful and burdensome manner. The Phrase Affairs of Company are being conducted points out a continuous wrong , the proceedings are meant to be in public interest of the Company or in the commercial interest of the company. The Tribunal can take preventive and a curative action for regulating the conduct of the Company s affairs in future and to bring to an end the matters complained of. It is to be pointed out that unfair utilisation of powers and impairment of confidence in probity with which the company s affairs have to be conducted, (in contra distinction) as distinguished from just resentment on the minority s part are the vital facts that are to be kept in mind by the Tribunal . It cannot be gainsaid that applying the standards of fairness the Tribunal , is to determine the main case on merits. While passing orders, the Company s interest and other equitable considerations are to be taken into account by the Tribunal . Undoubtedly, the Tribunal cannot interfere with the day to-day affairs of a Company and a wisdom of shareholders. Added further, one cannot ignore a prime fact that no Arbitrator can give relief to a Petition under Section 241 or 242 of the Companies Act, 2013 - It is relevantly pointed out that Section 11 of the Civil Procedure Code, bars Subsequent suit . Whereas Order 23 Rule 1(3) of the Civil Procedure Code bars remedy . It is to be remembered that Order 23 Rule 1 of the Civil Procedure Code bars remedy but does not extinguish the right. Whether the second Petition is void abinitio is to be seen by the Tribunal . Considering the fact, that the Arbitral Award dated 18.03.2021 is contested by the Respondents (in the present Company Appeal ) before the Hon ble High Court of Madras in O.P.No.310/311/312/313 of 2021, the same is pending for determination - In determining an Application/Petition under Section 241, 242 of the Companies Act, 2013, the Tribunal is to keep in mind the principle of particularity and proof . No doubt, the object of exercise of power under Section 241 of the Companies Act is either to prevent a Winding up of Company or to remove the continuance of harm or reasonable probability of injury to the interests of Company or to the wider injury of public interests . This Tribunal keeping in mind of the ingredients of Section 241 and 242 of the Companies Act, 2013 comes to a resultant conclusion that to achieve the object(s) for which the aforesaid provisions are enacted, without expressing any opinion on the merits of the matter, also not delving deep because of the fact that allegations of Oppression and Mismanagement concerning mixed question of Law and fact cannot be decided at the interim , stage by applying the yardstick of fairness directs the National Company Law Tribunal, Division Bench-1, Chennai to take up the main Company Petition No.393 of 2019 together with pending applications if any, for Hearing , (since the said Petition was filed on 14.03.2019) by requiring the Respondents concerned to file Counter(s) to the main Company Petition and to dispose of the same on merits (including dealing with the aspect of maintainability issue/point), of course, after providing adequate opportunities to respective sides by adhering to the Principles of Natural Justice in accordance with Law and in the manner known to Law at an early date. Liberty is granted to the respective parties to raise all factual and legal issues before the Tribunal in the main Company Petition. Appeal disposed off. 2021 (5) TMI 181 Approval of scheme of Amalgamation - section 230 -232 of the Companies Act, 2013 r/w the Companies (Compromises, Arrangements and Amalgamations) Rules 2016 - HELD THAT:- There is no apprehension that any of the creditors would lose or be prejudiced if the proposed scheme is sanctioned - The Petitioner Companies have filed Affidavit, stating that the scheme Proposed does not fall within the ambit of sections 4 and 5 of the Competition Act, 2002. The scheme does not require any modification, except to the Appointed Date as mentioned supra, as it appears to be fair and reasonable, not contrary to public policy and also not violative of any provisions of law. All the statutory compliances have been made under section 230-232 of the Companies Act, 2013 r/w the Companies (Compromises, Arrangements and Amalgamations) Rules, 2016. The Scheme of Arrangement between the Demerged Company and the Resulting Company was duly approved by the shareholders of respective companies - the company scheme is sanctioned. Petition allowed. Insolvency & Bankruptcy 2021 (5) TMI 185 Seeking release of attached property and to restore possession - property of Corporate Debtor who is not a financial establishment as defined under Section 2(e) WBPIDFE Act - assets of the Corporate Debtor should be kept outside the purview of sale or not - consistency of provision of Section 3 of the WBPIDFE Act with Sections 14 and 33(5) of the IBC - whether Section 14 as well as Section 33(5) of the IBC shall prevail over Section 3 of WBPIDFE Act?. Whether the property of Corporate Debtor who is not a financial establishment as defined under Section 2(e) WBPIDFE Act can be attached? - HELD THAT:- Under the WBPIDFE Act, the property acquired either in the name of a financial establishment or in the name ofany other person on behalf of such financial establishment can also be attached. In the present case, the property of the Corporate Debtor is attached on the allegation that Corporate Debtor is one of the Companies of Pincon Group Companies and the Pincon Group Companies had fraudulently accepted the deposits and all the money went to Corporate Debtor and the Corporate Debtor had purchased the attached properties with the money of the depositors. In this regard, the appellant placed reliance on the findings of the designated court - There is nothing on record that Corporate Debtor had raised any objection under Section 14(3) of the WBPIDFE Actthat the properties were wrongfully attached and produced before the court. In such circumstances, we are unable to convince with the argument of Ld. counsel for the respondent that the findings of the designated court are not binding on the Corporate Debtor - thus, the properties of the corporate debtor can be attached. Whether High Court of Calcutta in WP No. 24110(W)of 2016 vide order dated 23.04.2019 directed that the assets of the Corporate Debtor should be kept outside the purview of sale? - HELD THAT:- High Court have not placed on record any objection which has been filed under section 14 (3) of WBPIDFE Act. In such a situation, it cannot be said that the Hon ble High Court directed that the assets of the Corporate Debtor be kept outside the purview of sale. Whether the provision of Section 3 of the WBPIDFE Act is inconsistent with Sections 14 and 33(5) of the IBC. Therefore, Section 14 as well as Section 33(5) of the IBC shall prevail over Section 3 of WBPIDFE Act? - HELD THAT:- In this case, the properties of the Corporate Debtor were attached during 10.11.2017 to 17.11.2017 and after investigation DEO, WB filed charge sheet on 31.01.2018 under Sections 406, 409, 420 and 120B of IPC and under Section 3(1)(e) of the WBPIDFE Act against 41 accused persons, including Manoranjan Roy Director of the M/s Pincon Spirits Ltd. On 16.04.2018, the registered office of M/s. Pincon Spirits Ltd. (Corporate Debtor) was sealed. Thereafter, on 26.04.2018 and 25.02.2019, various properties of M/s Pincon Spirits Ltd. were attached by the DEO, WB. Meanwhile, on 19.07.2018 initiated CIRP against M/s Pincon Spirits Ltd. Thus, admittedly, the properties of M/s Pincon Spirits Ltd. were seized and the registered office was sealed much prior to the initiation of CIRP - the moratorium has been declared after the properties were attached by the DEO, WB and produced before the Designated Court of Economic Offences - Section 14 of the IBC has no overriding effect on Section 3 of the WBPIDFE Act. Whether Section 33 (5) of the IBC prevails over Section 3 of the WBPIDFE Act? - HELD THAT:- No resolution plan was approved which resulted in the change in control of the Corporate Debtor, therefore, there is no bar to take action against the property of the Corporate Debtor in connection with the offence. The explanation to sub-section (2)has clarified that the words and actions against the Corporate Debtor in relation to an offence would include the attachment, seizure, retention or confiscation of such property under the law applicable to the Corporate Debtor. Since the word include issued under sub-clause 1 of the explanation, the word action against the property of the Corporate Debtor is intended to have the widest possible amplitude. There is a clear nexus with the object of the IBC. The other part of the clarification under the explanation is found in the second sub-clause of the explanation. The Director of the Corporate Debtor and the property of the Corporate debtor cannot get immunity from the prosecution. Thus, the attached property, which is confiscated by the Designated Court of Economic Offences, cannot be de-attached - Now the attached property is not in possession and control of the DEO, WB. Therefore, as per the impugned order DEO, WB cannot de-attach the property which is already confiscated by the Designated Court of Economic Offences. The impugned order is not sustainable in law therefore, the order is hereby set aside - Appeal allowed. 2021 (5) TMI 180 Maintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its dues - Financial Creditors - existence of debt and dispute or not - date of default - HELD THAT:- The learned counsel for the respondent states that in the notice issued under SARFAESI, the date of default was mentioned as 27.11.2018. The learned counsel for the applicant states that there has been typographical error in the application and that the date of default is only 27.11.2018 - It appears that the said date 30.11.2019 is not the date of default but it is the date in which the said sum is due to the Financial Creditor. Except this description, date of default is not mentioned and some correction is seen to have made which has not been authenticated. Therefore, we hold that date of default is omitted from the relevant Column On a query, the learned counsel for the Financial Creditor has stated that the date of default is date of NPA i.e. 27.11.2018. The learned counsel for the Corporate Debtor, however maintained that the date of default is 12.11.2016. While reserving the order, this Adjudicating Authority had given opportunity for filing their respective written submissions in order to substantiate their arguments. In the above application, the date of default in the relevant column has not been deliberately typed by the applicant. Time Limitation - HELD THAT:- It is pertinent to cite here para 86 to 92 of the Hon'ble Supreme Court (Civil Appellate Jurisdiction) judgement in SESH NATH SINGH ANR. VERSUS BAIDYABATI SHEORAPHULI CO-OPERATIVE BANK LTD AND ANR. [ 2021 (3) TMI 1183 - SUPREME COURT] where it was held that If the period from the date of institution of the proceedings under the SARFAESI Act till the date of filing of the application under Section 7 of the IBC in the NCLT is excluded, the application in the NCLT is well within the limitation of three years. Even if the period between the date of the notice under Section 13(2) and date of the interim order of the High Court staying the proceedings under the SARFAESI Act, on the prima facie ground of want of jurisdiction is excluded, the proceedings under Section 7 of IBC are still within limitation of three years. Application admitted - moratorium declared. 2021 (5) TMI 179 Maintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its dues - Financial Creditors - existence of debt and dispute or not - HELD THAT:- On perusal of documents placed before this Adjudicating Authority, the Financial Creditor has proved existence of 'debt' and 'default' and there being no denial from the Corporate Debtor with respect to outstanding due. Application admitted - proposed Interim Resolution Professional appointed - moratorium declared. 2021 (5) TMI 178 Maintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its dues - Financial Creditors - existence of debt and dispute or not - HELD THAT:- On perusal of documents, it appears that 'debt' and 'default' are proved. In the counter filed by the Corporate Debtor on 05.03.2021, it was specifically admitted to sanction the credit facilities and also to the outstanding under the loan accounts in para 9 and 10 of their counter. Thereafter, the Corporate Debtor filed Additional Counter during February 2021 in which default in the loan account was categorically admitted. The grounds as raised by the Applicant in the present IA/167(CHE)/2021 and IA/168(CHE)/2021 do not hold much, since the affidavit not having been notarized is only a procedural irregularity and it is a curable defect. This irregularity can be rectified by the Applicant at any point of time. It is also pertinent to note here that the proviso to Section 7(5) of IBC, 2016 states that this Adjudicating Authority before rejecting the application under sub-clause (b) of sub-section (5) of Section 7 of IBC, 2016 shall give a notice to the Applicant to rectify the defect in the application - the Financial Creditor has proved existence of 'debt' and 'default', with respect to outstanding due against the Corporate Debtor. Therefore, this Insolvency and Bankruptcy Application stands admitted. Application admitted - moratorium declared. 2021 (5) TMI 177 Validity of CIRP proceedings commenced - validity of constitution of Committee of Creditors pursuant to commencement of Corporate Insolvency Resolution Process - restoration of status quo of Respondent no. 7 as on Apr 25, 2019 as if no CIRP was ever commenced - direction to Respondent no. 7 to return the amount of ₹ 2 Cr paid by the Applicant towards money received against the forward sale and purchase transaction for sale of land owned by Respondent no. 7 - HELD THAT:- It is pertinent to note herein that, had there been any irregularity in the admission order passed by this Adjudicating Authority in the IB Petition filed under Section 9 of the IB Code, in that event, the respondent/the then corporate debtor of CP (IB) 594 of 2018 would have approached before the Hon'ble Appellate Authority. However, the corporate debtor never approached the Appellate Authority for setting aside the admission order so passed by this Adjudicating Authority on 26.04.2019. Hence, admission order reached to its finality - It is also pertinent to mention herein that the present applicant had also filed an application, i.e. IA 802 of 2019 in CP (IB) 594 of 2018, before this Adjudicating Authority, during the pendency of CIRP, seeking direction upon the RP for accepting his claim as one of the financial creditors of the corporate debtor company. However, on hearing both sides, the said application was dismissed by this Adjudicating Authority on 07.02.2020. The application so filed by the applicant for recalling/quashing of the order dated 26.04.2019, along with other prayers, are not only beyond the jurisdiction of this Adjudicating Authority but also bad in the eye of law and is not maintainable - Application dismissed. FEMA 2021 (5) TMI 198 Applicant in respect of Section 31(1) of FERA - time-limit for cognizance of any offence under FERA - suit for specific performance for dismissal of the suit and rejection of the plaint under Order VII Rule 11 of The Code of Civil Procedure, 1908 (CPC) on the ground that the suit is barred by law - HELD THAT:- The statement in the plaint has been made with reference to the letter dated 14th December, 1989 from the lawyers of the plaintiff to Helen Wilson which reveals that Helen Wilson was a foreign national and hence came within the statutory requirement of Section 31(1) of FERA. This letter also reveals that Helen Wilson may not have had the permission of the RBI or communicated such permission to the plaintiff as on 14th December, 1989 which would be corroborated by the letter of 8th October, 1993 of the RBI granting permission to Helen Wilson under Section 31(1) of FERA. The letter of 8th October, 1993 has been brought on record by the applicant defendant no.3 as a part of the application for dismissal of the suit. Order VII Rule 11(d) applies where the plaint, on the face of it, is barred by law and the contravention of the law must be clear and unambiguous from the plaint itself. A Court which is called upon to decide the issue cannot engage with the alleged statutory violation or the fact to be determined beyond the limits of what the plaint discloses. The letter dated 14th December, 1989 would have served the objective of the defendant no.3 of having the suit dismissed if by such letter the Court could have come to an indisputable conclusion that Helen Wilson, a foreign national, had alienated the property by way of sale or gift or otherwise in favour of the plaintiff without first obtaining the permission from the Reserve Bank of India under Section 31(1) of FERA. This is obviously not the case since the plaintiff was constrained to file a suit on 18th July, 1990 precisely because the agreement had not been executed hence necessitating a direction on the original defendant to execute and register the deed of conveyance in terms of the agreement for sale dated 2nd January, 1989. The contention of the applicant in respect of Section 31(1) of FERA, subject to Section 49(3) of FEMA setting the time-limit for cognizance of any offence under FERA, would have also been acceptable had Helen Wilson attempted to set the property in motion from herself to the plaintiff without first complying with the statutory requirement as existed on the date of sale of the property. Since this is not the factual position, this Court is not persuaded to dismiss the suit or reject the plaint for contravention of any law which existed on the date when the suit was filed. The prayers must hence be rejected and the application for dismissal of the suit is accordingly dismissed without any order as to costs. The suit shall be listed for hearing after the summer holidays. 2021 (5) TMI 190 Search and seizure operation carried out by the officers of the Enforcement Directorate under FEMA - excess jewellery seized - HELD THAT:- With regard to the search and seizure of the excess jewellery that has been seized by the Enforcement Directorate, it is to be noted that in the writ petition, the petitioner has relied on several documents to indicate that this excess jewellery was duly accounted for and had been sent for job work. In my view, the Enforcement Directorate should look into the documents filed in the writ petition and pass a reasoned order on whether these goods are stock-in-trade or not. In the event, the Enforcement Directorate finds that the same are duly accounted for, the same should be released in favour of the petitioner in accordance with law. The above enquiry and the reasoned order should be passed within a period of eight weeks from date. The authorities are also directed to allow the authorized representative of the petitioner-company to have a lawyer of his choice to be present during the summons at an inaudible distance as per the guidelines laid down by the Supreme Court. The petitioner shall cooperate with the authorities. We further hasten to clarify that I have not gone into the merits of this case.With these above observations and directions, this writ petition stands disposed of PMLA 2021 (5) TMI 189 Money laundering - proceeds of crime - huge difference between the said cash deposit and the income of the petitioner - creation of benami Funds - shell companies - Validity of arrest of petitioner - Guilt standard - charge against the arrested person for having committed the predicate offence. Whether in terms of Section 19 of PMLA, the Investigating Officer or the Arresting Officer is required to inform the grounds of arrest to the person being arrested, if so, is it oral information or does it have to be in writing? - HELD THAT:- The term 'Arrest' has not been defined under the Cr.P.C. or under the IPC, nor for that matter has it been defined under the PMLA. Arrest, as generally understood, is to restrain to stay, and in relation to a person connected to an offence or suspected to be connected to offence, an arrest would mean to detain and restrain a person - Section 41 to 44 and 46 of Cr.P.C. deal with the arrest of a person, Section 41 empowering the police officer to arrest any person without a warrant, Section 42 empowering a Police officer to arrest a person who commits an offence in his presence, Section 43 enabling a private person to arrest any person who commits an offence in his presence and or a proclaimed offender, Section 44 deals with arrest by a Magistrate and Section 46 lays down the manner in which the arrest has to be made. In the present case, the power to arrest is circumscribed by the PMLA itself. This power has to be exercised in the manner as provided under PMLA or not at all. Apart from the exercise of power to arrest in a particular manner, PMLA also provides or mandates that the arresting officer inform the arrestee of the grounds of his arrest at the earliest without any unnecessary delay so as to safeguard the individual freedom of that person who can on that basis apply for and seek for bail if so provided - The question is as to whether the arresting officer is required to only inform the grounds of arrest or provide the same in writing to the person arrested for an offence under the PMLA. The PMLA has various provisions relating to the offence of money laundering as regards which stringent punishments are prescribed. Furthermore, in terms of Section 45 of the PMLA for the person arrested to seek bail, it is required that such a person establishes before the said Court that the accused is not guilty of the offence alleged against him. Since it is required that the arresting officer inform and provide the arrestee with the arrest order and grounds of arrest in writing, it would be required that the investigating officer establish the positive fact of having provided the same in writing, since the negative cannot be established by the arrestee. Hence, in such cases, apart from obtaining the acknowledgement of the arrestee on the said arrest order and grounds of arrest, it may also be advisable for the arresting officer to email the said arrest order and grounds of arrest to the arrestee s email account, to the e-Mail account of the lawyer and or the near and dear ones of the arrestee, if the lawyer or the near and dear ones are provided with a physical copy of the arrest order or grounds of arrest to obtain their acknowledgement of having received the same. Thus, in terms of Section 19 of PMLA, the Investigating Officer or the arresting officer is required to inform and provide a physical copy of the arrest order and grounds of arrest to the person being arrested. Mere oral information would not be sufficient - In the present case on facts having come to the conclusion that the grounds of arrest have been provided to the petitioner, I hold that requirement of Section 19 in providing grounds of arrest has complied with, and there is no infirmity in the same. Whether the expression reason to believe that any person has been guilty of an offence found under Section 19 of the PMLA Act require a preliminary adjudication by the Investigating Officer as regards the guilt of the accused before arresting him? - HELD THAT:- The arresting officer should have reason to believe that a person is guilty of an offence . The reason to believe cannot be said to be an adjudication which is required to be performed by the Investigating Officer as regards the guilt of the person being arrested; the Investigating officer cannot be a Judge, jury and executioner. The investigating officer is only to investigate and place the material before the competent court for adjudication - The requirement under Section 19(1) as extracted above, is a reason to believe on the basis of the material in his possession . This reason to believe, in my considered opinion, would be the objective satisfaction of the Investigating Officer on the basis of the material available with him since the Investigating officer has conducted the investigation and has secured material. The only requirement under the Act is the reason to believe by the Investigating officer or the arresting officer that the person is guilty of the offence . It is therefore not required for the Investigating officer to prove the purpose of arrest or even to make any submission as regards the requirement of arrest to protect the proceeds of the crime. Though of course, the same is not part of Section 19(1) as contended by Shri Aravind Kamath, learned Senior counsel, the same would be examined by the Court while granting bail to consider whether the person arrested is required to be retained in judicial custody for the reason that the said person may tamper with evidence and or with the proceeds of crime. Said factor would have to be considered at the time of granting of bail and not at the time of the arrest. Arrest and remand to police custody and thereafter to judicial custody, which would also include custodial interrogation, which is an essential weapon in the armoury of the Investigating Officer enabling the Investigating officer to properly and effectively investigate a particular offence. Suffice to say that one Mohammed Anoop was arrested with possession of the drugs in commercial quantity, thereby having committed an offence under the NDPS Act. On his arrest during the course of his interrogation, Mohammed Anoop has stated that the petitioner is his boss; he would act as per the instructions of the petitioner. The petitioner has invested money in his businesses, and he has transferred monies to the petitioner for use - No proper explanation was given by the petitioner during the course of his interrogation; there are serious offences that have been alleged against the said Mohammed Anoop and the petitioner and several others for offences under the NDPS Act, huge amounts of money had changed hands. It is suspected that these have been realized on account of trafficking or dealing with drugs which is a scheduled offence under the PMLA, therefore the money is suspected or believed to have been generated on account of such dealing with or trafficking in Narcotic or psychopathic substances, these monies would amount to proceeds of crime. Thus, the phrase reason to believe that any person has been guilty of an offence would mean the objective satisfaction of the Investigating Officer or the arresting officer that the person who is to be arrested is guilty of an offence punishable under the Act. It does not mean that the said Investigating officer or the arresting officer has to adjudicate on the guilt, pass a detailed order or record the same in writing to indicate as to why he is of the opinion that the person to be arrested is guilty of the offence, the recordal of the objective satisfaction with reference to the material on record would be sufficient compliance - on the basis of the discussion made as regards the facts that the investigating officer has in writing indicated as to why he is of the opinion that the petitioner is believed to be guilty of committing the offence, the recordal of the objective satisfaction with reference to the material on record is sufficient compliance of the requirement, and there is no infirmity in the arrest made. Whether the objective satisfaction of the guilt of the accused is required to be reduced to writing on the grounds of arrest formulated by the Investigating Officer? - HELD THAT:- The objective satisfaction of the guilt of the accused can only be ascertained from the material on record, it cannot be expected of an Investigating Officer to in detail record the same in writing and form a part of grounds of arrest formulated by the Investigating Officer - However, the grounds of arrest are required to be sufficiently detailed out as to why a person is being arrested, in brief state as to what is the material available with the Investigating officer which would link the person to be arrested to an offence under the Act and why the person is believed to be guilty of the commission of such an offence. These factors, if contained in the grounds of arrest, would be sufficient, it would not be required for a detailed adjudicatory order to be made by the Investigating Officer as to the guilt of the accused. Thus, the objective satisfaction of the guilt of the accused is required to be reduced to writing in the grounds of arrest formulated by the Investigating Officer prior to the arrest and to be furnished in writing to the arrestee at the time of arrest or immediately thereafter. Petition dismissed. Central Excise 2021 (5) TMI 191 SVLDRS - seeking to issue Form SVLRDS 3 for the amount stated - seeking an opportunity to present its case by providing a personal hearing - HELD THAT:- The impugned order which is sketchy in nature and does not assign adequate reasons, is set aside. The matter is remitted back to the respondent department to reconsider the case of the petitioner by taking into account the judgement of Gujarat High Court in the case of MESSRS SYNPOL PRODUCTS PVT. LTD. VERSUS UNION OF INDIA [ 2020 (9) TMI 257 - GUJARAT HIGH COURT] , where it was held that declaration filed by the petitioners and other similarly situated persons are required to be considered by the designated committee without payment of redemption fine by the declarant. A fresh decision be taken by the department expeditiously - petition allowed by way of remand. 2021 (5) TMI 175 CENVAT Credit - input services - Air Travel Agent Service /Rail Travel Agent Service - Real Estate Agent Service - denial on the ground that these services have no direct or indirect relation to the manufacturing activity of the appellant - HELD THAT:- The sample invoices were produced before the adjudicating authority and reason for denial of cenvat credit is that the services in question have no direct or indirect relation to the manufacturing activity of the appellant. It is not a case where the appellant has not provided the sample invoices of the services on which they have taken cenvat credit. In these circumstances, the services in question are having direct relation with the manufacturing activity of the appellant. CENVAT Credit allowed - appeal allowed - decided in favor of appellant. Wealth tax 2021 (5) TMI 199 Wealth tax assessment - ownership of the Gold in possession of the assessee - Limited power to deal with the Gold - Legal heirs - including the market value of the said gold in the computation of net wealth of the original petitioner - whether the Tribunal erred in law in rejecting the assessee's submissions that even if the said gold were to be included in the net wealth, the value thereof to be taken ought to be NIL or ought to be arrived at, bearing in mind the liability for confiscation, fine and penalty and bearing in mind that what had to be valued was the price which the assessee claim to be restored possession of the said gold would fetch, if sold in the open market ? - HELD THAT:- Applying the ratio in the case of Murari Mohan Dutta [ 1991 (9) TMI 17 - CALCUTTA HIGH COURT ] we are inclined to hold in the present case that there cannot be any market value ascribed for valuation of the seized gold on the respective valuation dates in view of the fact that the gold being seized was in the custody of the Central Excise Authorities on the respective valuation dates and the right of the original assessee was in jeopardy. Thus, we do not agree with the findings returned by the Tribunal in its order dated 29.09.1982 in so far as the issue of valuation is concerned. (1) Whether, on the facts and in the circumstances of the case, the Tribunal erred in law in including the market value of the gold and gold coins in the computation of net wealth of the appellant ? - Ans. : Yes (2) Whether, on the facts and in the circumstances of the case, the Tribunal erred in law in rejecting the assessee's submissions that even if the gold and gold were to be included in the net wealth the value thereof to be taken ought to be NIL, or ought to be arrived at, bearing in mind the liability for confiscation, fine and penalty and bearing in mind that what had to be valued was the price which the assessee claim to be restored possession of the gold would fetch, if sold in the open market ? - Ans. : Yes (3) Whether, on the facts and in the circumstances of the case, Tribunal erred in law in rejecting the assessee's claim that matter had to be considered on the footing of the assessee having invested the said gold and gold coins in gold bonds which were exempt from wealth-tax ?- Ans. : Yes (4) Whether, on the facts and in the circumstances of the case, the Department having knowingly and consciously prevented the assessee from investing the gold and gold coins in the purchasing of the gold bonds under the Gold Bond Scheme which was then in operation, can in law charge the assessee to wealth-tax on the footing that the assessee continues to be the owner of the gold (and not gold bonds) and was thus liable to wealthtax on the value of the said gold and gold coins ? - Ans. : No (5) Whether, the Tribunal erred in law in holding that the rules and principles of equity would have no application to the present case ? - Ans. : Yes (6) Whether, the Tribunal erred in law in valuing gold on the basis of a national sale when the assessee was not in possession of the gold and could not have sold the gold but could have at best entered into an agreement to sell the gold with a condition to deliver the gold, if and when he became entitled to and acquired possession thereof ? - Ans. : Yes (7) Whether, instead of determining the value of gold on the basis of a notional sale of gold which was not legally possible, the Tribunal ought to have included, if at all, the consideration which any wise and prudent person would have offered for entering into an agreement to purchase the gold subject to the condition that delivery of gold would be given and sale would be completed, if and when the assessee became entitled to and acquired possession of gold ? - Ans. : In view of the answers to the questions (1) to (6) herein above, the Tribunal ought not to have included any consideration for the seized gold for computation of wealth tax assessment on the respective valuation dates as the gold still stands seized and not released. Recovery proceedings - notice issued for the sum along with interest being the alleged dues of income tax and wealth tax payable by the estate of Shri. C.S. Goenka (original assessee) - HELD THAT:- A perusal of recovery notice does not evince confidence in the Court as the same is inadequate in terms of any details. Therefore, we are inclined to set aside the notice of recovery dated 22.09.2004 with liberty to the respondents / Revenue / Income Tax department to issue a fresh notice in accordance with law and if permissible in law to the legal heirs of the original assessee. If such a recovery notice is issued, it shall be open to the petitioners to contest the same whereafter law will take its own course. In so far as the amended prayer for seeking forthwith release of 85,617.80 grams of gold, jewellery, cash and other valuable articles form the premises of the original assessee as per the panchnama to the petitioners is concerned, it is seen from the record i.e IA No.16 of 2015 in Civil Appeal No.723 of 1973 filed in the Supreme Court, that the late Shri. C.S. Goenka had three legal heirs namely Smt. Sushila N. Rungta - daughter, Radheshyam Goenka - son and Rajkumari R. Goenka - daughter. It appears that an arbitrator was appointed by the Supreme Court vide order dated 01.11.1991 to settle the dispute as to who would be the legal heir to the estate of late Shri. C.S. Goenka. Probate Suit No.65/85 was also filed wherein the genuineness of the will dated 29.10.1982 of the original deceased assessee C.S. Goenka was held undisputed and the genuineness of the will was conceded on 27.10.1999 by the non applicants therein. The learned arbitrator passed an award holding that the will in favour of Sushila N. Rungta was inoperative and Radheshyam was the sole heir as adopted son. This award was challenged by Sushila N. Rungta in the Supreme Court. On 01.12.2000 the Supreme Court held that the award of the learned arbitrator was inoperative and on the basis of the probated will, Sushila N. Rungta was the legal heir of the deceased C.S. Goenka. Therefore, Sushila N. Rungta made an application before the Supreme Court that she be brought on record as the sole heir and representative of the deceased original assessee C.S. Goenka. On 18.07.2008, the Supreme Court was pleased to allow Interim Application No.15/2008 filed by Sushila N. Rungta and brought her name on record as the legal heir and representative of the appellant i.e Shri. C.S. Goenka. The copies of the above orders and the probate however are not on record so as to guide us in considering and directing the amended prayer as sought for by the petitioners. If the petitioners place the certified copies of the aforesaid orders and probate order on record to the satisfaction of the concerned authorities i.e the respondents / department of Income Tax, we direct that the respondents shall forthwith release 85617 grams of gold, jewellery, cash and other valuable articles as per the panchnama and hand it over to the petitioners being the legal heirs of Sushila N. Rungta. Petitioners i.e Nirajkumar N. Rungta and Bharti Saraf are the son and daughter of Smt. Sushila N. Rungta. Petitioners have to place on record the documentary evidence of they being the true and legal heirs of Sushila N. Rungta in order to seek release of the aforesaid articles to themselves. Not to mention that once the above articles are released into the hands of the petitioners, petitioners shall be liable to wealth tax assessment in respect of the value of the said articles in accordance with law. The present petitioners shall place the appropriate documentation of they being the only legal heirs of Sushila N. Rungta to the satisfaction of the respondents for seeking release of the articles. The seized gold shall be released by the respondents within a period of 6 (six) weeks of furnishing of the required documents by the petitioners.
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