Newsletter: Where Service Meets Reader Approval.
TMI Tax Updates - e-Newsletter
May 8, 2021
Case Laws in this Newsletter:
Income Tax
Customs
Corporate Laws
Securities / SEBI
Insolvency & Bankruptcy
PMLA
Service Tax
Articles
News
Notifications
Circulars / Instructions / Orders
Highlights / Catch Notes
Income Tax
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Bogus LTCG - disallowance of exemption claimed by assessee u/s 10(38) on account of LTCG - there is no live link in the order of SEBI about the transactions of shares of assessee under scrutiny, so such order cannot be read against the assessee in absence of ant corroborative evidence. In fact there is no evidence on record that the assessee made any prearranged transactions. - Additions deleted - AT
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Addition towards ROC expenses - section 35D provides amortization of certain expenses, which are in the nature of capital/intangibles/preliminary expenses, which have been incurred by the assessee in the preliminary stage of the company or in the normal course of business and the assessee is entitled to amortize of expenses over a period of time as per section 35D. Therefore, the AO is directed to allow the ROC expenditure incurred towards increase of share capital as per section 35D - AT
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Reopening of assessment u/s 147 - AO gets jurisdiction to reopen the assessment only after he records the reasons for reopening and thereafter, issues notice u/s 148 within the prescribed time and only on fulfilment of the conditions prescribed therein. None of these conditions have been fulfilled by the AO. No hesitation in holding that the re-assessment proceedings were not initiated validly and therefore, the re-assessment order is set aside. - AT
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Reopening of assessment u/s 147 - it is very clear in view of the detailed explanation filed by the appellant the AO had formed an opinion before passing the original assessment order and the appellant had discharged the evidences to the satisfaction of the assessing officer. Therefore in view of the above compliance the appellant was not in default within the proviso to section 147 with regard to R&D expenses. Therefore the second limb of the reasons recorded under section 147 for reopening fails the test of the said section. - AT
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Addition towards office rent and office maintenance charges - apportionment of expenses to the sister concerns and group companies - When all the assessee's sister companies are only paper companies with no activities conducted during the relevant assessment year it is obvious that the entire expenses incurred towards office rent and office maintenance charges are attributable to the assessee company and therefore these expenses cannot be apportioned to the assessee's sister companies and if at all apportionable it would be negligible. - AT
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Allowable deduction of remuneration paid to the partners u/s 40(b) - selection of the any head of income, more particularly of the head "Profit or gain of business or profession", is nowhere required or envisaged by the Legislature. That is, there is no warrant to select the head of income so far as the computation of the permissible amount of deduction of the remuneration under section 40(b) is concerned. As per Explanation 3 of section 40(b) of the Act, Assessing Officer does not get the jurisdiction to go behind the net profit shown in the Profit & Loss account except to the extent of the adjustments provided in the Explanation 3, nor he is empowered to decide under which head the income is to be taxed. - AT
Customs
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EPCG Scheme - Amendment in Shipping Bills - mention of the EPCG licence number on the shipping bill, mandatory or not - an opportunity must be extended to the petitioner to prove the factum of export through Glovis by way of supporting materials. The burden is, no doubt, heavy and it is for the petitioner to produce material before the authorities to discharge such burden. However such opportunity should be read into the provisions of para 5.7.1 to ensure that genuine and bonafide cases of supporting manufacturers are not denied the benefit of concessional duty. - HC
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Recovery during pendency of litigation - pre-deposit was made - In the light of the categoric statement of the Board to the effect that no coercive action shall be taken for recovery of any balance of disputed dues, once the pre-deposit is made, the present communication has no legs to stand - HC
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Service of order - change of address which was notified too - notice sent to an old address - delay in filing appeal or not - there is no actual ‘service’ or ‘communication’ of the decision/order upon the appellant - Therefore, the date on which the appellant has come to know about the Order-in-Original has to be considered for computing the period of limitation. When computed from such date, the appeal is filed within the time of sixty days. Thus, there is no delay in filing the appeal. - AT
IBC
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Exclusion from the period of CIRP - In the instant case, even though it is found that Regulation 30 C could have been applied for exclusion of 179 days on account of the unprecedented situation created by the Covid 19 pandemic and some of the Financial Creditors opined for fresh publication of form G for the invitation of EOI. But the COC had unanimously decided only for seeking exclusion of 179 days, i.e. from 5 May 2020 to 31 October 2020, for completion of CIRP. But the CoC, under its commercial wisdom, did not prefer for publication of Form-G afresh to invite Expression of Interest. Therefore such a decision of the CoC is not justifiable. - AT
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Initiation of CIRP - existence of debt and dispute or not - The terms and conditions in work order do not say that only if the cranes are put to use, the hiring charges shall be paid. Once based on work order, the equipment on rental basis is availed by respondent and also acknowledged by respondent, the respondent ought to settle the outstanding dues, irrespective of the fact whether the equipment was under utilisation or not - thus the 'debt' and 'default' is proved by the Applicant. - Tri
PMLA
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Offence under PMLA - Former Minister in the Government of Karnataka and his relatives and others - No legal right having been accrued in favour of the petitioners to hold on or to enjoy the proceeds of crime, the source of which cannot be explained by them, the argument of the learned counsel for the petitioners that the attachment proceedings initiated against them are unjust and bad in law is without any substance. - HC
Case Laws:
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Income Tax
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2021 (5) TMI 217
Bogus LTCG - disallowance of exemption claimed by assessee u/s 10(38) on account of LTCG - assessee submits that it is to be noted that the additions in this case is not based on investigation report of either income tax department or other authority or on the statement of entry provider - HELD THAT:- The conclusion drawn by ld CIT(A) is based on mare presumption. In our view, once it is accepted by the assessing officer in his remand report that all the transaction of the assessee that is contract notice/ledger accounts furnished by assessee are matching with the data furnished by the Stock Exchange. And the ld. CIT(A) the also took his view that the basis for making the addition did not survive, the additions cannot be sustained. The ld. CIT(A) sustained the additions merely on the basis of suspicion. There is no evidence on record to suggest that the assessee has availed accommodation entry or beneficiary of penny stock. So far as the allegation of the assessing officer in his second report dated 28.02.2018 is with regards to ban on trading of Bharat Bachubhai Merchant, Director of Nimbus Industries Ltd., by SEBI vide its order dated 30.09.2012 for market manipulation during the Initial Public Offering (IPO) of P. G. Electroplast Ltd., and M. R. Shah, Director of Regency Trust Ltd is concerned, the assessee has purchased shares much prior to the orders of SEBI. Moreover, there is no live link in the order of SEBI about the transactions of shares of assessee under scrutiny, so such order cannot be read against the assessee in absence of ant corroborative evidence. In fact there is no evidence on record that the assessee made any prearranged transactions. Thus, we do not find merit in the order of ld. CIT(A) in sustaining the additions on mere probability. The Hon ble Supreme Court in Umacharan Shah brothers Vs CIT [ 1959 (5) TMI 11 - SUPREME COURT] held that suspicion howsoever strong, may be cannot substitute the place of evidence. Also held in OMAR SALAY MOHAMED SAIT VERSUS COMMISSIONER OF INCOME-TAX, MADRAS [ 1959 (3) TMI 2 - SUPREME COURT] that no additions can be made on the basis of surmises, suspicion and conjecture. - Decided in favour of assessee. Exemption under section 10(2A) - assessee submits that the assessing officer has not allowed the exemption under section 10(2A) in respect of share of profit from the Firm namely Desai Gas Agency , in which the assessee is one of the partner - HELD THAT:- We have seen that the assessee in the computation of income has claimed exempt income of ₹ 1,66,406/- is allowable as exempted under section 10(2A), being income of share received from Firm Desai Gas Agency . The assessing officer instead of examining the facts and the evidences furnished by the assessee clubbed this income with the exempted LTCG claimed by the assessee. CIT(A) also ignored the similar facts and upheld the action of assessing officer. We have seen that the amount of ₹ 1,66,406/- is separate and independent income component, earned by the assessee which is claimed as exempted under section 10(2A). Further we have seen that the assessee has furnished all details particulars of the Firm including the return of income of Firm, details of partners, their PAN, and Circle of assessment of partners. After considering the documentary evidences furnished by the assessee, we find that all the evidences filed by the assessee are in order and that the assessee has earned exempted income of ₹ 1,66,406/-, form the profit of Firm, which is allowable as exempt income under section 10(2A) of the Act - we direct the Assessing Officer to allow full relief to the assessee.
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2021 (5) TMI 216
Addition towards ROC expenses - HELD THAT:- On perusal of the financial statements submitted by the assessee, we find that there is no doubt that the assessee has increased share capital. On perusal of the provisions of section 35D, we find substance in the written synopsis submitted by the ld. AR of the assessee relying on the judgements quoted supra that section 35D provides amortization of certain expenses, which are in the nature of capital/intangibles/preliminary expenses, which have been incurred by the assessee in the preliminary stage of the company or in the normal course of business and the assessee is entitled to amortize of expenses over a period of time as per section 35D. Therefore, the AO is directed to allow the ROC expenditure incurred towards increase of share capital as per section 35D - Decided in favour of assessee. Addition towards expenses for acquisition of subsidiary companies - HELD THAT:- As assessee has filed bills and vouchers in paper book at pages 63 to 80 and the same were placed before the CIT(A) AO. On considering the totality of the facts of the case also remit this back to the file of the AO for verification of bills and vouchers and the same are found in order, the AO is directed to allow these expenses as revenue expenditure for the impugned AY. Accordingly, this ground is allowed for statistical purposes. Addition towards carry forward loss - HELD THAT:- We find that the assessee has not pressed this ground before the CIT(A), but, the same has been pressed before us. Therefore, we restore this ground back to the AO for his factual verification. Thus, this ground of appeal is treated as allowed for statistical purposes.
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2021 (5) TMI 214
Reopening of assessment u/s 147 - which Officer having jurisdiction over the assessee? - HELD THAT:- We find that undisputedly, the re-assessment proceedings were initiated by the ITO Ward 5(3), while the assessment was completed by ITO Ward 11(4). It is also undisputed fact that the ITO Ward 11(4) is the Officer having jurisdiction over the assessee and the assessee had filed her return of income giving her correct address. Therefore, the ITO Ward 5(3) who issued notice u/s 148 had no jurisdiction over the assessee. When this fact was brought to the notice of ITO Ward 5(3), by the assessee, the assessment record was transferred to the ITO Ward 11(4). But even at that point of time, the ITO Ward 11(4) did not choose to record the reasons for reopening or issue notice u/s 148 of the Act to the assessee on her correct address. He chose to proceed from the stage at which ITO Ward 5(3), had transferred the files to him. Therefore, it is clearly without any jurisdiction. AO gets jurisdiction to reopen the assessment only after he records the reasons for reopening and thereafter, issues notice u/s 148 within the prescribed time and only on fulfilment of the conditions prescribed therein. None of these conditions have been fulfilled by the AO. No hesitation in holding that the re-assessment proceedings were not initiated validly and therefore, the re-assessment order is set aside. Decided in favour of assessee.
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2021 (5) TMI 213
TP Adjustment - adjustment on account of AMP expenses - HELD THAT:- As decided in own case [ 2020 (4) TMI 91 - ITAT DELHI ] According to the Rule, under the PSM, combined net profit of the AEs arising from the international transaction has to be determined and thereafter, if incurrence of AMP expenses is to be considered from the value of such international transaction then the combined profit has to be determined from the value of such international transaction. No FAR analysis of AE has been carried out or even demonstrated that any kind of profit has been derived by the AE from the AMP expenses incurred in India. Otherwise also, the profit earned on account of AMP expenses incurred by the assessee by way of economic exploitation of the trademark/brand in India already stands captured in the profit and loss account for the assessee company and the same has duly offered to tax and hence there was no logic to compute or make any Transfer Pricing Adjustment on this score. As rightly observed by the Ld. DRP in its order these issues are covered in assessee s own case for the assessment year 2006-07 to 2013-14 [ 2018 (12) TMI 277 - ITAT DELHI] . Since, the matter stands covered in favour of the assessee and in the absence of any material change in the facts of the case brought to our notice, we hereby direct that the addition be deleted.
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2021 (5) TMI 210
Unexplained bank deposits - admission of additional evidences - assessee explained the source of cash deposits as sale proceeds of the property sold in the capacity of GPA holder - assessee filed a petition for admission of additional evidence along with a copy of sale deed - HELD THAT:- We are of the view that the assessee's request for admission of additional evidence needs to be considered favourably. Accordingly, we admit the additional evidence and remit the matter back to the file of the Ld. CIT(A) to decide the appeal on merits after considering the additional evidence submitted by the assessee. The assessee is directed to submit the necessary information and cooperate with Ld. CIT(A) in disposing the appeal. We may clarify that in case of further failure or default by the assessee before the Ld. Commissioner then in that eventuality the assessee shall not be entitled for any leniency and the Ld. Commissioner shall be at liberty to decide the appeal of the assessee in accordance with law, while considering the peculiar facts and circumstances of the case. - Assessee appeal allowed for statistical purpose.
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2021 (5) TMI 208
TP adjustment - adjustment of interest @12% as arm's length price on receivables from Gulf Batter Co. Ltd. after allowing 60 days credit period and from HBL America Income. HBL Germany GmBH after allowing 180 days credit period - whether AO/TPO have erred by treating receivables from AEs as a separate international transaction? - HELD THAT:- It is sufficiently clear from a perusal of the assessment findings that the impugned ALP adjustment is based on the assessee's details produced in its letter dt. 23-11-2016 containing as well request to adopt the impugned interest rate @12% than 14.75% taken by the Transfer Pricing Officer (TPO). We observe in this backdrop of the facts as to how the assessee could not be taken as an aggrieved party once the impugned adjustment is based on its own computation submitted during the course of assessment. Coupled with this, this tribunals decision in Bechtel India Pvt. Ltd.[ 2017 (5) TMI 965 - ITAT DELHI] holds that such interest on delayed realisation on receivables is an international transaction in itself. We therefore find no reason to interfere with the impugned ALP adjustment in issue. The assessee's former six substantive grounds to this effect are declined. Addition on account of mismatching of tax credit as per form 26AS viz-a-viz its books of accounts - assessee's case is that the very income stands assessed in preceding assessment years and therefore, it amounts to double addition - HELD THAT:- We are of the opinion that in this backdrop of the facts about the instant issue requires factual verification at the Assessing Officer's end so that the impugned sum does not suffer double addition in different assessment years. This 7th substantive ground is taken as accepted for statistical purposes in foregoing terms. Disallowance u/s Section 14A r.w.s. 8D amount included in Section 115JB MAT computation -HELD THAT:- This tribunal in ACIT Vs. Vireet Investments P. Ltd.,[ 2017 (6) TMI 1124 - ITAT DELHI] holds that such Section 14A disallowance does not deserve to be included in Section 115JB MAT computation. We therefore direct the Assessing Officer to delete the impugned MAT addition in foregoing terms.
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2021 (5) TMI 207
Denial of natural justice - impugned order was passed by the ld. CIT(A) without giving proper and sufficient opportunity of being heard to the assessee - HELD THAT:- As the assessee has submitted that the assessee was residing in Bangalore at the relevant time and the authorised representative who presented the assessee's case before the Ld. CIT(A) could not be provided with relevant documentary evidence to support and substantiate his case due to ongoing Covid-19 Pandemic and the lockdown period. As contended that there was thus a sufficient cause for the failure of the assessee to produce the relevant documentary evidence in support of his case and urged that an opportunity may be given to the assessee to produce such evidence by sending the matter back to the ld. CIT(A) for fresh consideration. We find merit in this contention of the learned counsel for the assessee and since the ld. DR has not raised any objection for sending the matter back to the ld. CIT(A) for proper consideration, I set aside the impugned order passed by the ld. CIT(A) and remit the matter back to him for disposing of the appeal of the assessee afresh on merit in accordance with law after giving proper and sufficient opportunity for produce relevant document evidence in support of his case on the issues involved therein. As under taken by the learned counsel for the assessee, the assessee shall make due compliance before the ld. CIT(A) and shall extend all the possible cooperation in order to enable Ld. CIT(A) to dispose of the appeal expeditiously. Appeal of the assessee is treated as allowed for statistical purpose.
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2021 (5) TMI 206
Estimation of turnover of the assessee's benami firms - A.O. estimated the income of all the benami firms @ 5% of their aggregate turnover - HELD THAT:- Assessee is holding 95% share in all the 10 firms. The so-called partners of those firms have also conceded that they are only employees of the assessee and not the partner of the assessee. The assessee has also not brought out any materials on record to establish that the profits of the firms were distributed to the partners of the firm according to their profit-sharing ratio i.e., in the ratio of the capital held by the assessee and the other partners - it is apparent that all the ten partnership firms are the assessee's benami firms. Therefore, We are of the view that the Learned Revenue Authorities had rightly treated all the relevant firms as the assessee's benami firms. As these firms have also not maintained their books of accounts properly and produced cogent evidence for the expense incurred before the Ld. Revenue Authorities. Under these circumstances, the Learned Revenue Authorities has estimated 5% of the aggregate turnover of all the relevant firms as the income of the assessee which We are of the view is quite reasonable and fair. Therefore, we do not find it necessary to interfere with the order of the Learned Revenue Authorities on this issue. Disallowance u/s. 40(a)(ia) - Interest paid by the assessee to various entities without deducting TDS - HELD THAT:- At this stage, the Ld. AR could not controvert to the findings of the Learned Revenue Authorities on this issue. In this situation, We are of the view that the Learned Revenue Authorities had rightly invoked the provisions of section 40(a)(ia) of the Act which is in accordance with the provisions of the Act. Hence, we do not find it necessary to interfere with the orders of the Learned Revenue Authorities on this issue also. Therefore, Groundraised by the assessee are also devoid of merits.
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2021 (5) TMI 205
Reopening of assessment u/s 147 - foreign exchange fluctuation loss disallowance and R D expenses disallowance - HELD THAT:- There is no case to have a different opinion on the basis of the details called for during the course of original assessment proceedings and even on facts there is no case as most the of the expenses are recurring and incurred by the appellant year after year as evident from certain agreements filed. While passing the original order u/s. 143(3), the AO did not ask for any further evidences from the appellant and proceeded not to take any adverse view in the matter as discussed above pertaining to R D expenses Therefore, it is very clear in view of the detailed explanation filed by the appellant the AO had formed an opinion before passing the original assessment order and the appellant had discharged the evidences to the satisfaction of the assessing officer. Therefore in view of the above compliance the appellant was not in default within the proviso to section 147 with regard to R D expenses. Therefore the second limb of the reasons recorded under section 147 for reopening fails the test of the said section. The assessee has claimed its objections to the notice u/s. 148 were not disposed off by the AO even after the onus cast on the AY by the Apex Court in the case of CIT Vs. GKN Drive shafts.[ 2002 (11) TMI 7 - SUPREME COURT] No infirmity in the order of the CIT(A) in quashing the order of AO passed u/s. 147 of the Act, as the CIT(A) elaborately discussed and analysed the issue in dispute with various case law at length in his order. Accordingly, upholding the order of the CIT(A), we dismiss the grounds raised by the revenue.
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2021 (5) TMI 204
Addition towards office rent and office maintenance charges - apportionment of expenses to the sister concerns and group companies - CIT(A) partially sustained the addition by estimating the disallowance @ 50% of the total expenditure incurred towards rent paid for office premises and office maintenance expenses - HELD THAT:- Submissions of AR on that regard could not be successfully controverted by the Ld. Revenue Authorities either with any material evidence or from the books of account of the assessee company or from the particulars of the assessee's subsidiary companies. Therefore, it appears that all the subsidiary companies of the assessee are only existing on paper and not conducting any significant activities. CIT(A) has also not brought out any categorical finding to controvert the same in his Order. When all the assessee's sister companies are only paper companies with no activities conducted during the relevant assessment year it is obvious that the entire expenses incurred towards office rent and office maintenance charges are attributable to the assessee company and therefore these expenses cannot be apportioned to the assessee's sister companies and if at all apportionable it would be negligible. No merit in the addition made and sustained by the Ld. Revenue Authorities in the hands of the assessee company by disallowing the portion of expenditure incurred by the assessee company towards rent of office premises and office maintenance charges. Hence, We hereby direct the Ld. A.O. to allow the entire amount as allowable deduction - Decided in favour of assessee.
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2021 (5) TMI 202
Additional depreciation not claimed in the original return or not claimed through revised return, but, was claimed during the course of assessment proceedings - HELD THAT:- As per the decision in the case of M/s Goetze (India) Ltd. vs. CIT [ 2006 (3) TMI 75 - SUPREME COURT] the decision was limited to the powers of the assessing authority and does not impinge on the power of the Income-tax Appellate Tribunal u/s 254. We, therefore, direct the AO to adjudicate the issue of additional depreciation which was not claimed by the assessee either in the original return or during the revised return on the basis of the fact and law after giving due opportunity of being heard to the assessee. We hold and direct accordingly. The grounds raised by the assessee are accordingly allowed for statistical purposes.
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2021 (5) TMI 201
Employees contribution to provident fund as covered by the provisions of section 43B - HELD THAT:- Gujarat High Court in the case of CIT Vs. Gujarat State Road Transport Corporation [ 2014 (1) TMI 502 - GUJARAT HIGH COURT] whereby the issue of contribution of employees towards provident fund has been adjudicated against the assessee. The Hon`ble Court held that Contribution of employees towards provident fund does not come under the purview of section 43B of the Act . - Decided against assessee.
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2021 (5) TMI 200
Allowable deduction of remuneration paid to the partners u/s 40(b) - Disallowance of remuneration of partners - treating interest on FD and interest on income tax refund as income from other sources - HELD THAT:- The issue raised by the assessee before us in no longer res integra. The assessee`s issue is covered by the judgment of the Jurisdictional Hon'ble Gujarat High in the case of CIT V/s J.J. Industries [ 2013 (7) TMI 577 - GUJARAT HIGH COURT] , wherein it was held. that interest on fixed deposits held. by a firm for its business purpose is part of business income and it will be included in Book Profit . For the purpose of Section 40(b)(v) read with Explanation there cannot be separate method of accounting for ascertaining net profit and/or book profit. Therefore, the interest income earned by the assessee-firm from the fixed deposit receipts should. not be ignored for the purpose of working-out the book profit to ascertain the ceiling of the partners' remuneration. For the purpose of ascertaining such ceiling of the partners' remuneration on the basis of book profit, the profit shall be in the profit and loss account and is not to be classified in the different heads of income under Section 40 of the Act. The interest income, therefore, cannot be excluded for the purposes of determining the allowable deduction of remuneration paid to the partners under Section 40B of the Act. A bare reading of the Explanation 3 of section 40(b) of the Act, make it evident that selection of the any head of income, more particularly of the head Profit or gain of business or profession , is nowhere required or envisaged by the Legislature. That is, there is no warrant to select the head of income so far as the computation of the permissible amount of deduction of the remuneration under section 40(b) is concerned. As per Explanation 3 of section 40(b) of the Act, Assessing Officer does not get the jurisdiction to go behind the net profit shown in the Profit Loss account except to the extent of the adjustments provided in the Explanation 3, nor he is empowered to decide under which head the income is to be taxed. The net profit as shown, is not to be allocated into different components. Also see MD. SERAJUDDIN BROTHERS VERSUS COMMISSIONER OF INCOME TAX [ 2012 (8) TMI 104 - CALCUTTA HIGH COURT] - Thus we uphold. the contention of the assessee and therefore we delete the addition - Decided in favour of assessee.
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Customs
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2021 (5) TMI 224
Exemption from IGST - Oxygen concentrators imported by the State Government - N/N. 4/2021 - Customs dated 03.05.2021 - HELD THAT:- notification has exempted imposition of IGST on oxygen concentrators imported by the State Government, or via any entity, relief agency or statutory body, authorised by the State Government. This exemption, according to the learned ASG, is, presently, available till 30.06.2021. Since the respondent has gone this far, it could move further, and extend the exemption, to even individuals, to enable them to obtain imported oxygen concentrators by way of a gift, albeit, without having to pay IGST. List the matter on 06.05.2021.
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2021 (5) TMI 222
EPCG Scheme - Amendment in Shipping Bills - mention of the EPCG licence number on the shipping bill, mandatory or not - right to seek to explain, by virtue of other contemporaneous and supporting evidences, the factum of export - HELD THAT:- No doubt requires the mention of both the name of the supporting manufacturer as well as the EPCG authorization number on the shipping bill and in this case both are absent. However, the requirements, though mandatory, are capable of being satisfied constructively as well and non-mention is not fatal to the claim of concessional rate of duty. The provisions of Section 149 of the Customs Act provides a forum to the petitioner to establish this by way of contemporaneous records. Thus, an opportunity must be extended to the petitioner to prove the factum of export through Glovis by way of supporting materials. The burden is, no doubt, heavy and it is for the petitioner to produce material before the authorities to discharge such burden. However such opportunity should be read into the provisions of para 5.7.1 to ensure that genuine and bonafide cases of supporting manufacturers are not denied the benefit of concessional duty. The impugned order is a non-speaking order that has not adverted to the justification put forth by the petitioner and is hence set aside - Petition allowed.
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2021 (5) TMI 221
Principles of natural justice - seeking Mandamus directing the respondents to pass a speaking order in terms of Section 17 (5) of the Customs Act, 1962 in respect of the Bill of Entry within the time frame as fixed by this Court - HELD THAT:- Respondents would not object to the grant of Mandamus and would assure the Court that a speaking order as prayed for will be passed within a period of six (6) weks from today. As the mandamus sought for stands achieved and nothing further survives in this writ petition, the same is disposed as aforesaid.
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2021 (5) TMI 220
Recovery during pendency of litigation - pre-deposit was made - Circular No.1053/2/2017-CX dated 10.03.2017 - Absolute Confiscation - imported branded Watches - HELD THAT:- The Central Board of Excise and Customs has specifically addressed the question of recovery during pendency of litigation in the said circular and has held that Once the amount is paid, no coercive action shall be taken for recovery of the balance amount during the pendency of the appeal proceedings before these authorities. In the light of the categoric statement of the Board to the effect that no coercive action shall be taken for recovery of any balance of disputed dues, once the pre-deposit is made, the present communication has no legs to stand - petition disposed off.
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2021 (5) TMI 209
Service of notice - change of address which was notified too - notice sent to an old address - delay in filing appeal or not - Classification of imported goods - HELD THAT:- The Note given by the Administrative Officer of the Custom House, Chennai also shows that there were instructions given for verification of the new address of the appellant. There is nothing to disbelieve these documents. After intimating the change of address in July 2012, the Department has issued the Order-in-Original in February 2013 to the old address of the appellant. As per Section 128 as well as Section 153 of the Customs Act, 1962, any decision/order has to be communicated/served upon the person to whom it is addressed. In the instant case, there is no actual service or communication of the decision/order upon the appellant - Therefore, the date on which the appellant has come to know about the Order-in-Original has to be considered for computing the period of limitation. When computed from such date, the appeal is filed within the time of sixty days. Thus, there is no delay in filing the appeal. The rejection of the appeal on the ground of time-bar cannot sustain - matter is remanded to the Commissioner (Appeals), who shall decide the case on merits - Appeal allowed by way of remand.
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Corporate Laws
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2021 (5) TMI 225
Recall of order - seeking prosecution of the Respondents for allegedly committing perjury in relation to the proceedings before this Court by making false and contradictory averments in the counter affidavit - HELD THAT:- There cannot be any debate on the proposition raised by Mr. Savla that a review petition does not lie under the Code of Criminal Procedure, 1973, except for clerical and arithmetical errors. However, after much cogitation, the judgement deserves to be recalled for the reason set out hereinafter - Finding that the allegations of perjury levelled in the present petition directly or indirectly touched upon the issues pending before the NCLT, this Court was of the view that the issues raised in the present petition ought to be raised before the NCLT, being intrinsically linked. Application allowed.
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2021 (5) TMI 218
Non-inclusion of principles of natural justice especially audi alteram partem (giving opportunity of hearing to the other side) in the Master Directions on Fraud dated 01.07.2016 - Section 35-A of the Banking Regulation Act, 1949 - borrower Company is holder of fraudulent account or not? - resolution of the Fraud Identification Committee (FIC) dated 31.07.2019, whereby both the JLF and the FIC have classified the account of M/s. B. S. Limited, of which the petitioner was the former Chairman and Managing Director, as fraud and willful defaulter . HELD THAT:- The argument of urgency is belied by the record. For, the Company s account was declared as NPA on 29.06.2016; the JLF declared the Company s account as fraud on 15.02.2019, yet the FIC did not declare the Company s account as fraud till 31.07.2019. Thus, there is a gap of 4 months between the decision of the JLF and the FIC. Hence, obviously, the decision to declare the account as fraud has not been taken on an urgent basis - Furthermore, if the requirement of principle of nature justice is not read into the Master Circular, it would suffer from vagueness. For, on the one hand, Clauses 8.9.4 and 8.9.5 of the Master Circular prima facie seem to deny the opportunity of hearing to the borrower. Yet, Clause 8.12.1 of the Master Circular clearly states that the procedure for declaring a borrower as a willful defaulter has to be followed. In the case of Jah Developers (supra), the Hon ble Supreme Court has already declared that prior to declaring a borrower as a willful defaulter, an opportunity of hearing has to be given. If the principle of audi alteram partem were not read into Clauses 8.9.4 and 8.9.5 of the Master Circular, there would be a contradiction between the procedure adopted for declaring a borrower as a willful defaulter , and the procedure adopted for declaring an account as fraud . Obviously, the Master Circular could not speak in self-contradictory terms. Therefore, to erase the self-contained contradiction, and to save the Master Circular from the virus of vagueness, the principles of natural justice perforce would have to be read into Clauses 8.9.4 and 8.9.5 of the Master Circular. Since the right to livelihood is part and parcel of fundamental right to life under Art. 21 of the Constitution of India, the fundamental right can be deprived only by a reasonable procedure established by law. However, to deny the said fundamental right without giving an opportunity of hearing would be highly unreasonable, unfair and unjust. Thus, the Master Circular, as interpreted by the RBI, would be in violation of Article 21 of the Constitution of India. Therefore, to save Clauses 8.9.4 and 8.9.5 of the Master Circular from being declared as unconstitutional, it is essential to read the principle of natural justice into the said Clauses - since the Master Circular also imposes a duty on the banks to lodge a complaint with the CBI / criminal investigating agency within a short period, after detecting / declaring an account as fraud , obviously, the borrowing Company, its Promoter / Director would quickly be embroiled in criminal investigation and in criminal proceedings. Such involvement in criminal proceedings not only affects the social standing of an individual and the goodwill of a Company, but also forces an individual to spend money, to invest energy, and to go through the rigmarole of a criminal trial. Therefore, the classification of an account as fraud has devastating impact on the life of a person. The right to be heard has been given to third parties, such as builders, warehouse/cold storage owners, motor vehicle/ tractor dealers, travel agents, etc. and professionals such as architects, valuers, chartered accountants, advocates, etc., if they have played a vital role in sanction/disbursement, or facilitated for preparation of fraud. Hence, while those who are allegedly the peripheral accomplices are granted an opportunity of hearing, the main actor is denied the right to speak and to defend his position. Considering the grave civil consequences and penal action, which would be followed as a result of classifying a borrower as a fraudulent borrower , or a holder of a fraudulent account , it is imperative that principles of natural justice must be read into Clauses 8.9.4 and 89.9.5 of the Master Circular - Fair play in governance is the gravitational force which binds the entire State. Therefore, before a person or entity is obliterated, or is subjected to civil and penal consequences, the person or entity must be given an opportunity of hearing. Without giving an opportunity of hearing, without giving an opportunity to explain the intricacies of the accounts, or of the business dealings, to denounce a person is to act unfairly, unjustly, unreasonably, and arbitrarily. Even in an administrative action, justice should not only be done, but also must appear to be done to the satisfaction of all the parties. Therefore, the principles of audi alteram partem, howsoever short, have to be applied before declaring a party as a fraudulent borrower , or as a holder of fraudulent account . Once the JLF was of the opinion that further clarification is required from the Forensic Auditor, once it is in the process of taking a decision, once it has decided to wait till further clarification is submitted, the JLF is not justified in concluding that the account be treated as fraud . In fact, the JLF was legally required to wait for further clarification, or non-clarification from the Forensic Auditor - A bare perusal of the resolution of FIC, dated 31.07.2019, also reveals that the said resolution is based on the Report submitted by Dr. K.V. Srinivas, IRP. However, there is no evidence available on record to establish the fact that a copy of the said Report was furnished to the borrower Company, or to the petitioner. Thus, neither the borrower Company, nor the petitioner, nor any other Director was given a chance to explain, or to challenge the finding of the said Report. A copy of the said Report has not been placed even before this Court by the respondents. The principle of audi alteram partem, part of the principles of natural justice, is to be read in Clause 8.9.4 and 8.9.5 of the Master Circular - the decision, dated 15.02.2019, passed by the JLF, and the resolution dated 31.07.2019, passed by the FIC are, hereby, set aside - the JLF is directed to give an opportunity of hearing by furnishing copies of both the Reports, namely the Forensic Auditor Report, dated 06.04.2018 and the subsequent Report submitted by Dr. K.V. Srinivas, IRP, to the petitioner, and to the OL - the JLF is directed to give an opportunity of personal hearing both to the petitioner and to the OL before taking any decision on the issue whether the account should be classified as fraud or not? - after the JLF has taken its decision, the FIC is directed to pass its resolution whether the decision of the JLF should be confirmed or not? Application disposed off.
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Securities / SEBI
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2021 (5) TMI 203
Diversion of funds - Show cause notice for violation of the PFUTP Regulations, 1995 and 2003 - WTM found that misleading statement was made by the appellant which was violative of Regulation 5 of the PFUTP Regulations, 1995 - HELD THAT:- We are of the opinion that there has been an inordinate delay in the issuance of the show cause notice. Even though there is no period of limitation prescribed in the Act and Regulations in the issuance of a show cause notice or for completion of the adjudication proceedings, the authority is required to exercise its powers within a reasonable period as held recently in Adjudicating Officer, Securities and Exchange Board of India vs. Bhavesh Pabari [ 2019 (3) TMI 197 - SUPREME COURT] In the instant case, we are of the opinion that the power to adjudicate has not been exercised within a reasonable period and therefore no direction could be imposed. In the instant case there was no diversion of funds in the issuance of the GDR. We also find that no finding has been given with regard to any violation in the procedure adopted by the appellant in the issuance of the GDR. The only charge that remains was nondisclosure of the Account Charge Agreement before the stock exchange. We find that nothing has been brought on record to indicate as to how this non-disclosure was violative of the Listing Agreement. We also find that no misleading statement was made by the appellant with regard to the subscription of the GDR issue. Considering the fact that there has also been an inordinate delay in the issuance of the GDR the order passed by the WTM debarring the appellant from accessing the securities market for a period of one year cannot be sustained in the peculiar facts and circumstances of the present case and is therefore quashed. The appeal is allowed
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Insolvency & Bankruptcy
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2021 (5) TMI 215
Exclusion from the period of CIRP - exclusion of period commencing from 5 May 2020 till 31 October 2020, from the CIRP, to provide the benefit under Regulation 40 C - Section 12 (2) of the Insolvency and Bankruptcy Code, 2016 - HELD THAT:- Based on Regulation 40C, it is clear that the Regulator, the IBBI brought this Regulation to meet the eventualities of the Covid 19 pandemic. It is stated that the period of lockdown imposed by the Central Government in the wake of the Covid-19 outbreak shall not be counted for the timeline for any activity that could not be completed due to such lockdown about a Corporate Insolvency Resolution Process - In the instant case, the IRP/RP conducted the CIR Process in the timeline with the provisions of the Code and the Regulations and, when required, invoked Regulation 40 C. The RP doesn't need to invoke Regulation 40 C as a matter of routine. Regulation 40 C provides exclusion of the timeline for completion of CIRP during the Covid-19 outbreak for any activity that could not be completed due to such lockdown. It excludes the timeline for the activities that could not be performed due to the lockdown during the Corporate Insolvency Resolution Process. On perusal of the minutes of the CoC, it appears that the RP apprised the CoC about the legal options available either to seek an extension of the timeline for submission of Resolution Plan or to make the decision for publication of fresh Form-G. It was the CoC's commercial decision that no extension of time for submission of Resolution Plan should be done and RP was directed to expedite the valuation process and check the feasibility and viability of the Resolution Plan already submitted and present the eligible Resolution Plan before the CoC for consideration. -In its commercial wisdom, the CoC discussed the viability and feasibility of the Resolution Plan and had taken such a decision which is pending consideration before the Adjudicating Authority. In the instant case, even though it is found that Regulation 30 C could have been applied for exclusion of 179 days on account of the unprecedented situation created by the Covid 19 pandemic and some of the Financial Creditors opined for fresh publication of form G for the invitation of EOI. But the COC had unanimously decided only for seeking exclusion of 179 days, i.e. from 5 May 2020 to 31 October 2020, for completion of CIRP. But the CoC, under its commercial wisdom, did not prefer for publication of Form-G afresh to invite Expression of Interest. Therefore such a decision of the CoC is not justifiable. The decision taken by the Adjudicating Authority needs no interference - Appeal dismissed.
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2021 (5) TMI 212
Maintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its dues - Operational Creditors - existence of debt and dispute or not - HELD THAT:- Upon hearing submissions and perusal of the documents placed before this Adjudicating Authority, it is seen that there is clear pre-existing dispute between the parties. It is an evident that the Pre-existing dispute from the set of emails exchanges filed along with reply. Further, the goods supplied by operational creditor have lot of mismatch as highlighted in the email between the parties. A few were replaced by Applicant as reflected in the emails. The total picture emerging from pleading and documents is that there has been a lot of discussions, replacement of goods and issue of mismatch of goods as earlier as email dated 27.08.2018 onwards. The Respondent has also filed copy of email dated 22.02.2019 in respect of loss faced and dissatisfaction of customer due to mismatch of casting valves. Further, by email dated 07.03.2019, the respondent has sought clarification regarding delayed supply and replacement of wrong supply. Application dismissed.
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2021 (5) TMI 211
Maintainability of application - initiation of CIRP - Corporate Debtor defaulted in payment of dues - Operational Creditor - existence of debt and dispute or not - existence of debt and dispute or not - time limitation - HELD THAT:- Pursuant to the demand made by operational creditor 08.10.2019, the corporate debtor sent emails on 08.08.2019 and 17.08.2019 questioning as to on what basis the claim was made from 21.07.2019 to 16.08.2019 though the work was completed as early as 21.07.2019 and thereby denied liability arising out of the second work order dated 17.07.2019. The operational creditor has not furnished the reason for the claim on the aforesaid period. The operational creditor had manipulated second log book by forging signatures and compelled the authorized person of the corporate debtor to sign in the manipulated log book - On 17.11.2020, the corporate debtor sent a reply legal notice denying the liability to the tune of ₹ 42,02,000/- as claimed by the operational creditor. Inspite of raising disputes over the second tax invoice by email communications, the operational creditor filed an affidavit on 21.01.2020 before this Tribunal stating that the corporate debtor has not raised any dispute with respondent in respect of the debt. Upon perusal of pleadings and documents, it is clear that there is outstanding debt due and payable by Corporate Debtor to Applicant towards hiring charges of cranes. The terms and conditions in work order do not say that only if the cranes are put to use, the hiring charges shall be paid. Once based on work order, the equipment on rental basis is availed by respondent and also acknowledged by respondent, the respondent ought to settle the outstanding dues, irrespective of the fact whether the equipment was under utilisation or not - thus the 'debt' and 'default' is proved by the Applicant. Application admitted - moratorium declared.
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PMLA
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2021 (5) TMI 219
Offence under PMLA - Former Minister in the Government of Karnataka and his relatives and others - Prevention of Corruption Act, 1988 - Correctness and legality of the proceedings initiated against them under sections 3, 4 and 8(5) of the Prevention of Money Laundering Act, 2002 - predicate offence or not - proceeds of crime - Attachment/confiscation of properties - offences which are alleged to have been committed prior to 01.06.2009 - HELD THAT:- Petitioners appear to have put forward the plea of post facto law on the premise that the acts constituting the offences alleged against them were perpetrated prior to the amendment of the schedule to the PML Act and therefore, the action initiated against them falls within the mischief of Article 20(1) of the Constitution of India. This contention, in the factual setting of the case, is totally misplaced and misconceived and appears to have been canvassed by misconstruing the provisions of sections 3, 2(1)(u) and the Schedule appended to the PML Act. No-doubt, it is true that the Schedule to the PML Act was amended by Act 21 of 2009 and the various offences specified therein came to be included therein with effect from 1.06.2009. Nonetheless, in the instant cases, as on the date of initiation of action against petitioners, be it under section 3 or under section 5 of the PML Act, these provisions were very much there in the statute book. The Schedule to the PML Act of 2002 was amended by Act 21 of 2009 and section 13 of the Prevention of Corruption Act namely criminal misconduct by a public servant and sections 419, 420, 465, 468, 471, 120B of IPC came to be inserted in the schedule with effect from 01.06.2009. As a result, as on the date of initiation of the proceedings against the petitioners, the above offences were already included in the Schedule. But the thrust of the arguments of the learned Counsel for the petitioners is that the proceeds of crime as defined under section 2(1)(u) of the PML Act is referable to the offences specified in the Schedule and since section 13 of the PC Act and the offences under IPC (predicate offences) came to be inserted in the Schedule by way of amendment only on 01.06.2009, the petitioners cannot be prosecuted for the acts and events that had taken place earlier to the insertion of those offences as it would take away the protection granted to the petitioners under Article 20(1) of the Constitution of India. From the plain reading of section 3 read with section 2(1)(u) of the PML Act, it is clear that what is made punishable under section 3 is the activity connected with the proceeds of crime either by getting oneself involved in the process or activity connected thereto or directly or indirectly attempting to indulge or knowingly assist or knowingly be a party to the alleged activities and projecting it as untainted property, whereas the components of the offences under section 13 of the PC Act and Sections 120B, 419, 420 and other IPC offences are entirely different. The prosecution under section 3 of the PML Act, by no stretch of imagination, could be equated with the prosecution under section 13 of the PC Act or other offences specified in the Schedule namely IPC or other laws. They are distinct and separate offences. Prosecution under section 3 of PML Act is not based on the outcome of the trial of the offenders under section 13 of the PC Act. No subject has an inviolable right to enjoy the wealth acquired by him by illegitimate means, the legitimate source of which cannot be explained by him. That being the object and purpose sought to be effectuated by section 5 and 8 of the PML Act and a well oiled machinery having been provided with all safeguards to protect the right and interest of the offender as well as those who are not parties to the predicate offence, there is absolutely no basis for the petitioners to seek quashment of the attachment and consequent confiscation proceedings initiated against them on the purported plea that the same is violative of Article 20(1) of the Constitution of India - No legal right having been accrued in favour of the petitioners to hold on or to enjoy the proceeds of crime, the source of which cannot be explained by them, the argument of the learned counsel for the petitioners that the attachment proceedings initiated against them are unjust and bad in law is without any substance. Petition dismissed.
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Service Tax
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2021 (5) TMI 223
Recovery of admitted dues of service tax to be paid by the petitioners - petitioner would fairly state that the arrears are admitted and the orders of assessment giving rise to such demands have attained finality - HELD THAT:- In light of the fact that the impugned notice is only for collection of admitted dues that have become final and no legal flaw or infirmity has been raised in this regard, this writ petition has no merit and is dismissed.
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