TMI Tax Updates - e-Newsletter
June 15, 2024

Case Laws in this Newsletter:

GST Income Tax Customs Insolvency & Bankruptcy FEMA PMLA Service Tax Central Excise CST, VAT & Sales Tax

Articles

1. Notification extending the period of limitation for issuance of Show Cause Notice upheld

   By: Bimal jain

2. Mark the Due dates for the Company Annual Filing FY-2023-2024

   By: Ishita Ramani

3. APPROVAL UNDER SECTION 153D OF INCOME TAX ACT, 1961 FOR ASSESSMENT IN CASES OF SEARCH OR REQUISITION

   By: DR.MARIAPPAN GOVINDARAJAN

4. Delay in filing an appeal could be condoned if the appellant is prevented by sufficient cause

   By: Bimal jain

News

1. Annual Survey of Unincorporated Sector Enterprises (ASUSE) Results for 2021-22 and 2022-23

2. India’s total exports estimated to grow at 10.25 % in May 2024; cumulative overall exports during April-May 2024 estimated to grow at 9.21%

3. Index Numbers of Wholesale Price in India for the Month of May, 2024 (Base Year: 2011-12)

Notifications

Customs

1. 09/2024 - dated 13-6-2024 - ADD

Seeks to impose Anti-dumping duty on import of ‘Poly Vinyl Chloride Paste Resin’ from China PR, Korea RP, Malaysia, Norway, Taiwan and Thailand for 6 months, pursuant to final findings issued by DGTR.

GST - States

2. CCT/26-2/2024-25/82/993 - dated 13-6-2024 - Goa SGST

Supersession of Notification No. CCT/26-2/2018-19/79/2777 dated 16th December, 2022

Circulars / Instructions / Orders

SEBI

1. SEBI/HO/MRD/MRD-PoD-3/P/CIR/2024/82 - dated 14-6-2024

Modification in Framework for Offer for Sale (OFS) of Shares to Employees through Stock Exchange Mechanism

Highlights / Catch Notes

GST

• Refund claim denied for GST assessment at 18% instead of 5% by KG Foundation. Recipient not paid the GST, petition dismissed.

  Case-Laws - HC : The High Court dismissed a petition regarding a refund claim made by the recipient of services supplied by KG Foundation. The court held that GST is imposed on construction services on a forward charge basis on the service provider, in this case, KG Foundation. The court accepted the contention that the services were provided by KG Foundation and not the petitioner, making the petition not maintainable. The petition was dismissed.
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• HC: Levy of tax, interest, and penalty on CMWSSB for supplying purified water. Order remanded for reconsideration.

  Case-Laws - HC : HC considered levy of tax, interest, and penalty on CMWSSB for supplying purified water. HC found issues with adjudication: 1) Misinterpretation of purified water supply, not exempt; 2) Lack of details on supply values through different means. HC remanded the matter for reconsideration, requiring petitioner to remit Rs. 3 crores within six weeks. Petition disposed off by way of remand. Key legal terms: adjudication, exemption, composite supply, CGST, SGST, remand.
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• Argument that respondent failed to provide hearing opportunity due to portal issues rejected. Petitioner's tax credit shortfall upheld. Petition dismissed.

  Case-Laws - HC : The High Court addressed the issue of violation of natural justice due to the respondent's failure to provide a personal hearing opportunity. The petitioner faced difficulties with the online portal, resulting in the inability to upload eligible input tax credit. The court noted a shortfall in maintaining books of account for claiming input tax credit. The respondent considered relevant sections of the CGST Act and upheld the obligation to pay interest on the total tax liability. Referring to a previous judgment, the court dismissed the petitioner's contentions, ruling in favor of the respondent. The petition was ultimately dismissed.
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• Violation of natural justice, lack of reasoning in orders, fraud by tax consultant. Orders set aside for re-adjudication.

  Case-Laws - HC : The High Court found a violation of natural justice principles due to lack of reasoning in orders of Assistant Commissioner and GST officer. The orders did not address the petitioner's claim of fraud by tax consultant, lacked essential details, and showed non-application of mind. The orders were set aside and remitted for re-adjudication of the Show Cause Notice and petitioner's replies. The petition was disposed of.
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Income Tax

• High Court Allows Late Appeal on Assessment Order, Stresses Natural Justice Concerns in Tax Proceedings.

  Case-Laws - HC : The High Court considered the validity of an assessment order u/s 143(3) r/w sec 144B, focusing on the alleged violation of natural justice principles. The petitioner filed a writ petition after 30 days from the order date. The court noted that prior notices were issued u/s 143(2) and 142(1), and the petitioner had responded. Despite knowing the deadline, the petitioner sought an adjournment, extending the response deadline. The petitioner attempted to submit a response after office hours, failing to demonstrate prejudice from the assessing officer's actions. The court found the order appealable and, despite no proven prejudice, granted the petitioner liberty to appeal within 15 days with a condonation request. The appellate authority must hear and decide the appeal within 6 weeks, considering the petitioner's response and grounds.
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• Petitioner's delay in filing tax return for AY 2022-23 due to accountant's illness condoned. Genuine hardship recognized.

  Case-Laws - HC : The High Court rejected the application for condonation of delay u/s 119 (2) (b) in filing income tax returns u/s 139 (1) or 139 (4) for AY 2022-23. The petitioner's senior accountant's illness and subsequent resignation caused delay in finalizing accounts. The Board alleged willful negligence, but lacked evidence. The Court found the delay due to unforeseen events, condoned it u/s 119 (2) (b), and allowed filing within 15 days. The order was set aside due to genuine hardship, emphasizing a justice-oriented approach.
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• Penalty notices must clearly state the offense committed by the assessee. Failure to do so can lead to cancellation of penalties.

  Case-Laws - AT : The Appellate Tribunal considered two issues: Penalty u/s 271(1)(c) and u/s 270A. For the first, the Tribunal found the penalty notice defective as it did not specify the offense committed by the assessee, following the precedent set in Mohd. Farhan A Shaikh. The penalty u/s 271(1)(c) was directed to be deleted. Regarding penalty u/s 270A for misreporting income, the Tribunal noted the vague show cause notice lacking specific sub-clauses under section 270A(9). Since the AO made ad hoc disallowances without clear mention of sub-clauses, the assessee qualified for immunity u/s 270A(6)(b). Citing SCHNEIDER ELECTRIC SOUTH EAST ASIA, the Tribunal canceled the penalty u/s 270A due to the vague notice. Both decisions favored the assessee.
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• Tribunal Overturns Unwarranted Additions: Legitimate Transactions and Interest-Free Loans Upheld.

  Case-Laws - AT : The Appellate Tribunal addressed two key issues. Firstly, regarding the addition u/s 68, it was found that the investors' transactions were genuine, evidenced by banking records and supporting documents. The burden of proof shifted to the AO, who failed to provide evidence of wrongdoing. Some investors responded to notices, further validating the transactions. The AO's claim of cash deposits was disproven, leading to deletion of the addition. Secondly, the notional interest added lacked legal basis as the loans were interest-free and no deduction was claimed. The absence of a business connection with the borrower precluded the addition. Citing precedent, the Tribunal upheld the deletion of the notional interest addition. Ultimately, the appeal by the assessee was allowed.
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• ITAT directed fresh assessment u/s 263 for FMV of shares. Existing shareholders not taxable. Pr.CIT's revisional action unjustified.

  Case-Laws - AT : The ITAT directed the AO to conduct a fresh assessment u/s 263 to determine the Fair Market Value (FMV) of shares issued u/s 56(2)(viib). Existing shareholders received substantial shares at a premium, with only a few new subscribers. Citing a precedent, it was found that taxing excessive premium on shares issued to existing shareholders is not applicable as no income accrues to them. The AO's actions were not erroneous or prejudicial to revenue. The Pr.CIT's revisional action lacked jurisdiction under Section 263, leading to the appeal being allowed, canceling the revisional order and restoring the AO's decision.
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• Tribunal Overturns Disallowance of Club Expenses, Citing Misclassification as Personal Instead of Business-Related.

  Case-Laws - AT : The Appellate Tribunal considered the disallowance of club expenses to determine if they were incurred for business purposes. It held that the Assessing Officer's addition based on the expenses being personal was erroneous. As a company, the assessee would not have personal expenses. The Tribunal emphasized that a company, as a juristic person, does not have personal expenses like individuals. The High Court decision in Sayaji Iron & Engg.Co. vs CIT supported this view, stating that a company is a distinct assessable entity. The Tribunal found that the lower authorities failed to assess whether the expenses were incurred in the course of business. The CIT(A)'s findings lacked specificity on the nature of the expenses, and a mere assertion of personal nature without proper examination was insufficient. The Tribunal allowed the assessee's appeal, emphasizing the legal provisions of u/s 40(c) and u/s 40A(5) to support its decision.
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• Assessment reopened u/s 147 for undisclosed income source of property investment. AO lacked jurisdiction for additional tax.

  Case-Laws - AT : The Appellate Tribunal considered the issue of reopening assessment u/s 147 based on the belief that the investment in a property was from undisclosed income. However, the assessee provided evidence that the investment was from disclosed sources. The AO did not challenge this but made an independent addition u/s 56(2)(vii)(b) for the property's valuation difference. The Tribunal held that since the AO did not question the source of investment, he lacked jurisdiction to make the additional assessment. The AO's order u/s 144 r.w.s. 147 was deemed invalid, and the appeal was allowed.
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• Tribunal Overturns PCIT's Order for Lack of Independent Review on Assessment Discrepancies and Audit Objections.

  Case-Laws - AT : The Appellate Tribunal considered a case involving a revision u/s 263 due to discrepancies in the assessment order, including undisclosed TDS, differences in purchases in ITR, and incorrect deductions leading to under-assessment. The Tribunal referenced a previous case where it was established that the Principal Commissioner of Income Tax (PCIT) did not independently exercise jurisdiction u/s 263 but acted on the AO's proposal. The Tribunal noted that in this case, the AO also based the proposal on audit report objections. The Tribunal found that the PCIT did not apply an independent mind, as the notice u/s 263 mirrored the AO's proposal and audit report. Consequently, the Tribunal set aside the order u/s 263, ruling in favor of the assessee.
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• Advance written off as expense is allowable u/s 37 if related to business. Loss not capital.

  Case-Laws - AT : The Appellate Tribunal considered the disallowance of advance written off as an expense u/s 36(2). The Assessing Officer argued it should be allowable u/s 37 due to a direct nexus with the assessee's business. The issue was whether the amount given up represented a loss of capital or revenue expenditure. Citing CIT vs. Mysore Sugar Co. Ltd, the Tribunal held that as there was no capital investment in the advances, the loss was on the revenue side and deductible. Referring to Appollo Tyres Ltd, it was established that business advances for revenue items are allowable u/s 37. As the amount was given in the course of business, it was allowed to be written off u/s 37. The appeal of the assessee was allowed.
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• Business Setup Expenses Allowed Pre-Revenue; Bonus Costs Recognized; Short-Term Capital Gains Misclassification Upheld.

  Case-Laws - AT : The case involves the disallowance of expenditure incurred during business setup. The Appellate Tribunal clarified that setup of business is distinct from commencement of business. Expenses post-setup are allowable even if no revenue is generated. The gestation period for business like the assessee's is long. The Tribunal held that actual business income generation is not essential for claiming business expenditure, focusing on whether the business is set-up. The Tribunal allowed revenue expenditure claimed post-setup date. Depreciation was allowed based on setup date. Disallowance of bonus under u/s 43B/36 was overturned as bonus is part of CTC and not profits. Addition on Short-Term Capital Gains was upheld as gains were offered under 'income from other sources' not as capital gains.
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• Expenses must directly relate to income to be deductible. Liquidation expenses not linked to interest income not allowed.

  Case-Laws - AT : The ITAT held that expenses claimed u/s 57(iii) lacked nexus with interest income earned on fixed deposits. The interest expenditure was for liquidation expenses, not for earning interest income. Liquidation expenses did not relate to interest income, so not allowable u/s 57(iii). Liquidator's contention that all expenses incurred during liquidation, including interest paid on loans, were allowable was rejected. Set off of losses against income from other sources dismissed due to disallowed expenses. Short term capital gains treated as long term for concessional tax rate u/s 112(1) of the Act.
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• Appellate Tribunal ruled trust not AOP. Income taxed to beneficiaries, not trust. Beneficiaries not AOP.

  Case-Laws - AT : The Appellate Tribunal addressed the status of the assessee as a trust or AOP, focusing on the taxability of income in the hands of the Appellant Trust versus beneficiaries. The Tribunal held that the trust was valid u/s Indian Trust Act, 1882, rejecting the AO's argument that the trust was not valid due to contributors and beneficiaries being the same. It was determined that the assessee was not an AOP as beneficiaries did not jointly aim to earn income. The income was deemed taxable in the hands of beneficiaries u/s 61 to 63 of the Act, as the trust was revocable and not indeterminate. The Tribunal allowed the appeal, concluding that the income should be assessed in the hands of beneficiaries, not the trust.
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• Denial of interest on delayed DDT refund was wrong. Appellant entitled to interest payment. Lower authority's decision set aside.

  Case-Laws - AT : The Appellate Tribunal held that denial of interest on delayed refund of Dividend Distribution Tax (DDT) was incorrect. Lower authorities misinterpreted section 244A(1) and wrongly applied subsequent part of the section. Citing ITC Ltd. case, it emphasized that interest payment is a statutory obligation to the assessee. The Tribunal found the denial of interest illegal and set aside the order, ruling that the assessee is entitled to interest on DDT refund from the date of excess tax payment. Assessee's appeal was allowed.
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• Tribunal Upholds Charitable Trust's Tax Exemption Despite Rental Income Exceeding Threshold; No Profit Motive Found.

  Case-Laws - AT : The Appellate Tribunal considered whether the assessee, a trust registered u/s 12AA, qualified for exemption u/s 11 as a charitable entity. The AO argued the trust's activities were commercial due to rental receipts exceeding Rs. 25 lakhs, thus not charitable u/s 2(15). The CIT(A) allowed exemption. The Tribunal found no profit motive in the trust's activities, with funds invested for charitable purposes. The AO failed to justify treating rental income as commercial. The Tribunal cited a Supreme Court case allowing a 20% mark-up on receipts for exemption. The CBDT clarified that mere receipts do not make income commercial. The proviso to section 2(15) requires public utility activities not exceeding 20% of total receipts for exemption. As rent receipts were below 20%, the proviso didn't apply. Even if it did, full exemption u/s 11 couldn't be withdrawn. The Tribunal upheld the CIT(A)'s decision to grant benefits u/s 11 & 12, ruling against the revenue authority.
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• Tribunal Overturns Rejection of 80G Approval; Late Form Filing Not Grounds for Dismissal, Emphasizes Merit Evaluation.

  Case-Laws - AT : The Appellate Tribunal addressed the issue of rejection of approval u/s 80G due to late filing of Form 10AB. The Tribunal held that the CIT(E) should have considered the application on merits rather than declaring it non-maintainable solely based on the commencement date of activities. The assessee obtained provisional approval and filed Form 10AB within the specified time frame, meeting the requirements of Section 80G(5)(iii). The Tribunal emphasized that the commencement date of activities before incorporation was irrelevant in this case. The phrase "whichever is earlier" was deemed inapplicable given the unique circumstances of the case. The decision lacked a thorough examination of the merits of the application, highlighting a legal flaw in the approach taken.
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• Reassessment Invalid: Tribunal Quashes Tax Reopening Due to Lack of New Evidence, Mere Opinion Change Insufficient.

  Case-Laws - AT : The case involves the validity of reopening of assessment u/s 147/148 based on reasons to believe, where the head of income was changed from business to income from other sources due to poor quality material in sub-contract execution. The Appellate Tribunal held that no fresh information was available to the Assessing Officer (AO) at the time of recording reasons for reopening, rendering the reassessment a mere change of opinion. The law requires reasons for reopening to be based on new information not previously considered. The Tribunal cited legal precedents to support this principle. The AO's reliance on post-survey inquiries by the same AO was deemed insufficient for reopening. The Tribunal found no basis for escapement of income without quantifying the alleged tax evasion. The assessment under section 147 was deemed illegal and quashed in favor of the assessee.
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Customs

• Penalty reduced for Customs House Agent due to lack of direct involvement in fraudulent exports.

  Case-Laws - AT : The case involves imposition of penalty on a Customs House Agent (CHA) u/s 114 (iii) of the Customs Act 1962 for misusing drawback benefit through fraudulent exports. The appellant was not directly involved in illegal activities. The Tribunal, considering a similar case, reduced penalty from Rs.3,00,000/- to Rs.75,000/- as there was no evidence of the appellant benefiting from the fraud. The penalty on the appellant is reduced to Rs.75,000/- from Rs.3,00,000/-. The appeal is partly allowed.
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FEMA

• Tribunal Upholds Section 8(1) FERA Violation; Differentiates Standards of Proof in Quasi-Judicial and Criminal Cases.

  Case-Laws - AT : The case involves contravention of Section 8(1) of FERA, 1973. The Appellate Tribunal held that the transfer of money from an NRE account, even if received in Indian currency, satisfies the requirements of Section 8(1). The denial of cross-examination of witnesses was deemed acceptable in quasi-judicial proceedings, especially when the witness was unavailable. The Tribunal found that the respondents proved their case through collected documents, rendering cross-examination unnecessary. The appellants' acquittal by the ACMM Court did not impact the Tribunal's decision, as the respondents provided sufficient evidence of the transfer from the NRE account. The Tribunal emphasized that the standards of proof in criminal and adjudication cases differ, and the failure of the prosecution case does not automatically lead to the failure of the adjudication case.
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• Appellate Tribunal found company guilty of violating FERA by diverting cargo to Dubai instead of Russia. Directors held liable.

  Case-Laws - AT : The case involves contravention of FERA provisions u/s 8(1), 48, and 49 r.w.s. 72(c) due to delivering cargo to Dubai instead of Russia, causing foreign exchange loss. Authenticity of incriminating letters confirmed. Suspected collusion between exporter, shipping company, and non-existent Russian buyers. Lack of legal action against shipping company raises suspicion. Appellant's diversion to Dubai contradicted export requirements. Failure to provide export documents strengthens case against appellant. Directors held liable u/s 68 FERA. Penalty upheld for company and director due to culpability in export irregularities.
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• Appellant denied allegations under FERA 1973, requested cross-examination not granted. Lack of evidence against appellant, order set aside.

  Case-Laws - AT : The Appellate Tribunal considered a case involving contravention of section 9(1)(f)(i) of FERA 1973. The appellant argued lack of material and violation of natural justice, requesting cross-examination of Sudhir Kapadia. The order lacked evidence linking the appellant to the alleged contravention. Sudhir Kapadia's statement was the sole basis, but he retracted it. The appellant was denied the opportunity to cross-examine him. The Tribunal found insufficient evidence against the appellant and set aside the order, highlighting the need for proper evidence and fair procedure.
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IBC

• NCLAT ruled on delay in filing appeal. No free copy of order obtained. Law of limitation applies. Appeal dismissed.

  Case-Laws - AT : The case involved a petition for condonation of delay in filing an appeal before the NCLAT. The petitioner, a bank, did not apply for a certified copy of the impugned order within the time limitation. The NCLAT held that adherence to the I&B Code, 2016 is mandatory, and the law of limitation bars the remedy but does not extinguish the right. The tribunal emphasized that equities cannot override clear rules. The petitioner's reasons for delay, such as seeking legal advice and festivals, were deemed insufficient. The NCLAT concluded that no sufficient cause was shown for condoning the 3-day delay, leading to the dismissal of the appeal.
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PMLA

• Money laundering case: Illegal possession of property can be proceeds of crime. Attempt to conceal, possess, or use crime proceeds is covered.

  Case-Laws - HC : The High Court held that forceful possession of property can be considered proceeds of crime u/s 2(1)(u) of PMLA. Money laundering involves any activity connected with proceeds of crime derived from criminal activity. Illegal possession of property falls within the definition of property u/s 2(1)(v) of PMLA. Even attempts to conceal, possess, or use proceeds of crime constitute money laundering. The court upheld the validity of section 19 of PMLA. The ED's case against the petitioner is supported by evidence, and the legality of subsequent remand orders does not affect the initial arrest. The petitioner's petition was dismissed.
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• Appellate Tribunal Upholds Attachment Under Money Laundering Act; Appellants Fail Burden of Proof, Section 24 Applied.

  Case-Laws - AT : AT upheld provisional attachment order u/s PMLA, 2002 due to illegal foreign remittances made through fake import documents. Prosecution complaints pending, incriminating evidence against appellants. Burden of proof not discharged u/s 24. Provisional attachment aims to prevent concealment or transfer of proceeds of crime. SC in Vijay Madanlal Choudhary case emphasized balancing interests and preserving crime proceeds. "Attachment" u/s 2(1)(d) prohibits property transfer but allows use. No grounds to interfere, appeal dismissed.
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Service Tax

• Petitioner not at fault for payment delay under Sabka Vishwas Scheme. Allowed to avail benefits. Previous case supports decision.

  Case-Laws - HC : The High Court considered a challenge to letters issued by the Deputy Commissioner under the Sabka Vishwas Scheme due to the Petitioner's failure to make payment as per the SVLDRS-3 form. The Court found that the Petitioner's inability to make payment was due to a technical glitch, which was raised with the Respondents. The Petitioner expressed willingness to pay, and as no fault was attributed to them, they should not be denied the SVLDRS benefit. The Court referenced a previous decision where a similar situation allowed the declarant to make payment and benefit from the SVLDR scheme. The application was disposed of in favor of the Petitioner.
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• CESTAT ruled no service tax on revenue shared with distributor for cinema hall services. In earlier case, Supreme Court upheld decision.

  Case-Laws - AT : CESTAT, an Appellate Tribunal, addressed the taxability of Unincorporated Joint Ventures involving revenue sharing arrangements and support services of business or commerce (BSS). The appellant provided cinema hall and infrastructure to a distributor for movie exhibition, without paying appropriate service tax. Referring to precedents like PVS Multiplex and Inox Leisure, the Tribunal held that service tax cannot be imposed on the appellant u/s BSS. The Supreme Court upheld this view, affirming the Tribunal's correctness. The case is now with the Division Bench for appeal decision.
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Central Excise

• CESTAT rejected application u/s 35C(2) of Central Excise Act, 1944 on bank discount from auto dealers. Order quashed, remanded for review.

  Case-Laws - HC : The High Court addressed the issue of rectification of an order by the CESTAT, which rejected an application filed u/s 35C (2) of the Central Excise Act, 1944. The key question was whether the discount received by a bank from automobile dealers could be considered as a consideration for service. The Court held that a previous decision by the CESTAT was rendered per incuriam as it did not consider earlier decisions of equal strength. The Court noted the lack of specific references to contradictory decisions in the impugned order. Consequently, the Court quashed the order and remanded the matter to the Tribunal for fresh consideration.
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Case Laws:

• GST

• 2024 (6) TMI 607
  Refund claim made by the recipient of supply of services - Assessment of GST at 18% instead of 5% by KG Foundation (the supplier of services) - HELD THAT:- GST is imposed on construction services on forward charge basis on the provider of services. In this case, services were provided by KG Foundation and not by the petitioner. Therefore, the contention of learned Additional Government Pleader is liable to be accepted. This writ petition is not maintainable at the instance of the petitioner. Petition dismissed.

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• 2024 (6) TMI 606
  Maintainability of petition - availability of alternative remedy - HELD THAT:- The Petitioner having not appeared before the original authority is permitted to produce all the documentary evidence available with him before the Appellate Authority and the same shall be considered objectively by the Appellate Authority and the rights of the Petitioner shall not be foreclosed merely because the proceedings is in the form of an Appeal. The petition is disposed off.

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• 2024 (6) TMI 605
  Levy of tax, interest and penalty on the Chennai Metropolitan Water Supply and Sewerage Board (the CMWSSB) - petitioner was supplying purified water or not - HELD THAT:- On perusal of the impugned order, it is evident that the adjudication turned on two factors. First, the adjudicatory authority concluded that the petitioner was purifying the water and that the same would not fall within the scope of exemption. Learned counsel for the petitioner placed on record a note with regard to the difference between potable water and purified water. Learned counsel points out that potable water is required to conform to norms laid down in BIS:10500-2012, whereas purified water is required to fulfil the norms laid down in BIS:14543:2016. Without taking these aspects into consideration, the impugned order proceeded on the basis that the petitioner was supplying purified water. Secondly, the adjudicating authority concluded that the activity of the petitioner is a composite supply and that supply through mobile units falls within the scope of Heading 9969 (Serial No.13), which is taxable at 18%. On such basis, CGST and SGST of Rs. 96,10,02,025/- each was imposed along with interest and penalty thereon. The order does not contain any details of the value of supply of water to house holds and other premises through pipelines; the value of supplies made through tankers on account of insufficiency of water in the relevant areas; and the value of supplies made through mobile units on account of the establishments concerned requiring higher quantities of water, which are supplied at commercial rates. Without such classification, the adjudicating authority could not have arrived at the conclusion that the principal supply is through mobile units at commercial rates. The matter is remanded for reconsideration subject to the condition that the petitioner remits a sum of Rs. 3 crores within six weeks from the date of receipt of a copy of this order - Petition disposed off by way of remand.

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• 2024 (6) TMI 604
  Violation of principles of natural justice - respondent failed to provide an opportunity of personally hearing -online portal did not work properly and therefore, the petitioner could not upload eligible input tax credit - shortfall in upholding the books of account claiming for edibility insofar as the input tax credit is concerned - HELD THAT:- There was a shortfall of Rs. 3,82,97,676/- vide Annexure A. The petitioner approached in W.P. No. 202419/2019. As per the order passed by the Co-Ordinate Bench of this Court, this Court stayed the operation of Annexure A so as to provide an opportunity for the writ petitioner to approach the respondent/authority for processing his request vide Annexure B in the said writ petition. The time limit was also prescribed in the said order of maximum period of 15 days. Section 16 (1) of the CGST Act and effect of Section 16(2) of the said Act has been considered by the authority and so also Section 41 (1) and 41 (2) of the said Acts were considered by the respondent. The respondent also considered the effect of Section 49 of the said Act which deals with the payment of tax, interest, penalty and other amount in the light of the delayed made by the petitioner. Taking note of all these aspects of the matter and also considering the judgment of the High Court of Telangana in the case of M/s. Megha Engineering Infrastructures Ltd. Vs. The Commissioner of Central Tax, Hyderabad and others [ 2019 (4) TMI 1319 - TELANGANA AND ANDHRA PRADESH HIGH COURT ] especially adverting to paragraph Nos. 36 and 38 of the said judgment, respondent over-ruled all the objections taken by the petitioner in making the belated payment of tax and directed that the petitioner is under statutory obligation to pay interest on the total tax liability. The contentions urged in the writ petitions on behalf of the petitioner cannot be countenanced in law - Petition dismissed.

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• 2024 (6) TMI 603
  Violation of principles of natural justice - lack of reasoning in orders - non-application of mind - fraud by tax consultant - HELD THAT:- Perusal of the impugned orders issued by Assistant Commissioner and the GST officer show that the same do not contain any reasoning. The case of the petitioner that fraud was committed by the tax consultant is not even adverted to in the said orders. Further, the orders do not have any CRN number, nor is the name of any assessee mentioned. The order passed by the Assistant Commissioner, Mr. Vinod Kumar states that no reply has been received and as such it is assumed that taxpayer has nothing to state. The order passed by the GST officer, records that reply/explanation submitted by the taxpayer within time was examined and found not satisfactory. Clearly, there appears to be complete non-application of mind to the case of the petitioner. Accordingly, the said orders dated 26.12.2023 cannot be sustained and are set aside with an order of remit. Accordingly, the proper officer shall once again re-adjudicate the Show Cause Notice dated 23.09.2023 read with Scrutiny Notice dated 13.07.2020 as also the replies filed by the petitioner. Petition disposed off.

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• Income Tax

• 2024 (6) TMI 602
  Validity of order of assessment passed u/s 143 (3) r/w sec 144B - violation of principles of natural justice - writ petition has been filed beyond 30 days from the date of passing of such order - HELD THAT:- Admittedly, prior to issuance of the order notices u/s 143 (2) and 142 (1) of the said Act had been issued. The petitioner had duly responded to the same. In this case, the petitioner was well aware that the time for completion of the proceedings was about to expire on 31st March 2024. Notwithstanding the aforesaid the petitioner instead of responding to the notice dated 11th March 2024 had sought for an adjournment on 18th March 2024. At the instance of the petitioner time to file its response was extended till 22nd March 2024. From the documents on record it would appear that the petitioner had attempted to file its response after 5.00 P.M. on 22nd March 2024, i.e., beyond the office hours. The communication made by the petitioner to the samadhan portal has also not been disclosed. The petitioner has failed to identify what prejudice was caused to the petitioner by reasons of the assessing officer not considering its response and/ or whether the response submitted by the petitioner was different from the previous response submitted by the petitioner to the notice issued u/s 143 (2) of the said Act. It would appear that the order passed u/s 143 (3) of the said Act is an appealable order. Although, the petitioner has attempted to made out a case of violation of principles of natural justice in absence of the petitioner being able to demonstrate the prejudice caused, the petitioner cannot be entitled to the reliefs as prayed for. However, taking into consideration the fact that an efficacious remedy in the form of appeal is available, that justice would be subserved if the petitioner is granted liberty to file an appeal from the order dated 25th March 2024. If such appeal is filed within a period of 15 days from date along with an application for condonation of delay, the appellate authority, upon condoning the delay, shall hear out and dispose of the appeal on merits taking into consideration the response given by the petitioner and the grounds raised by the petitioner in the appeal, preferably within a period of 6 weeks from the date of filing of the appeal subject to compliance of other formalities by the petitioner, in accordance with law.

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• 2024 (6) TMI 601
  Rejection of application for condonation of delay u/s 119 (2) (b) in filing returns u/s 139 (1) or 139 (4) of the said Act - petitioner s case that the petitioner could not file its return of income u/s 139 (1) for the AY 2022-23 for the reasons beyond its control - It is also the petitioner s case that the petitioner s senior accountant, had been diagnosed with heart ailments for which he had to be hospitalized and as such the books of accounts could not be finalized which resulted in delayed finalization of accounts. HELD THAT:- Admittedly, in this case initially the accountant fell ill and subsequently on account of such illness had to resign. Although, the Board had observed that the petitioner had adopted a casual approach in finding replacement of its accountant and there was willful negligence on the part of the management, the materials on record do not substantiate the same. To the aforesaid extent, the finding reached by the Board appears to be based on no evidence and is perverse. Considering the enormity of the problem suffered by the petitioner and the subsequent resignation of the petitioner s accountant due to his health condition, the same would certainly make out a case of genuine hardship. The delay also does not appear to be on account of any negligence or mala fide of the petitioner as the illness and the subsequent resignation of the accountant was an entirely unforeseen event. The authorities ought to have taken a justice oriented approach. The order cannot be sustained and the same is accordingly set aside. Since, no fruitful purpose will be served by remanding the matter back to the Board for reconsideration of the aforesaid issue, I am of the view that considering the unavoidable circumstances and the genuine hardship suffered by the petitioner, the delay in filing the return should be condoned especially when the petitioner had already in its application for condonation of delay filed on 31st March, 2023, had enclosed therewith, a copy of the audited balance-sheet for the Assessment Year 2022-23. Accordingly, the delay in filing of return is condoned in terms of Section 119 (2) (b) of the said Act, with liberty to the petitioner to file its return of income within a period of 15 days from date.

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• 2024 (6) TMI 600
  Penalty u/s. 271(1)(c) - Defective notice u/s 274 - not struck off the inappropriate portion as to whether the assessee had concealed the particulars of income or furnished inaccurate particulars of income - whether non-striking off of the irrelevant portion in the penalty notice by not specifically mentioning the offence committed by the assessee, would become fatal to the penalty proceedings ? HELD THAT:- In the instant case, on perusal of the penalty notice placed on record it is evident that the ld. AO had not struck off the irrelevant portion thereon mentioning the specific offence committed by the assessee. The ratio laid down in Mohd. Farhan A Shaikh [ 2021 (3) TMI 608 - BOMBAY HIGH COURT (LB)] squarely applies to the facts of the instant case before us. Hence we direct the ld. AO to delete the penalty levied u/s 271(1)(c ) of the Act . Decided in favour of assessee. Penalty u/s. 270A - misreporting of income - Disallowance of 10% of miscellaneous expenses,10% of business promotion expenses, 10% of Conveyance and Travelling expenses, 20% of Communication expenses and 10% of Direct operational expenses - HELD THAT:- As we find that in the show cause notice issued u/s 274 r.w.s. 270A of the Act, AO had not bothered to mention the specific sub-clause under which the assessee s case falls. The provisions of section 270A(9) of the Act clearly define mis reporting of income and hence the ld. AO is duty bound to clearly mention in the show cause notice itself as to which of the sub-clauses in sub-section (9) get attracted in the facts of the present case. Hence it could be safely concluded that the show cause notice issued by the ld. AO is very vague. Entire disallowance of expenses has been made by the ld. AO in the quantum proceedings only on an estimated basis by making adhoc disallowances. Hence the assessee s case squarely falls under the exception provided in section 270A(6)(b) of the Act, wherein the assessee would be entitled for immunity from levy of penalty u/s 270A of the Act. AO must clearly mention in the show cause notice itself as to which of the sub-clauses in sub-section (9) get attracted to the facts of the instant case. This is conspicuously absent in the show cause notice. See SCHNEIDER ELECTRIC SOUTH EAST ASIA (HQ) PTE LTD. [ 2022 (3) TMI 1295 - DELHI HIGH COURT] Thus no hesitation to cancel the levy of penalty u/s 270A of the Act in the facts and circumstances of the instant case as the penalty notice is very vague and hence becomes fatal to the proceedings. Decided in favour of assessee.

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• 2024 (6) TMI 599
  Addition u/s 68 - addition of share capital share premium notional interest on interest free loan given to sister concern - notice u/s 133(6) of the Act had not been replied or not served by the investors - Addition made as parties does not exist in the addresses given by the assessee - primary onus cast to establish the genuineness of the transaction together with identity and creditworthiness of the investors HELD THAT:- The transactions of investments made by the investors in assessee company were made through regular banking channels and duly reflected in the balance sheet of the investors. Share application forms coupled with minutes of the Board meeting and share certificates in addition to the aforesaid documents proved the genuineness of the transaction. No deficiencies whatsoever were pointed out by the ld AO on the elaborate documents submitted by the assessee. Assessee had duly justified the fact of issuance of shares at a premium to these investors despite the fact that the shares were allotted to the original promoters were at par. It is very reasonable for any company to issue shares to the outside investors at a premium in order to ensure that the promoter s stake in the company does not get diluted. Investors come forward with accepted mindset to make investment at a premium seeing the growth potential prevalent in the investee company. The assessee had duly discharged its primary onus cast on it by furnishing the requisite documents before the ld AO. Merely because the notice u/s 133(6) of the Act had not been replied or not served by the investors and directors of the investors company were not produced coupled with less income shown by the investors in their ITR, the transaction of making investment by the investors in the assessee company cannot be doubted. If the ld AO had entertained any doubt on the documents submitted by the assessee, nothing prevented him from issuing summons to the investors company and if none complied, take the proceedings further in the manner known to the law. Hence, the primary onus has been duly discharged by the assessee, the burden of proof therefore shifts to the ld AO. The assessee cannot be faulted after furnishing the requisite documents. Some of the investors had duly responded directly before the ld AO in response to the notice issued u/s 133(6) of the Act. Hence, there is absolutely no reason for the ld AO to draw adverse inference on the documents submitted by the assessee. AO had also stated that cash was deposited by the investors before making investment in the assessee company, which fact was found to be incorrect on perusal of the bank statements. In view of the aforesaid observations, the ld CIT(A) had rightly deleted the addition made u/s 68. Notional interest added by the ld AO - As we find that the same had been added completely on notional basis without having any support from the provisions of the Act. The assessee had indeed given interest free loans of Rs. 1.48 crores to M/s. Pacific Industries Ltd. The assessee had not claimed any deduction for interest payment on its borrowings. AO s case is that there is no business connection between the assessee and M/s. Pacific Industries Ltd. Even then, there cannot be any addition towards notional interest. It is trite law that only real income should be brought to tax as has been held in the case of CIT Vs. Shoorji Vallabhdas and Co. [ 1962 (3) TMI 6 - SUPREME COURT] - Hence, we find that the ld CIT(A) had rightly deleted the addition. Assessee appeal allowed.

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• 2024 (6) TMI 598
  Assessment u/s 153A/153C - seized/incriminating materials found as a result of search and seizure or not? - HELD THAT:- As per the settled legal position, AO has to record satisfaction note for each assessment year, for which, he intends to initiate proceedings u/s 153C of the Act and he also has to refer to incriminating/seized materials relating to such assessment year to justify initiation of proceedings under section 153C. In the facts of the present appeals, it is not the case. In fact, on specific query, learned Departmental Representative failed to bring to our notice any seized/incriminating materials, which could have influenced the present additions. Even, the paper-books filed by the Department do not contain any seized/incriminating materials. Uncontroverted facts on record do clearly reveal that the additions made in the impugned assessment orders are not based on any incriminating/seized materials found during search and seizure operation. That being the factual position emerging on record, the ratio laid down in case of PCIT Vs. Abhisar Buildwell Pvt. Ltd. [ 2023 (5) TMI 587 - SUPREME COURT] would squarely apply. Pertinently, while considering identical nature of dispute in case of assessee s group concern arising out of the same search and seizure operation, the Coordinate Bench in case of M/s. Frontier Commercial Co. Ltd. [ 2023 (7) TMI 1160 - ITAT DELHI] has deleted the additions, as, they were not based on any seized/incriminating materials found as a result of search and seizure operation. Thus, we are of the view that the disputed additions having been made without reference to any seized/incriminating material found as a result of search and seizure operation, are unsustainable. Appeal of assessee allowed.

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• 2024 (6) TMI 597
  Revision u/s 263 - direction to the AO to make fresh assessment de novo after making suitable inquiries towards determination of Fair Market Value (FMV) of shares issued and consequent taxability u/s 56(2)(viib) - HELD THAT:- Substantial shares have been allotted to the existing shareholders and only few shares have been allotted to the new subscribers. Shares were allotted at the premium of Rs. 40 per share based on valuation report filed by the independent valuer. In the factual backdrop, we refer to the decision rendered in the case of BLP Vayu (Projects-I) (P.) Ltd. vs. . [ 2023 (6) TMI 209 - ITAT DELHI] wherein it was observed that object of treating excessive premium received on issue of shares as taxable income of revenue character under Section 56(2)(viib), is wholly inapplicable to issuance of shares to existing shareholders where no resultant income could be said to accrue to ultimate beneficiary, i.e., existing shareholders. The action of the AO in such facts cannot be branded as erroneous per se. No prejudice could possibly result to the interest of the revenue by charging purportedly excessive premium on fresh issue of shares to the existing shareholders either. In the absence of order being erroneous and also prejudicial to the interest of revenue, the revisional action of Pr.CIT in the context of the facts of the case does not meet the jurisdictional requirement of Section 263. A revisional action of the Pr.CIT in the context of facts of the case thus appears to be wholly unjustified and without meeting the jurisdictional requirements of Section 263 of the Act. We thus find wholesome merit in the plea of the assessee for cancellation of revisional order and restoration of the order of the AO. Appeal of the assessee is allowed.

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• 2024 (6) TMI 596
  Disallowance of club expenses - Whether the club expenses were incurred for business purposes? - HELD THAT:- AO had made impugned additions on the basis that the expenditure so incurred was personal in nature. This finding in our view is erroneous. Undisputedly, the assessee is a company, it would have no expenses of personal in nature. AO ought to have verified whether such expenses were incurred in the course of business and for the business of the assessee. The company being juristic person would not have any personal expenses and would not incur personal expenses unlike living being. The body corporate operates through living beings. The authorities below failed to advert to this fundamental question. Hon ble Gujarat High Court in the case of Sayaji Iron Engg.Co. vs CIT [ 2001 (7) TMI 70 - GUJARAT HIGH COURT] assessee which is a private limited company is a distinct assessable entity as per the definition of person under section 2(31) of the Act. Therefore, it cannot be stated that when the vehicles are used by the directors, even if they are personally used by the directors the vehicles are personally used by the company, because a limited company is an inanimate person and there cannot be anything personal about such an entity. The view that we are adopting is supported by the provision of section 40(c) and section 40A(5). The findings of the CIT(A) cannot be sustained as same is bereft of any specific finding about the expenses under question. It is well-settled that a bald assertion would not be sufficient concluding that the expenditure is personal in nature when admittedly, the assessee is a company. Assessee appeal allowed.

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• 2024 (6) TMI 595
  Reopening of assessment u/s 147 - reopening of reason that he held a bonafide belief that investment made by the assessee towards the purchase of the subject property was sourced from her undisclosed income - HELD THAT:- As observed by the AO that the investment in the subject property, as explained by the assessee based on corroborative documentary evidence was sourced from her disclosed sources. A.O. had though neither made any addition as regards the investment that was claimed by the assessee to have been made towards the subject property nor drawn any adverse inferences as regards her claim that the said investment was sourced from her disclosed sources. A.O. had made an independent addition u/s. 56(2)(vii)(b) of the Act., i.e. towards the difference between the value adopted by the Stamp valuation authority/Segment rate and purchase consideration of the subject property. We are of a strong conviction that now when the A.O. had not made any addition as regards the very basis, on which proceedings u/s. 147 of the Act were initiated in the case of the assessee, i.e. the source of the investment in the subject property, therefore, he was divested of his jurisdiction from making an independent addition u/s 56(2)(vii)(b) - difference between the stamp duty value/segment rate of the subject property fixed by the Sub-Registrar, Bilaspur at Rs. 43,03,700/- (supra) and the consideration for which the assessee had purchased the same. As the A.O. had traversed beyond the scope of his jurisdiction and had made an addition u/s. 56(2)(vii)(b) we are unable to concur with the view taken by the lower authorities. Accordingly, the order passed by the A.O u/s. 144 r.w.s. 147 is quashed for want of valid assumption of jurisdiction on his part. Thus, the revised ground of appeal No.2 is allowed..

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• 2024 (6) TMI 594
  Addition u/s 68 - unexplained cash credits - no sources of cash deposits during the demonetization period provided - HELD THAT:- Sales including cash sales cannot be questioned. We also find that no evidence has been bought on record to prove that the cash-in-hand shown by the assessee was used for any other purpose so that sufficient cash was not available to make deposits in the bank account, as claimed by the assessee. The appellant has submitted that cash sales and realisation in cash from debtors were 1.68% and 5.37% of the turnover respectively, which is a very small portion of the turnover. AO has not given any finding that assessee was having any other source of income which is not recorded in the books of account and cash generated therefrom was deposited in the bank account. We find that cash realised from debtors and cash sales etc. have been duly recorded in the books of accounts. The impugned deposits have been made from cash balance available in the books of account. We also find that such books have not been rejected by the AO nor any defect has been found out by him. When cash deposits were out of the cash in the bank as per the books of account, there is no question of treating the said deposits as unexplained cash deposit u/s 68 - Hence, we do not find any infirmity in the order of learned CIT(A). The decisions relied upon by him also support his findings. Accordingly, the grounds of appeal raised by Revenue are dismissed.

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• 2024 (6) TMI 593
  Revision u/s 263 - discrepancies in the assessment order - undisclosed TDS, differences in purchases shown in ITR, and wrong claims of deductions resulting in under-assessment - HELD THAT:- We find that the Hon ble Calcutta High Court in the case of PCIT vs. M/s Sinhotia Metals and Minerals Pvt. Ltd. [ 2022 (1) TMI 1297 - CALCUTTA HIGH COURT ] categorically upheld the conclusion of the Tribunal that PCIT has not exercised his jurisdiction u/s 263 of the Act himself but only on proposal of AO. This is a question of fact which was appreciated by the Hon ble High Court to hold that there was irregular exercise of jurisdiction u/s 263 of the Act. The Tribunal in the case of Stewarts Lloyds of India Ltd. [ 2016 (3) TMI 178 - ITAT KOLKATA ] had thoroughly gone on the facts of the case and in that case, independently the AO had made a proposal. In the case in hand before us even the AO made a proposal on the basis of audit report objections. As we examine the notice u/s 263 it appears that the contents of the notice in a tabular form are similar to the proposal dated 27.09.2018 of the AO. The audit report is provided by Revenue and same only seems to be the foundation of all the reasons quoted by the PCIT, for giving a finding that assessment order is erroneous. Thus, though not mentioned specifically in the order of the PCIT, that the jurisdiction is being invoked on the basis of the audit objections and the proposal thereof, the manner in which the PCIT has approached the issues by issuing show-cause notice and the discussion made upon the issue establish non-application of independent mind. It appears that based upon the audit objections and proposal only the jurisdiction u/s 263 was invoked and exercised to hold assessment order to be erroneous so far as prejudicial to Revenue. The impugned order u/s 263 of the Act is set aside and the appeal of the assessee is allowed.

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• 2024 (6) TMI 592
  Disallowance of advance written off as expense u/s 36(2) - as per AO Advances Written Off is allowable u/s 37 as there is a direct nexus between the amount of advance given and business of the assessee, which has never been doubted by the assessing officer - whether the said amount which was given up represented a loss of capital or was revenue expenditure? - HELD THAT:- As decided In the case of CIT vs. Mysore Sugar Co. Ltd [ 1962 (5) TMI 3 - SUPREME COURT] question was whether the said amount which was given up represented a loss of capital or was revenue expenditure. The Supreme Court held that there was no element of a capital investment in making the advances and the loss incurred by the assessee was, therefore, a loss on the revenue side and was deductible. Similarly, in the case of Appollo Tyres Ltd [ 2012 (8) TMI 952 - ITAT, COCHIN] held that Business advances given for acquisition of revenue items is allowable to be written off u/s 37. Since the amount given is in the course of business, the same may be allowed to be written off u/s 37 of the Income Tax Act, 1961. Appeal of assessee allowed.

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• 2024 (6) TMI 574
  Validity of reopening of assessment - cash deposits receipts by assessee - petitioner argued that all bank transactions had been examined in the scrutiny assessment proceeding - as per DR formation had been received, that money has been brought by M/s Olivia Tradelinks India Pvt. Ltd to the petitioner s bank account - HELD THAT:- Vital information was not furnished to the petitioner. By means of a notice issued u/s 148A (b) the only information furnished to the petitioner was with respect to cash deposits received in his bank account from M/s Olivia Tradelinks India Pvt. Ltd. The other receipts with respect to which notice was issued are not disputed by the revenue. To that extent, the explanation furnished by the petitioner has found acceptance. Since, the petitioner was not confronted with the information that he had received cash deposits from M/s Agarwal Bullion, the petitioner was not granted opportunity to rebut the same. Seen in that light, it appears that due compliance of Section 148A has not been made, inasmuch as the notice issued to the petitioner u/s 148A (b) was not complete. In view of the fact that the petitioner has earlier faced scrutiny assessment for the same assessment year, wherein he claims to have disclosed all bank accounts with respect to which reassessment has been drawn, we consider it desirable that appropriate consideration be first made to the material aspects noted above before the fruitful reassessment proceeding may arise to the petitioner. Order u/s 148A (d) set aside - Decided in favour of assessee.

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• 2024 (6) TMI 573
  Estimation of income - bogus purchases - CIT(A) restricted addition to 5% - HELD THAT:- In the case in hand, due to clandestine activities of the assessee, he does not deserve any leniency and it appears reasonable to apply GP @5% of the said bogus purchases to bring the additional income on bogus purchases to tax which the assessee may have made by purchasing the goods from grey market. We are not inclined to disturb the findings arrived at by the impugned order passed by learned CIT(A), who has directed the AO to apply GP rate @5% on the said bogus purchases. Addition of interest u/s 36(1)(iii) - assessee paid interest on borrowed funds and by giving interest free advances, undue benefits to the concerned parties was provided to reduce tax liability - HELD THAT:- The assessee intended to expand his business, which is his fundamental right under Article 19(1)(g) of the Indian Constitution, which provides right to practice any profession or to carry on any occupation, trade or business to all citizens subject of course to the restrictions that can be imposed U/A 19(2) of the constitution by the state. Since, the advances were made out of interest bearing funds, then the allowability of interest should be examined from the angle of commercial expediency. The Assessing Officer cannot be justified in view of aforesaid scenario in rejecting the appellant s explanation that the aforesaid advances were not intended for the purpose of business expediency. Learned CIT(A) was thus, right in deleting the addition of Rs. 13,08,000/ of u/s.36(1)(iii) of the Act, in view of commercial expediency with respect of the expansion of the assessee s business. The facts of Phatan Sugar Work Ltd. [ 1993 (8) TMI 41 - BOMBAY HIGH COURT] referred by the revenue are not attracted to the facts of the instant case, hence for no avail to the revenue. The second point is also determined accordingly in negative against the revenue.

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• 2024 (6) TMI 572
  Disallowance of expenditure incurred during set-up of business - expenses incurred up to the date of commercial production disallowed - assessee deducted amount which were termed as Powertrain expenses prior to capitalization - assessee stated that it carried out trial run during September, 2009 and commenced commercial production on 05-02- 2010 - AO opined that the business could be said to have commenced only from the day from which the assessee begins commercial production - HELD THAT:- There is difference between setup of business and commencement of business. Once the business is setup though the same has not actually commenced by generation of revenue, the expenditure incurred after setup of the business would be allowable to the assessee. The term previous year as defined in Section 3 of the Act would mean the financial year immediately preceding the assessment year. However, in the case of newly set-up business, the previous year shall be the period beginning with the date of setting-up of the business. Accordingly, till the time the business is set-up, all the expenses, even if revenue in nature, would have to be capitalized which is the stand of lower authorities in the present case. As a natural corollary, if the business is set-up, the expenditure would be allowable notwithstanding the fact that no business income was earned by the assessee during the year. The gestation period, in the kind of business in which the assessee was engaged, would generally be long and it is quite natural that it would take substantial time to start the actual business operations and generate business income. Quite clearly, without testing trail run production, the assessee could have never been able to commence its business. We are of the considered opinion that the generation of actual business income was not an essential element to allow the business expenditure. What was required to be seen was whether the business had been set-up or not. We would hold that the assessee was correct in adopting setup date as 01-10-2009 and therefore, the revenue expenditure claimed under powertrain segment post 01-10-2009 would be allowable to the assessee subject to the verification of the fact that in subsequent years, the assessee has neither claimed the same as revenue expenditure not claimed depreciation on the same. AO would verify necessary computations accordingly. The assessee is directed to furnish requisite details. The corresponding grounds stands allowed for statistical purposes. Depreciation Disallowance - assessee claimed depreciation for full year though it started commercial production only from 05-02-2010 - HELD THAT:- Since we have already concurred with the stand of the assessee that the date of setup of business was to be considered as 01-10-2009, the depreciation claimed by the assessee would be allowable on the basis of assets put to use. The additional depreciation has been denied for want of documentary evidences. Therefore, this issue stands restored back to Ld. AO for fresh consideration by accepting date of setup of business as 01-10-2009 Disallowance u/s 43B/36 - bonus Remained unpaid - assessee submitted that the same was variable pay and part of CTC of employees, but AO rejected the explanation and disallowed the same - HELD THAT:- We are of the considered opinion that 36(1)(ii) refers to any sum paid to an employee as bonus for services or commissions for services rendered where such sum would not have been payable to him as profits or dividend if it had not been paid as bonus or commission. The simple test, as per settled legal principle is that had the bonus or commission not been paid, it would have added to the profits or dividend of the company. Thus, the deduction is permissible if the sum paid is bonus or commission for services rendered. In the present case, bonus is payable to employees who have rendered services to the assessee and the same form part of CTC of employees. Therefore, impugned disallowance, in our considered opinion, is not sustainable. The impugned disallowance, therefore, stand deleted. Addition on account of Short-Term Capital Gains - assessee earned profit on sale of investments and assessee offered the same as income from other sources instead of under the head capital gains - HELD THAT:- The gains in the books were computed on weighted average cost method. It was also submitted that mutual funds were in dematerialized form and in such a case, the distinct trail linking every unit to a certificate and its unique distinctive number linking it to subsequent sale would not be available. The same was stated to be in accordance with CBDT Circular No.704 dated 28-04-1995. However, Ld. CIT(A) rejected the arguments of the assessee and upheld the addition. We find that the gains on sale of mutual funds have been offered to tax by the assessee under income from other sources and therefore, the assessee is precluded to take benefit of cited circular of CBDT. The assessee, in books of accounts, has followed particular methodology to compute the gains. In our opinion, the same gains should have been offered by the assessee to tax. Therefore, we see no reason to interfere in the impugned order, on this issue. The corresponding grounds stand dismissed.

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• 2024 (6) TMI 571
  Disallowance u/s 14A r.w.rule 8D - expenses incurred on exempt income - HELD THAT:- Ballarpur Industries Ltd. [ 2016 (10) TMI 1039 - BOMBAY HIGH COURT ] has been relied upon by the Ld. CIT(A) in which has been held that no disallowance u/s 14A is warranted in respect of investments not yielding tax free income for the appellant. Similar view has been taken in the case of ACIT v/s Vireet Investments Pvt. Ltd. [ 2017 (6) TMI 1124 - ITAT DELHI ] Similarly, in the case of S. Krishnamurthy [ 2016 (1) TMI 1401 - ITAT MUMBAI ] has also held that the disallowance has to be worked out on the basis of investment which yielded dividend during the year and not by factoring in the total amount of investment. The appellant s contention is that it has not earned any exempt income during the year from investments in equity and debenture instruments and hence no disallowance of expenditure is permitted. In view of the various judicial pronouncement on this regard reliance was placed on the Hon ble Supreme Court s decision PCIT v/s Oil Industry Development Board [ 2019 (3) TMI 1571 - SC ORDER ] wherein as dismissed the SLP filed against the Hon ble Delhi High Court s order upholding the ITAT s decision to delete the disallowance u/s 14A in the absence of any exempt income. Disallowance of foreign travel expenses - HELD THAT:- It has been explained that the assessee had undertaken Project Athashri in Pune for Senior Housing, and that foreign travel was undertaken by the Director of the company in order to replicate the project in USA for Senior Citizens of Indian community. The other visit to Israel was undertaken to attend 19th Annual International Convention NETCON 2019 held in Tel Aviv, Israel in August 2019. The event was wholly and exclusively for the purpose of business. It is seen that submissions filed in this regard vide reply dated 07.09.2022 have not been taken into account by the AO, as such the Ld. CIT(A) has rightly allowed the claim of foreign travel expenses u/s 37(1). Appeal filed by the revenue is dismissed.

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• 2024 (6) TMI 570
  Claim of expenses u/s 57(iii) - assessee failed to establish the necessary nexus between the expenditure and the interest income - Deductibility of Expenses u/s 57(iii) against the income from other sources earned by way of interest income on fixed deposits - HELD THAT:- We find that as far as the claim of interest expenditure is concerned, the same has been stated to have been incurred on interest bearing loans granted by the Government to the assessee to meet its liquidation expenses. In this regard several copies of letters from the Government of India, Ministry Chemical and Fertilizers for releasing funds to the assessee for liquidation purpose were filed before us. The contents of the same reveal that the interest bearing funds were granted for meeting the expenditure for running the office of the Liquidator.It is only the unsecured loans given which are to be utilized for meeting the liquidation expenses. Therefore, purpose of taking unsecured loans or being granted unsecured loans from the government was for meeting the liquidation expenses. The purpose clearly was not to earn interest income there from. Therefore, the interest expenditure incurred on these unsecured loans has nexus only with the incurrence of liquidation expenses, and has no nexus with the earning of interest income. The same follows for all different expenses which were incurred by the liquidator which admittedly were incurred only for the purpose of carrying out the process of liquidation. The purpose of incurring the expenses definitely was not to earn any interest income. Therefore, even with respect to the expenses of liquidation, there is no nexus, direct or indirect, with the earning of interest income. Therefore, on the touch-stone of the conditions to be fulfilled u/s 57(iii) of the Act, for allowability of claim of expenses incurred by the liquidator against the interest income earned during liquidation, we find that, all the claims of the assessee fail ,with no nexus established between incurrence of expenditure and earning of interest income. Assessee s contention that the liquidator, in the process of liquidation, has earned interest income and also incurred liquidation expenses, and both being earned/ incurred in the process of liquidation therefore, the liquidation expenses are allowable against the interest income - No merit in this contention of assessee. The allowability of any claim, whether of income or expense, is to be determined as per the provisions of law. In the present case only expenses which were incurred for the purpose of earning interest income are allowable as per section 57(iii) of the Act. Merely because the incidence of both the income and expenses happen in the same process of liquidation does not establish nexus of the expenses incurred with the earning of interest income. Interest income has been earned on deposits of funds while expenses are incurred for liquidation process. If the directive of granting interest bearing loan included, besides the loan also the interest earned therefrom to be utilised for meeting expenses of liquidation, it could be said that the interest expenses had a nexus with the earning of interest income, because the purpose of incurring interest expenses in that case would be to meet liquidation expenses out of loan and to earn interest again for meeting liquidation expenses. In such circumstance the interest expense would be allowable u/s 57(iii) of the Act having nexus with the earning of interest income. But that is not the case before us. In the present case, it was the duty of the liquidator to have retained a portion of interest income to meet the income-tax liability arising as per law, and to use only the balance for the purpose of incurring the liquidation expenses. No merit in the contentions of the assessee that all the expenses incurred, including the interest paid on the loan obtained from the Government for carrying out the liquidation process, were allowable in terms of section 57(iii) of the Act against the interest income earned on deposits from the surplus remaining with liquidator out of unsecured loans given to it to meet the liquidation claims. In view of the above the issue of allowability of expenses incurred during liquidation as per 57(iii) of the Act stands decided against the assessee. Claim of set off of losses under the head income form other sources against the income returned to tax under other heads - This ground also needs to be dismissed since we have disallowed the claim of expenses under the head income from other sources and there arises consequently no losses to the assessee under the head Income from Other sources. Levy of concessional rate of tax of deemed short term capital gains earned by the assessee under section 50 - HELD THAT:- The short term capital gains returned by the assessee in terms of provisions of section 50 of the Act on assets held for a period of more than 36 months be treated as long term capital gains and taxes be levied thereon at the concessional rate prescribed u/s 112(1) of the Act.

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• 2024 (6) TMI 569
  Revision u/s 263 - disallowance of water charges and water cess and Police Protection charges by invoking the provisions of section 40(a)(iib) - HELD THAT:- Hon ble Supreme Court in Kerala State Beverages Manufacturing Marketing Corporation Ltd [ 2022 (1) TMI 184 - SUPREME COURT ] has held that the aspect of exclusivity u/s. 40(a)(iib) has to be viewed from the nature of undertaking on which levy is imposed and not on the number of undertakings on which the levy is imposed and concluded that there is an exclusive levy on the State Government undertakings. Therefore, the reliance placed by the DR in the decision of case of Kerala State Beverages (Manufacturing Marketing) Corporation Ltd. [ 2018 (4) TMI 1070 - KERALA HIGH COURT ] has been overruled by the Hon ble Supreme Court [ 2022 (1) TMI 184 - SUPREME COURT ] and hence cannot be applied to the instant case. CIT has erred in invoking the provisions of section 263 in the mater of disallowance of water charges and water cess and Police Protection charges by invoking the provisions of section 40(a)(iib) of the Act is not valid and we therefore have no hesitation to quash the order passed by the Ld. Pr. CIT u/s. 263 of the Act. Assessee appeal allowed.

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• 2024 (6) TMI 568
  Status of the assessee as trust or AOP - contributors and beneficiaries were the same - Taxability of income in the hands of the Appellant Trust vs. beneficiaries - HELD THAT:- We find that the Co-ordinate Bench of Tribunal in M/s. Scheme A1 of ARCIL CPS 002 XI Trust [ 2020 (9) TMI 465 - ITAT MUMBAI] while deciding the similar issue as arising in the case of trust set up by the ARCIL pursuant to the provisions of SARFAESI Act and the guidelines of RBI to acquire financial assets of the borrowers classified as NPAs held that there is no prohibition on the settler in becoming a beneficiary of the trust and as per the provisions of section 9 of the Indian Trust Act, 1882, every person capable of holding property may be a beneficiary of the trust, while as per the section 7 of the Indian Trust Act, 1882 any person competent to contract can become a settlor of the trust. Accordingly, the Co-ordinate Bench held that the observation of the AO that the assessee trust was not a valid trust, for the reason that its contributors and beneficiaries were the same, clearly militates against the express provisions of the Indian Trust Act, 1882. Status of the assessee is an AOP on the basis that the beneficiaries had associated and joined hands for a common purpose or action with QIBs for the sole purpose of the acquisition of NPAs, and transferring those at a profit with motive of earning income/profit , the Co-ordinate Bench held that there is nothing on record which would suggest that the beneficiary had agreed to associate for any common objective and the beneficiaries who do not have any control over the activities carried on by the trustee in managing the trust, had made their respective investments based on the offer documents, and on the basis of their investments made in the trust were allotment the Security Receipt which represented their undivided and proportionate interest in the corpus of the trust. Accordingly, the Co-ordinate came to the conclusion that the AO had failed to place on record any material which would even remotely suggest that there was a concerted effort by the beneficiaries to earn income jointly, and therefore, the assessee cannot be treated as an AOP. Taxability of income in the hands of the Appellant Trust vs. beneficiaries - Co-ordinate Bench [supra] rejected the findings of the AO that the income has to be taxed in the hands of the assessee and payment of taxes by the contributors would have no bearing, on the basis that the money always intended to be passed on to and only to the beneficiaries, i.e. the SR holders in proportion to their interest in the corpus of the assessee trust as per the trust deed and offer documents. Also held that the assessee trust is a determinate trust and neither any discretion has been given to the trustee to decide the allocation of the income every year, nor any right is given to the beneficiary to exercise an option to receive the income or not each year. Thus we are of the considered view that the assessee trust is a revocable trust and is not an AOP. Further, the income is liable to be assessed in the hands of the beneficiaries as per the provisions of section 61 to 63 of the Act. Further, since the respective shares were known since inception, therefore, the assessee could not be considered as an indeterminate trust. As a result, the grounds no. 1 - 3 raised in assessee s appeal are allowed.

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• 2024 (6) TMI 567
  Denial of interest on the delayed refund of Dividend Distribution Tax (DDT) - Rectification application rejected arguing that the issue was debatable and not a clear mistake - HELD THAT:- It is evident from the order of the lower authorities that they seem to be more concerned about the rectification of the order and has spoken less about the entitlement of assessee to the interest on refund. Both Ld. AO and Ld. CIT(A) seems to have misinterpreted the provision of section 244A(1) which is the only provision applicable in case of the assessee and there is no requirement of applicability of subsequent part of section 244A. The subsequent part of the section has been wrongly applied by the Ld. lower authority on the wrong presumption that in the case of assessee no notice under section 156 was issued. The finding recorded by the Ld. Coordinate Bench in ITC Ltd. Vs. Commissioner of Income Tax, Kolkata [ 2016 (3) TMI 1005 - ITAT KOLKATA ] perfectly covers the facts and circumstances of this case wherein as relied the case of Supreme Court of India in Union of India Vs. Tata Chemicals Ltd. [ 2014 (3) TMI 610 - SUPREME COURT ] stating that the Interest payment is a statutory obligation and non-discretionary in nature to the assessee. In tune with the aforesaid general principle, Section 244A is drafted and enacted. The language employed in Section 244A of the Act is clear and plain. It grants substantive right of interest and is not procedural. Thus we are of the considered opinions that Lower authority has committed illegality and perversity while denying the interest on the DDT refund amount and the impugned order is not legally sustainable in the eyes of law and accordingly set aside. We therefore accordingly hold that the appellant/assessee is very much entitled to payment of interest on the already ordered DDT refund from the date of payment of excess tax/additional tax till the payment of interest in pursuance of this order. Assessee appeal allowed.

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• 2024 (6) TMI 566
  Exemption u/s 11 - charitable activity u/s 2(15) - AO observed that the assessee s activities were commercial, with rental receipts exceeding Rs. 25 lakhs, thus not qualifying as charitable - AO concluded that the trust s activities were in the nature of trade, commerce, or business, thus falling under the amended section 2(15) - AO concluded that assessee is not entitled for benefit of exemption of income u/s 11 of the LT. Act and its case is being assessed as AOP, Capital expenditure debited in Income Expenditure a/c is not an allowable expenses - CIT(A) allowed exemption/deduction. HELD THAT:- Assessee is registered u/s. 12AA of the act and their objects are considered as charitable in nature. There is no material brought on record to support the fact that the assessee is acting with profit motive so far in the activities carried out. The receipt that the assessee received is invested or expended for the object of the society. AO merely noted that major source of revenue if the donation is reduced then the income is on account of rent income and therefore, he considered the activity of the assessee trust as commercial in nature and invoked the proviso to section 2(15) and denied the benefit of section 11 12 to the assessee. We have gone the finding recorded by the ld. AO he has merely stated that the assessee is earning the rental income and the same was considered as commercial in nature. But while doing so he failed to bring on record as to why the rental income was treated by him as commercial income. Even the apex court in the case of ACIT vs. Ahmedabad Urban Development authority [ 2022 (10) TMI 948 - SUPREME COURT] accepted that if the mark up is up to 20 % of the overall receipt it can be granted exemption provided the quantitative limit ( of not exceeding 20% ) under second proviso to section 2(15) for receipt from such profits, is adhered to. There is no finding in the order of the lower authority is that the assessee is earning exceeding 20 % of the overall receipt and the mark up is exceeding the standard set by the apex court. We also take note of the fact that the CBDT in circular NO. 11/2008, dated 19-12- 2008 clarified that In the final analysis, however, whether the assessee has for its object the advancement of any other object of general public utility is a question of fact. Assessee, who claim that their object is charitable purpose within the meaning of Section 2(15), would be well advised to eschew any activity which is in the nature of trade, commerce or business or the rendering of any service in relation to any trade, commerce or business. Merely the receipt would not fall the character as commercial income of the assessee. Not only that the apex case in the case of AUDA (supra) held that the word is total receipts , thus it appears to be farfetched an argument that certain receipts shall be deducted to arrive at for the purpose of prescribed percentage, especially when there is no such mention in the Section itself. The proviso to section 2(15) provides that the advancement of any object of general public utility shall not be a charitable purpose unless such activity is undertaken in course of actual carrying out of such advancement and the aggregate receipt from such activity do not exceed 20% of the total receipt. Thus, when the receipt from an activity undertaken with object of general public utility but such receipt do not exceed 20% of the total receipt, the proviso would not be applicable. In the present case the receipt from rent is in course of actual carrying out of the objects of the general public utility and such receipt is below 20 % (sl.5 of submissions thereunder before the ld. CIT(A)). Alternatively, if it all it is noted that the proviso to section 2(15) is attracted, then in that circumstances, exemption of section 11 cannot be withdrawn in its entirety. As the intent and purpose is tax that business income which arises because of an activity in the nature of trade, commerce and business. Based on these observations we do not find any infirmity in the finding of the ld. CIT(A) in allowing the benefit section 11 12 to the assessee - Decided against revenue.

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• 2024 (6) TMI 565
  Reopening of assessment u/s 147 - Notice issued after the expiry of 4 years - unexplained cash deposits - HELD THAT:- Since, the appellant has disclosed the disputed cash deposits in his saving bank maintained with Axis Bank Ltd in the Balance sheet and profit and loss account filed with the return of income for the relevant assessment year and duly considered by the AO while passing the Assessment order u/s 143(3) dated 12/12/2011. AO ought to have examined the information received in the context of the material facts disclosed by the appellant on record. If such an exercise would have been done, it is most likely that the AO would have come to the conclusion that there was no failure on the part of the appellant to disclose truly and fully all material facts necessary for assessment. Thus, the entire proceedings in the present case would be hit by 1st proviso to section 147 which bars any reopening after the expiry of four years where assessment under section 143(3) has been completed unless there was failure to disclose material facts truly and fully. In the instant case, from the reasons recorded, it is revealed that there was no allegation in the reasons recorded that there was any failure on the part of assessee to truly and fully disclose all material facts necessary for its assessment for the relevant assessment year. In our view, such an assessment order passed u/s 147 and confirmed by the CIT(A) is bad in law and deserves to be quashed. Apex Court in Canara Bank [ 2023 (9) TMI 1043 - SC ORDER] has dismissed SLP filed against the order of the High Court where it was held that where notice u/s 148 is to be issued after expiry of four years or before expiry of six years, assessee should have failed to disclose material facts, hence, where AO had not even stated or alleged that there was failure on part of assessee to disclose fully and truly all material facts in respect of claim of deduction under section 36(1)(viia), Tribunal rightly held that reopening assessment initiated beyond four years was bad in law - Whether SLP filed by revenue against said impugned order was to be dismissed. Similarly, the Hon ble Jurisdictional High Court in the case of State Bank of Patiala [ 2015 (5) TMI 872 - PUNJAB HARYANA HIGH COURT] observed that reasons for opening assessment which had already been concluded did not show that there was any failure on part of assessee to disclose fully and truly all material facts and thus, it was merely a change of opinion and reassessment was not justified. We hold that the AO has acted solely on basis of information and material already on record in original assessment, and therefore, the impugned reopening notice issued beyond period of four years was illegal. We, therefore hold that the assessment order passed by the AO as bad in law and as such same is quashed. Appeal of assessee allowed.

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• 2024 (6) TMI 564
  Rejection of application for final approval u/s 80G(5)(iii) - application was not filed within the prescribed time limits - assessee has brought our attention to the recent CBDT Circular No.7 of 2024 dated 25.04.2024, vide which the due date for filing application for final approval under clause (iii) of the 1st Proviso to section 80G of the Act has been extended till 30.06.2024 - HELD THAT:- Institutions/trusts which had been vigilant and had made effort to comply with the amended provisions and duly applied for fresh registration within the due date but mistakenly under the wrong clause, would be deprived of benefit of the said Circular, whereas, the institutions who did not apply at all till the last date as extended by CBDT Circular no.6 of 2023 i.e. upto 30.09.2023, but applied subsequently as a new trust, will be benefited by the said Circular. Even the institutions which did not apply at all either as an existing institution or as a new institution, the benefit of the said circular has also been extended to the said institutions and they have given the option to apply upto 30.06.2024. We are of the view that the object and intention behind the CBDT Circular No.7 of 2024 is not to deprive any such institutions of its benefit. Therefore, it is held that the assessee will also be entitled to the benefit of the said Circular No.7 dated 25.04.2024 and the application of the assessee will not be rejected by the CIT(Exemption) finding any fault in the application of the assessee on the basis of any such interpretation of the said Circular No.7 of 2024. With the above observations, the present appeal of the assessee is disposed of with the liberty to the assessee-trust to move a fresh application as per CBDT Circular No.7 of 2024 and if such an application is made by the assessee, the same will be decided by the ld. CIT(Exemption) within two months of receipt of such application. If the assessee is granted final approval by the ld. CIT(Exemption), then the benefit of approval u/s 80G of the Act will be deemed to be continued without any break as admissible to the assessee prior to the Amendment brought vide Amending Act of 2020. The assessee will not be deprived of the benefit during the time period falling between 31.03.2021 and the date of grant of provisional approval under clause (iv) i.e. 28.05.2021. Appeals of the assessee are treated as allowed for statistical purposes.

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• 2024 (6) TMI 563
  Rejection for approval u/s 80G - Application not filed within due date specified in the act - Whether the commencement date of activities affects the application maintainability? - HELD THAT:- Jurisdiction of the CIT(E) is to pass order on merits if he / she wants to do it on account of non-satisfaction for both purposes of rejecting such an application and cancelling its approval. But in the instant case, unfortunately this has not happened instead it is held to be non-maintainable, on a trivial ground that date of commencement of activity is 18/04/2006 and / or Form 10AB dt. 23/09/2023 is time barred as it is filed beyond time i.e; 30/09/2022. Totality is ignored. In any case the said Form No. 10AB was filed before 30/09/2023 the due date which was extended (supra). There is thus no decision on merits of the case. Merits / demerits of Form No. 10AB dt. 23/09/2023 for final approval of assessee society are just not examined, an approach wholly untenable in law. Provisional and Final Approval Application - Since the assessee society had obtained provisional approval w.e.f 05/04/2023 and therefore, it was incumbent upon them to have filed Form No. 10AB on or before 05/10/2023 which in fact they have filed on 23/09/2023 much before the expiry of six months on 05/10/2023. Assessee society case is therefore covered by first part / limb of Section 80G(5)(iii) proviso as second part/limb deals with the commencement of the activities which is not applicable herein at all in the facts and circumstances of the present case as the case is first of the provisional approval after incorporation of society on 06/09/2022 which was obtained by the assessee society on 05/04/2023. The Form No. 10AB as natural corollary for final approval of assessee society was filed on 23/09/2023 well within due date of expiry of six months period from date of provisional approval. The present case does not fall under second part / limb as the assessee society had commenced there activities from 18/04/2006 to 06/09/2022 / 05/04/2023 (80G) under Red Cross Society of India Act, 1920 the umbrella organization as stated and it is only on 06/09/2022 they acquired a new legal status upon incorporation under Societies Registration Act (XXI of 1860) and as amended by Punjab Amendment Act, 1957 and prior thereto they worked under Indian Red Cross Society Act, 1920. Therefore, the date of commencement of activity w.e.f 18/04/2006 is insignificant and is of no consequence. The expression whichever is earlier in above factual backdrop remains unworkable to the scheme of Society / Institution /Fund applying for final approval u/s 80G(5)(iii) in the peculiar facts and circumstances of the present case.

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• 2024 (6) TMI 562
  Validity of Reopening of assessment u/s 147/148 - reasons to believe - change of head of income from business to income from other source of the receipt - AO mentions in the reasons that during the inquiries it was found that the quality of the material used in the execution of sub-contract was poor and that the sub-contract was executed by another sub-contractor - AO had considered the statement of one of the Directors of the assessee company and found that the purchases made by the assessee company from certain name suppliers were not of good quality - HELD THAT:- What crystallises is that at the time of passing assessment order u/s 143(3) of the Act on 17.10.2012, the then AO had before him all the relevant material to examine revenue from the work done by the assessee concerning Common Wealth Games. The reasons for reopening themselves manifest that extensive inquiries were made on the basis of survey operations including recording of statement of Shri Amarjit Mehta, one of the directors of the company. The reasons make it apparent that whatever information was subsequently considered at the time of recording of reasons for reopening was, in fact, part of the assessment record on the basis of which assessment was completed on 17.10.2012 u/s 143(3) of the Act. As observed earlier, at the time of recording of the reasons, there is specific reference to a notice dated 30.05.2011 by which the assessee was said to have been given a final opportunity to produce books of account and copy of bank statement in compliance of which Shri Suraj Garg, CA and assessee filed bank statements and copy of the last audited balance sheet. Thus, it is established that at the time of recording of the reasons there was no fresh information with the AO. It appears that only because there was a new AO the case was reopened. As a matter of fact, the assessment u/s 143(3) of the Act and the survey was done by the same AO who was Joint Commissioner of Income-tax, Range-1, Bathinda who had concluded the assessment on 17.10.2012. The subsequent notice u/s 148 of the Act dated 11.08.2014 is issued by the Asstt. Commissioner of Income-tax, Circle-1, Bathinda while taking cognizance of only so much of the information which was available on record with Shri S.K. Mittal, the Assessing Officer at the time of conclusion of assessment u/s 143(3) of the Act. The law in regard to reopening stands settled that the reasons to believe for the purpose of section 147/148 of the Act reassessment should be recorded or based on some information which was not available or not considered or left out of consideration due to any act of assessee or assessing officer, at the time of original assessment. Any information which has been consciously procured and processed becomes stale and if same used will amount to a mere change of opinion. Reliance in this regard is placed on judgments Rasalika Trading Investment Co. Pvt. Ltd [ 2014 (2) TMI 851 - DELHI HIGH COURT] and CIT V/s Kelvinator of India Ltd [ 2002 (4) TMI 37 - DELHI HIGH COURT] . The Hon ble Supreme Court [ 2010 (1) TMI 11 - SUPREME COURT] confirmed the decision of the Hon ble Delhi High Court judgement in CIT V/s Kelvinator of India Ltd. (supra) wherein the Hon ble Supreme Court judgement in the case of Indian and Eastern Newspaper Society [ 1979 (8) TMI 1 - SUPREME COURT] was relied for making observations that the AO must first have information in his possession and then in consequence of such information he must have reasons to believe that income has escaped assessment. The information to be relied, to our mind, should be one which was not in the knowledge of the AO, for the reasons it was not patent or left latent. In the case in hand, the AO has merely relied on the survey and post survey/search inquiries made by the then AO , himself. The aforesaid discussion establishes that there were extensive inquiries post survey with regard to the sub-contract work and its accounting in the books of the assessee in the course of regular assessment and merely by using the same the reasons to believe were recorded. DR has although defended the reasons for reopening relying on the prima facie belief test that at the stage of reopening only a prima facie belief is to be formed and mere possibility is sufficient. However, it is not the case of lack of substance in the information, but, as discussed above case of no information at all, as what is considered as information was already processed and had culminated into the assessment order u/s 143(3) of the Act. CIT(A) seems to have missed the vital fact that all the enquires referred in re-opening reasons were collected before the original assessment u/s 143(3) - CIT(A) has merely gone on the question: if there was prima facie some material for reopening and not sufficiency or correctness of the material , relying on the judgement of Raymond s Woolen Mills [ 1997 (12) TMI 12 - SUPREME COURT] where there was allegation of suppression of material facts by the assessee during initial assessment, which is not the case here at all. Every aspect was enquired in initial assessment and there was no further information to show that was accepted out of enquiry in initial assessment was erroneous on facts or law, requiring re-assessment. Mere change of head of income from business to income from other source of the receipt from SNSPL, the Ld. AO has found it case of escapement. However, we are of considered view that it cannot at all result into belief of escapement of income or assessment without establishing and quantifying the escapement of tax in reasons itself. In the case of assessee both business receipts and income from other sources are liable to the same rate of 30% tax, and the Assessing Officer, in the reasons, has not specified that any expense debited by the assessee to its Profit Loss Account is bogus or inflated expenditure or otherwise not allowable under any provision of the Act. Assessee had duly recognised the amount of Rs. 3.46 crore as its income in its audited accounts and consequently, had offered the same to tax in its ITR which stood accepted. There is no allegation in the reason that any income chargeable to tax has been under assessed or assessed at too low a rate or made the subject of excessive relief under the Act or excessive loss or depreciation allowance or any other allowance has been computed in the original assessment order dated 17/10/2012. Thus assumption of jurisdiction u/s 147 of the Act was vitiated and same goes to the root of assessment u/s 143(3)/148 of the Act, making it illegal. The assessment so framed is liable to be quashed. Decided in favour of assessee.

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• Customs

• 2024 (6) TMI 591
  Imposition of penalty on CHA / Co-noticee u/s 114 (iii) of the Customs Act 1962 - Misusing the drawback benefit by fraudulent exports. There is no allegation in the SCN or in the OIO that the appellant had directly involved in the illegal activities. It is submitted that in a case filed by M/s. Skylark Cargo Services, who is a co-noticee in the proceedings arising out of the very same show cause notice, the Tribunal had considered the issue of imposing penalty on the CHA under Section 114 (iii) of Customs Act 1962. HELD THAT:- The Ld. Counsel has brought to notice that the Tribunal in the case of CHA who was a co-noticee in the proceedings has considered the issue in detail and reduced the penalty from Rs.3,00,000/- to Rs.75,000/-. In the said decision the Tribunal observed that there is no allegation that the appellant themselves have benefited from any part of the drawback fraudulently obtained by the main operators/exporters. The penalty requires to be reduced from Rs.3,00,000/- to Rs.75,000/-. The impugned order is modified to the extent of reducing the penalty imposed on this appellant from Rs.3,00,000/- to Rs.75,000/-. The appeal is partly allowed.

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• Insolvency & Bankruptcy

• 2024 (6) TMI 590
  Maintainability of Section 95 IBC application - initiation of CIRP against personal guarantors - non-speaking, un-reasoned order - non-application of mind - time limitation - HELD THAT:- The matter is remanded back to the NCLT, to consider the various objections raised by the petitioners on the aspect of limitation and maintainability of the Section 95 IBC application, filed by the respondent no.1 herein, before the NCLT. Rights and contentions of both the parties are left open, which shall be considered by the learned Adjudicating Authority of the NCLT, on its merits. The petition is disposed off.

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• 2024 (6) TMI 589
  Condonation of Delay in filing a appeal - Right to receive a Free Copy of the Impugned Order - Petitioner / Appellant / Bank, has not even applied for a Certified Copy (Paid Copy) of the Impugned Order - exemption as per Rule 14 of the NCLAT Rules, 2016 - time limitation - sufficient cause for delay or not. Time Limitation - HELD THAT:- It cannot be gainsaid that the Law of Limitation, may affect a Person, but, it cannot be forgotten, that a Statutory Provision, may cause an inconvenience or hardship, to the concerned Person / Litigant, but, this Appellate Tribunal, is left with no option, but, to adhere, to the Provisions of the I B Code, 2016, Rules and Regulations, in true letter and spirit, without carving out any exception. In reality, the Law of Limitation, bars the remedy, but, the Right, is not extinguished. It is a settled `Law that a `Tribunal / `Appellate Tribunal , is not to pass an `Order , in a given `Legal Proceeding , before it, as `opposed to Law . When the I B Code, 2016, the `Tribunal and `Appellate Tribunal , Rules 2016, are quite clear, without any `ambiguity or `incongruity , etc., the same will have to be pressed into service and applied, overriding `Equities , despite, `Unpalatable Consequences flowing thereto. It cannot be brushed aside that the Petitioner / Appellant / Bank (Financial Creditor), has failed to `apply for a `Certified Copy (`Paid Copy ) of the `Impugned Order , from the `Adjudicating Authority / `Tribunal , prior to the `Expiry of `Limitation Period on 29.11.2023. The Filing of the instant Comp. App by the Petitioner / Appellant / Bank (Financial Creditor), before this `Appellate Tribunal , with the aid of `Free of Cost Copy (`Certified True Copy of the `Impugned Order , duly signed by the `Officer concerned of the `Adjudicating Authority / `Tribunal ), cannot be a `Substitute for `every Appeal , to be `accompanied , by the `Certified Copy (`Paid Copy ) of the `Impugned Order , as opined by this `Tribunal , in the teeth of Rule 22(2) of the NCLAT Rules, 2016. Viewed in that perspective, the Filing of the instant Comp. App, accompanied by the `Free of Cost Copy of the `Impugned Order (`Certified True Copy ), is per se `not Maintainable , in the `eye of Law , as held by this `Tribunal . Sufficient cause for delay or not - HELD THAT:- In the instant case on hand, the reasons assigned, on behalf of the Petitioner / Appellant / Bank (Financial Creditor) to the effect that, during the said period, the Petitioner / Appellant / Bank (Financial Creditor), has `sought `Legal Advise , from their `Legal Counsels , for filing this Appeal, however,` due to occurrence of major Festivals , including `Diwali , there was a delay, in preparing and finalising the present `Appeal , etc., are in `no manner plausible reasons / explanations , to come within the umbrage of the term `Sufficient Cause , and the same is only a `ploy , praying for `Condoning the Delay in question, for preferring the `Appeal , as held by this `Tribunal . This `Tribunal , taking note of the cumulative attendant facts and circumstances of the present case, in an `integral manner, comes to a consequent conclusion, that the Petitioner / Appellant / Bank (Financial Creditor), has not made out any `Sufficient Cause , for the purpose of `Condoning the delay of 3 days , in preferring the instant `Company Appeal . Appeal dismissed.

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• FEMA

• 2024 (6) TMI 561
  Recording of reasons for formation of opinion - Judicial Review of Show Cause Notices - scope of procedures contemplated under Rule 4 of FEMA Rules for Holding of enquiry - Non adhering to spirit of Rule 4(3) of the Foreign Exchange Management (Adjudication Proceedings and Appeal) Rules 2000 - Enforceability of departmental circulars - HELD THAT:- Procedures are to be read as it is and the Court cannot expand the scope of the procedures so as to provide any additional opportunity or otherwise. In the absence of any challenge, scope of the procedures contemplated under the Rules are to be followed as it is and any expansion would result in derailing of the procedures, which is otherwise contemplated under the Rules. Inconsistency may also arise in such circumstances which exactly arose in the present case. The inconsistency in interpretation arose on account of the expansion of Rule 4(3) offered by the Bombay High Court. Bombay High Court, while interpreting Rule 4(3), expanded the scope by stating that the term The adjudicating authority is of the opinion that an enquiry should be held, would mean that the opinion formed must be communicated to the person concerned, enabling them to defend the case . Therefore, in the opinion of this Court, it amounts to an expansion, providing an additional opportunity to the person to get the copy of the opinion recorded in writing by the adjudicating authority in the file, which is not contemplated under Rule 4(3). As we examine the spirit and intent of Rule 4(3), on issuance of show cause notice by the adjudicating authority along with the materials relating to contraventions and on receipt of the explanations from the persons/addressee, the adjudicating authority under Rule 4(3) has to consider the cause if any shown by such person.That would indicate that the explanation submitted is to be considered. On such consideration, if the adjudicating authority is of an opinion that an enquiry should be held, then he shall issue notice. The show cause notice issued relating to contraventions explanations submitted by the addressee are considered together and an opinion is formed for the purpose of conducting an enquiry. Mere forming of an opinion would be a ground to penalize a person or not? - The scope of Rule 4(3) cannot be expanded unnecessarily so as to provide an additional cause by intimating the opinion formed by the adjudicating authority to proceed with the personal hearing. On forming of an opinion under Rule 4(3), the adjudicating authority shall issue a notice fixing a date for the appearance of the person, either personally or through his legal practitioner. Therefore, the opinion is the point, where the enquiry commences and such an opinion formed would not be a ground to penalize a person. The opinion is formed by the adjudicating authority to proceed with the personal hearing and not for any other purposes. Therefore, intimating such an opinion formed by the adjudicating authority to the persons are unnecessary and not contemplated under Rule 4(3). Therefore, Rule 4(3) cannot be interpreted beyond its scope and the procedures contemplated under Rule 4 in entirety are to be considered holistically to understand whether a fair opportunity has been provided to the persons or not. No Writ against a show cause notice is entertainable in a routine manner. A writ against a show cause notice is entertainable only if it is issued by an incompetent authority, having no jurisdiction, or tainted with allegation of mala fides. In the present case, the show cause notice has been issued under Rule 4(1) of the Rules. Therefore, the petitioners are bound to respond to the show cause notice by availing the opportunity. Thereafter, the adjudicating authority has to form an opinion under Rule 4(3) of the Rules, either to exonerate the person or proceed with the enquiry proceedings. If the adjudicating authority takes a decision to proceed with the enquiry then Rule 4(4) to 4(12) is to be followed scrupulously. When the adjudicating authority has not even formed an opinion under Rule 4(3) of the Rules, question of challenging the show cause notice issued under Rule 4(1) would not arise at all. Therefore, the grounds raised on merits in the writ petitions cannot be adjudicated by this Court at this stage and it is for the petitioner to respond to the show cause notice by submitting his explanations and if any opinion is formed to proceed with the enquiry proceedings thereafter, the petitioners have to defend their case in the manner contemplated under the Act and Rules. WP dismissed.

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• 2024 (6) TMI 560
  Contravention of Section 8(1) of FERA, 1973 - Denial of cross-examination of witnesses - violation of the principles of natural justice - whether a case of contravention of Section 8(1) of FERA, 1973 would be made out even if the appellants admitted receipt of the money from an NRE account because it was received by them in Indian currency? - HELD THAT:- The statement of deposits and withdrawals from the NRE account shows that foreign exchange came in the account of AkbarVeerji on its deposit and it was transferred to the account of the appellants, may be the Indian currency. It is not that NRE account was opened with deposit of Indian currency and transferred it in favour of the appellants so as to exclude from the purview of Section 8(1) of FERA, 1973. The ingredients of Section 8(1) are satisfied in this case on transfer of the amount from NRE account where Foreign Exchange was deposited, thus the first legal argument raised by the appellant cannot be accepted. If the argument of the appellant is accepted, it would hit sub-section (2) of Section 8 of FERA, 1973. Though the appellants have not alleged for contravention of the aforesaid provision but reference of the said provision has been given to show the argument of the appellant, if accepted, then would offend other provisions of FERA, 1973. Thus, first ground raised by the appellant cannot be accepted. Proceedings before the Adjudicating Authority are of quasi-judicial and otherwise summary in nature. Cross-examination in such proceedings cannot be claimed as a rule. It may be required in Courts dealing civil or criminal cases. This is apart from the fact that cross-examination can be allowed when statement is recorded. In this case, statement could not be recorded in absence of presence of Akbar Veerji. The cross-examination cannot be sought of a person who never deposed statement before the Court or the authority. It is a fact that AkbarVeerji could not be produced before the Adjudicating Authority and thereby there was no question of recording of his statement. He was, in fact, a non-resident Indian and despite the efforts of the respondents, they could not secure him rather received a reply to the letter. In those circumstances, when the witness was not available and otherwise could not be produced in the proceedings and his statement was not recorded even during the course of investigation, the question of cross-examination would not arise. The letter replied by him is nothing but reiteration of the documents collected by the respondents from the Banks to prove their case. The respondents have given details of the account opened by AkbarVeerji coupled with the accounts of the appellants to show deposits and withdrawals of the amount and it is coupled with the fact that the account of AkbarVeerji was an NRE account. In such a case where the allegations are proved by the documents, the cross-examination of witness in summary proceedings cannot be claimed as a right when the person has not even been examined. Denial of cross-examination has not affected the appellants otherwise because the respondents could prove their case based on the documents collected during the course of investigation. Thus, we do not find that denial of cross-examination in this case is fatal. Thus, the second ground raised by the appellant is also not sustainable. Impact of Acquittal by the ACMM Court - The appellants argued that their acquittal by the ACMM Court should lead to the setting aside of the impugned order - ACMM Court has, however, recorded a finding that there is no material to prove transfer of an amount from NRE account whereas the respondents before us have submitted complete material to show and prove that an NRE account was opened by Akbar Veerji. The documents and the information received from Canara Bank produced before the authority was sufficient to prove transfer of Foreign Exchange in NRE account. The documents of two other Banks proved transfer of money in the account of the appellants. They even admitted it in their statement recorded under Section 40 of the Act and can be relied being judicial statement. The transfer of money in the account of the appellants was out of Foreign Exchange. Thus, the conclusion drawn by the ACMM Court cannot be made binding when the respondents have sufficiently proved their case before us. It has been held that in all circumstances, it would not be necessary for the court to accept the finding recorded by the Adjudicating Authority and it would be vice-versa. It would all depend on the facts of the case and, therefore, rigidly it cannot be held that as and when prosecution case fails necessarily the adjudication case should also fail. It is when the standard of proof in two proceedings are different.

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• 2024 (6) TMI 559
  Contravention of the provisions of Sections 8(1), 48 and 49 r.w.s. 72(c) of the Foreign Exchange Regulation Act, 1973 ( FERA) - Imposition of Penalty by the Adjudicating Authority - culpability of the appellant company - delivery of the cargo to Dubai instead of Russia - formation gathered by the Directorate that certain exporters were abusing the policies governing exports from India to Russia against repayment of Rupee credits, thereby causing large-scale loss of foreign exchange to the exchequer - As alleged that the Russian buyers were non-existent. HELD THAT:- Upon perusal, the letters in question appear to be authentic in all respects. As pointed out by the learned adjudicating authority, they are on the appellant company s letterhead, mention all the essential details such as the shipment container number, voyage number, name of the like vessel etc. The charge of forgery is a serious one under law. No facts have been placed before us to indicate that any criminal complaint was filed by the appellant against the shipping company for the alleged forgery and if so, what was the fate of the same. Adjudicating authority has also referred to the fact that delivery of the cargo to Dubai instead of Russia was in fact, against the commercial interest of the shipper as it would result in reduced freight charges, unless, of course, the shipping company, was in collusion with the exporter and benefitted by diverting the cargo to a hard currency area in order to generate hard foreign currency in Dubai on the one hand and at the same time also realised payment in rupees under the state credit scheme for export to Russia. As also taken note of the observation of the learned adjudicating authority that in the event the exporter really intended that the goods should be delivered at Moscow only and the goods in fact did not reach Moscow but were delivered at Dubai, the logical course of action on the part of the exporter (the appellant company) or the importer (M/s Arina, Moscow) ought to have filed a case against the shipping company for claiming damages, but no such action was taken by either of them in this case. He has further observed that all the three parties involved, namely, the shipper/exporter, the shipping agent, and the consignee appear to have had no grievances or complaints against one another until the initiation of enquiries by the respondent Directorate. From all these facts, it cannot be ruled out in our view that all three parties were complicit in the entire episode. Alternately, it is also possible that the Russian importers, whose very existence has been doubted by the respondent Directorate, are not even genuine parties and were mere paper entities. It is evident that the blame game between the exporter and the shipping agent started only after investigations were initiated into the alleged fraud. Therefore, not much credence can be given to the appellant s submission laying all the blame at the shipping company s door. We do not, however, wish to express any final view on the matter as the present case pertains only to the shipper/exporter company (and its Director) and the other two parties in the equation, namely, the shipping agent and the Russian importer are not before us in the present appeals. As having completed all the paperwork for export to Russia and loaded the consignments for shipment, the appellant company itself superseded its earlier instructions by issuing fresh instructions by way of the letters in question to deliver the cargo at Dubai to M/s Indem General Trading (LLC), Dubai. In the above view of the matter, none of the other issues raised by the appellants holds any merit in our view since export to Russia, the key precondition under the RBI Circular for drawing funds under the state credit scheme, was not complete as against the appellant company. The inability expressed by the appellant company vide its letter dated 29.12.2001 to furnish copies of the L/Cs, contract and correspondence with the foreign buyers, and other export documents on the pretext that the same could not be traced out because of shifting of the office premises further strengthens our view in the matter. We are of the view that the culpability of the appellant company is adequately established on the preponderance of probabilities, rendering them liable for imposition of penalty under FERA, 1973. The learned adjudicating authority was of the view that important export deals of such nature are normally decided in the Board meetings in the presence of all directors. Viewed in this perspective, the culpability for the transactions in question converge at the level of the directors of the company. Accordingly, he held the three directors of the company, namely, Shri Arun Kumar, Shri Prasanta Kumar Ray and Shri Amir Akbar Khan liable for the violations in terms of Section 68 of FERA, 1973 in relation to the appellant company, M/s S.S.K. Exports Ltd. As already stated, in this order, we are only concerned with one of the three directors, namely, Shri Arun Kumar. We find that no separate arguments have been presented challenging the penalty imposed upon Shri Arun Kumar over and above the arguments and contentions raised on behalf of the company which we have already dealt with in detail in this order. Penalty imposed upon the director was a direct consequence of the penalty imposed upon the company. No material has been placed before us to indicate that Shri Arun Kumar, Director, was not in charge of, and was not responsible to the company for the conduct of business of the company at the relevant time. Accordingly, we hold that Shri Arun Kumar, Director of M/s S.S.K. Exports Ltd., is also liable for imposition of penalty in view of the aforementioned Section 68 of FERA, 1973. Further, considering the nature of the contravention and the amount involved, we are of the view that the amount of penalty imposed is reasonable. Accordingly, we confirm the penalty of Rs. 20,00,000/- imposed upon the company which is the appellant before us as well as the penalty of Rs. 5,00,000/- imposed upon its Director Shri Anup Kumar, the appellant.

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• 2024 (6) TMI 558
  Contravention of section 9 (1) (f) (i) of FERA 1973 - Appellant argued lack of material and violation of natural justice, citing the need for cross-examination - appellant denied the allegations made against him and prayed for cross-examination of Sudhir Kapadia which was not acceded to - HELD THAT:- No part of the order pertains to the appellant to show his involvement for the contravention of the provision of the Act of 1973. In the statement recorded on 31.07.1996, Sudhir Kapadia stated about the details of the account at New York sent by Baghubhai to him. The payment of U.S. $ 38,000 is said to have been made on the instruction of the appellant who approached him on 16th or 17th July 1996. He required an amount of U.S. $ 38,000 outside India. He then contacted Baghubhai in London who asked him to hand over an amount of 14,82,000/- to Mahendrabhai which was collected from Amit Shah on 18th July. The order does not contain a reference of statement of Mahendrabhai or anyone other than Sudhir Kapadia said to have retracted his statement. The fax message does not make a reference of the appellant. Thus, we do not find any material to show involvement of the appellant other than the statement of Sudhir Kapadia. When Sudhir Kapadia had retracted his statement and the appellant was denied an opportunity of cross-examination of the person whose statement was relied against him, it was not proper to draw conclusions against the appellant without any other evidence to prove his involvement. The order does not discuss any material against the appellant other than a reference of the statement of Sudhir Kapadia despite retraction. We find reasons to cause interference in the impugned order qua the appellant which is set aside.

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• PMLA

• 2024 (6) TMI 588
  Money Laundering - forceful possession of property - proceeds of crime - main plank of the petitioner is that mere forceful possession of the subject property cannot be the proceeds of crime covered under section 2(1)(u) of the PMLA - HELD THAT:- The gist of the offence of money-laundering as defined under section 3 of the PMLA is involvement in any process or activity connected with the proceeds of crime derived or obtained as a result of criminal activity relating to or in relation to a scheduled offence. Concerning a scheduled offence, the definition of money-laundering under section 3 encompasses every possible manner of involvement of the person with the proceeds of crime derived or obtained as a result of that crime. Section 3 incorporates every attempt whether directly or indirectly to conceal, possess, acquire, or use the proceeds of crime. Even an attempt to project the proceeds of crime as untainted property or attempting to claim the same to be an untainted property shall come within the sweep of section 3. The expression possession has a definite meaning and connotation and illegal possession of a person over an immovable property is protected in law to a certain extent. The word property within the meaning under clause (v) to section 2(1) of the PMLA includes any property or assets of every description and it can be tangible or intangible. There is a crime registered for forging the revenue records, falsification of the official records and other scheduled offences. This is the case pleaded by the ED that by its timely action the intended acts of forgery and manipulation in the revenue records of the subject property were foiled. The subject property must be considered the proceeds of crime which is in forceful possession of the petitioner and there is prima facie evidence of an attempt to commit the scheduled offences for legalizing the subject property. To constitute the offence of money-laundering under section 3 of the PMLA, this is not necessary to establish that first a crime was committed which included the scheduled offence. It may so happen, as has happened in this case, that the property was first grabbed and then the attempt was made to make it lawfully acquired through illegal acts which shall constitute the scheduled offence or an attempt to commit the scheduled offence. The interpretation to section 2(1)(u) of the PMLA that is put, is in tune with the intention of the Parliament and further advances the object and purpose behind the legislation. The validity of section 19 of the PMLA was under challenge in Vijay Madanlal Choudhary [ 2022 (7) TMI 1316 - SUPREME COURT ]. The Hon ble Supreme Court held that this provision has reasonable nexus with the purposes and objects of prevention of money-laundering and confiscation of the proceeds of crime involved in money-laundering and prosecution of the persons involved in the processes or activities connected with the proceeds of crime under the PMLA Act; the Constitutional validity of section 19 was upheld. Section 167 of the Code of Criminal Procedure empowers the Judicial Magistrate to authorize the detention of an accused in the custody of the police and, until the accused is committed the Court of Sessions, the Magistrate is vested with the power under section 209 of the Code of Criminal Procedure to remand an accused to custody. However, even where an order of remand is found to be illegal the accused does not get acquitted and the proceedings do not terminate. The provisions under section 19 of the PMLA are clear and unambiguous. The power of the arresting officer is well defined and his duties are prescribed under sub-sections (2) and (3). This is a fundamental rule of interpretation that if the words of a statute are themselves precise and unambiguous no more is necessary than to expound those words in their natural and ordinary sense as the words themselves shall best declare the intention of the Legislature - In the present case, the question of malafides pales into insignificance in the face of the abundance of materials collected by the ED which prima facie show the involvement of the petitioner with the proceeds of crime and money-laundering. The case set up by the ED against the petitioner is not based only on the statements recorded under section 50 of the PMLA including of those who claimed themselves real owners of the properties in question, there is an abundance of documents that lay a foundation for the arrest and remand of the petitioner to police and judicial custody. At this stage, this is not possible to hold that the ED has proceeded against the petitioner for no reasons. The admissibility or otherwise of the materials collected by the ED can be examined by the Special Court if a prosecution report is filed against the petitioner. The learned ASG rightly contended that the scheme under the PMLA does not contemplate a mini-trial at this stage. The maxim sublato fundamento cadit opus which means when the foundation goes the superstructure falls shall not be applied in case of subsequent remand(s). Every remand order is a separate order and without laying a challenge to the subsequent remand order(s), the accused must fail in his attempt to seek a declaration that his custody is bad in law. The challenge to the remand order dated 2nd February 2024 is of no consequence and it is not demonstrated that the arrest of the petitioner was illegal. Petition dismissed.

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• 2024 (6) TMI 587
  Money Laundering - provisional attachment order - making illegal foreign remittances to Hong Kong through banking channels by submitting fake import documents to the banks - HELD THAT:- The prosecution complaints under PMLA, 2002 have been filed and proceedings arising out of the same are pending against all the appellants involved in these appeals. Evidence exists in the form of statements of witnesses, including that of the main accused and other accused persons apart from other evidence, which incriminate the appellants. On the other hand, other than bare denials, the appellants have not presented any credible evidence to discharge their burden of proof under section 24 of the Act. It is by now well-settled that under PMLA, 2002 provisional attachment of property is an emergent measure to be taken by the designated authority upon being satisfied and having reason to believe that the proceeds of crime are likely to be concealed, transferred or dealt with in any manner, which may result in frustrating any proceedings relating to confiscation of such proceeds of crime. The purpose of such attachment is to protect and preserve the proceeds of crime until the guilt or innocence of the person, as the case may be, is established. The Hon ble Supreme Court in Vijay Madanlal Choudhary Ors. v. UoI Ors., [ 2022 (7) TMI 1316 - SUPREME COURT ], has observed that it is clear that the provision in the form of Section 5 provides for a balancing arrangement to secure the interest of the person as well as to ensure that the proceeds of crime remain available for being dealt with in the manner provided by the 2002 Act. Under section 2(1)(d) of the Act, attachment has been defined to mean prohibition of transfer, conversion, disposition or movement of property. Attachment of property does not prevent the person from use and enjoyment of the property. There are no grounds to interfere with the order of the Ld. Adjudicating Authority in the instant set of appeals - appeal dismissed.

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• 2024 (6) TMI 586
  Deletion of bail condition - seeking permission to travel abroad - review of previous order - HELD THAT:- It is settled law that an accused has fundamental right to travel abroad. Certainly, he is required to take permission of the Court. It has to be noted that many accused persons involved in ED cases and who were never arrested under Sec.19 PML Act, have inevitable part of their life / profession to frequently and extensively travel abroad. Every time they have to apply to the Court for seeking permission of the Court. Certainly the Court cannot pass any order without hearing ED. ED raises typical objections of flight risk etc. for which they never thought to arrest the accused under Sec. 19 PML Act. Another aspect requires consideration is the volume of trial and approximate duration of its conclusion which anyone can anticipate or estimate. The release of applicant (A4) under Sec. 88 Cr.P.C was to safeguard the trial. As per Sec. 44(1)(c) PML Act the trial of PMLA case has to be simultaneously conducted with the trial of the case(s) related to the Scheduled Offence. In the instant case, the case related to the Scheduled Offence was pending in Jammu Kashmir State and until the Court given direction to the ED, no step had been taken by the ED to commit the same, particularly when one of the accused Nihal Garware (A1) was undertrial prisoner. This applicant is a frequent flyer and for his profession he has to travel all over the world. Sometimes he visits 2-3 countries and thereafter, has to extend his travel to some other countries. The time span between such travels is very short wherein he cannot return India, approach the Court and seek further extension of travel. In such situation, either he has to loose his opportunities simply because of the Order of the Court or if he (A4) continues his travel to new destination which is not a part of his application for permission, his travel would certainly amount breach of the permission granted by this Court and ED would certainly canvass this aspect. Applicant is permitted to travel abroad during and until the conclusion of trial to any destination without any impediment of condition - further conditions imposed - application allowed.

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• Service Tax

• 2024 (6) TMI 585
  Challenge to letters issued by Deputy Commissioner under Sabka Vishwas Scheme - Failure to make the payment of the amount mentioned in SVLDRS-3 form - HELD THAT:- The Respondents having not rebutted the averments made by the Petitioner which states that on account of technical glitch, the Petitioner could not make the payment and a grievance was raised by the Petitioner with the Respondents on this count and the admitted fact, as stated in the affidavit-in-reply that Petitioner is willing to make payment, in our view the Petitioner should not be denied the benefit of the SVLDRS when no fault can be attributed to the Petitioner. The Petitioner is justified in relying upon the decision of the Co-ordinate Bench of this Court in the case of J JAI SAI RAM MECH TECH INDIA P. LTD., VERSUS UNION OF INDIA, JOINT COMMISSIONER SABKA VISHWAS COMMITTEE OFFICE OF COMMISSIONER CGST CENTRAL EXCISE OF PALGHAR, DEPUTY COMMISSIONER OFFICE OF COMMISSIONER CGST CENTRAL EXCISE OF PALGHAR. [ 2024 (4) TMI 236 - BOMBAY HIGH COURT] wherein on identical facts situation this Court had permitted declarant to make the payment and avail the benefit of SVLDR scheme. There are no reason for taking a different view. Application disposed off.

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• 2024 (6) TMI 584
  Classification of service - Maintenance or Repair Service or not - benefit of exemption N/N. 12/2003-ST dated 20.06.2003 - retained goods on value of service - Applicability of Rule 2A of the Service Tax Valuation Rules, 2006 - HELD THAT:- Respondents are replacing Coil, Transformer Oil and other items. They are paying Service Tax only on Labour Charges whereas it is contention of Revenue that Respondent should pay Service Tax on entire cost including of all the goods which are used in repair and Respondents are also not eligible for benefit of exemption Notification 12/2003, dated 20-6-2003 since there is no documentary proof. On going through contract, it is noticed that contracts described the rate of each item of works. Further the invoices issued by the respondent clearly shown that the VAT has been paid by the Respondents on cost of materials which are used in repair maintenance. The explanation (c) of the Rule 2A(i) very clearly provides that value adopted for the purpose of payment of VAT shall be taken as the value of property in goods transferred in the execution of the said works contract for determination of value of service portion in the execution of works contract. The identical issue in the case of repair of transformer activity stands considered by the Tribunal in number of decisions. In the case of M/S BALAJI TIRUPATI ENTERPRISES VERSUS CCE, MEERUT-II [ 2014 (2) TMI 1137 - CESTAT NEW DELHI] as also in the case of CCE, ALLAHABAD VERSUS M/S. KAILASH TRANSFORMERS [ 2014 (2) TMI 1136 - CESTAT NEW DELHI] and in the case of HINDUSTAN AERONAUTICS LTD. VERSUS COMMR. OF SERVICE TAX, BANGALORE [ 2009 (9) TMI 163 - CESTAT, BANGALORE] , the value of the goods used while carrying out repair activities was taken out of the service cost. Some of the said decisions stand confirmed by the Hon ble Supreme Court when the appeal filed by the Revenue was dismissed. Appeal of Revenue dismissed.

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• 2024 (6) TMI 583
  Exemption from service tax - Erection, Commissioning Installation Service - N/N. 11/2010 Service tax dtd. 27.02.2010 read with Circular No. 123/5/2010 TRU dtd. 24.05.2010 - HELD THAT:- On examination of the contract awarded by M/s. GETCO to the respondent, it transpires that the scope of work is in connection with transmission line of electricity. In exercise of the powers conferred by Section 11C of the Central Excise Act, 1944 read with Section 83 of the Finance Act, 1994, the Central Government vide Notification No. 45/2010-S.T., dated 20-7-2010 has directed that the servicetax payable on transmission and distribution of electricity provided by the service provider, which has not been levied, shall not be required to be paid in respect of the taxable service under the category of Erection, Commissioning or Installation. The issue of eligibility of Notification No. 45/2010-S.T. in identical situation is no longer res integra and has been decided in favour of service providers such as the respondent, in a number of cases. The very same Notification was considered by the Bench of the Tribunal in the case of M/S KEDAR CONSTRUCTIONS VERSUS COMMISSIONER OF CENTRAL EXCISE, KOLHAPUR [ 2014 (11) TMI 336 - CESTAT MUMBAI] wherein the Bench has considered the activity of the appellant therein of construction of sub-station and also for maintenance of sub-station. The activity of respondent is clearly exempted from payment of Service tax. The impugned order is upheld. The appeal filed by Department is dismissed.

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• 2024 (6) TMI 582
  Taxability of Unincorporated Joint Ventures - Revenue sharing arrangements - support services of business or commerce (BSS) - appellant provided the cinema hall and other infrastructure to the distributor for exhibition of the movie in the theatre - non-payment of appropriate service tax on the amount received by the appellant for providing the the service - HELD THAT:- A Division Bench of the Tribunal in PVS Multiplex India Pvt. Ltd. vs. Commissioner of Central Excise, Meerut-I [ 2017 (11) TMI 156 - CESTAT ALLAHABAD] , after recording a finding that the appellant had screened films in the multiplex on a revenue sharing basis with the distributor, held that the appellant would not be liable to pay service tax on the amount that fell in the share of the distributor. A perusal of the decision of the Tribunal in Inox Leisure [ 2021 (10) TMI 893 - CESTAT HYDERABAD] would indicate that not only was the earlier decision of the Tribunal in PVS Multiplex [ 2017 (11) TMI 156 - CESTAT ALLAHABAD] followed, but independent findings were also recorded to hold that service tax could not be levied upon the appellant under BSS. This order of the Tribunal was assailed by the Department before the Supreme Court and the Supreme Court while dismissing the appeal specifically observed that the Tribunal had taken an absolutely correct view, to which the Supreme Court agreed. PVS Multiplex and Inox Leisure, therefore, lay down the correct law. The papers may now be placed before the Division Bench of the Tribunal for deciding the appeal.

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• Central Excise

• 2024 (6) TMI 581
  CENVAT credit availed on capital goods procured in 2007-08 and 2008-09 but installed in 2011 - HELD THAT:- A conjoint reading of the provisions of Rule 2 (a) and Rule 4 of the Rules of 2004 go to show that while Rule 2 (a) lays down the definition of capital goods , the conditions for providing CENVAT credit under the Rules are laid down under Rule 4. A plain reading of Rule (2) (b) of Rule 4 shows that balance of CENVAT credit may be availed in any financial year subsequent to the financial year in which the capital goods were received in the factory of the manufacturer. Rule (2) (a) of Rule 4 of the Rules of 2004 provides that CENVAT credit in respect of capital goods received in a factory or in the premises of the provider at any point of time in a given financial year shall be taken only for an amount not exceeding 50% of the duty paid on such capital goods in the same financial year. It is no doubt correct that as per Rule 2 (a) of the Rules of 2004 it would be open for the assessee to avail upto 50% of CENVAT credit in the financial year when the capital goods were procured. However, Rule 2 (a) of the Rules does not make it mandatory for the assessee to lodge a claim for Cenvat Credit only in the year of procurement of the machinery - in the facts and circumstances of the present case, there is no cogent basis for this Court to conclude that the assessee had illegally availed CENVAT credit for procurement of the capital goods pertaining to the years 2010-11 and 2011-12. Consequently, the order for recovery of the amount of CENVAT credit as affirmed by the learned Tribunal is held to be unsustainable in the eyes of law. The Commissioner (Appeals), Customs, Central Excise and Service Tax, Guwahati, was not correct in passing the order dated 25/11/2014 particularly in so far as allowing the demand for recovery of Rs. 15,95,332/- as CENVAT credit availed by the appellant on the capital goods is concerned. Appeal allowed.

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• 2024 (6) TMI 580
  Rectification of order by the CESTAT - Rejection of application filed u/s 35C (2) of the Central Excise Act, 1944 - discount received by bank from automobile dealers can be treated as a consideration for service or not - HELD THAT:- The decision in case of IndusInd Bank Ltd. [ 2019 (2) TMI 26 - CESTAT CHENNAI] was rendered even without taking note of any of the decisions rendered earlier by the benches of co-equal strength and such a decision cannot be but a decision rendered per incuriam. What is quite glaring is that the Tribunal has not bothered to list which are those matters prior to IndusInd Bank Ltd., where a contrary view has been taken and which are those matters which have not been considered in the IndusInd Bank Ltd. It is nothing but a bald observation made without details. Apart from mere assertion, there is no mention in the impugned order of any decision of the Appellate Tribunal, which has taken a contrary view. The impugned order passed by the Tribunal on 5th December 2019 has to be quashed and set aside. The matter is remanded to the Tribunal for denovo consideration - application disposed off.

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• 2024 (6) TMI 579
  Suo moto credit in the CENVAT Credit account - benefit given under N/N. 01/2011-C.E. - HELD THAT:- It is a fact on record that the respondent had cleared goods to the Indian Railways as well as private companies and during the period from April 2012 to June 2012, the respondent utilized the CENVAT Credit for payment of duty at the rate of 6% for the clearances to Indian Railways as well as private companies. Later on, upon realization that the respondent is entitled to the benefit of Notification No. 01/2011-C.E. dated 01.03.2011 wherein duty is payable at the rate of 2% in cash, the respondent paid the same along with interest. In these circumstances, the duty paid during the period from April 2012 to June 2012 for clearances to the Indian Railways by utilizing CENVAT Credit is eligible as CENVAT Credit for the respondent. The case of the Revenue is that the respondent is not entitled to avail CENVAT Credit suo moto, but are required to file refund claims. The said issue has been settled by this Tribunal in the case of M/S. CIMMCO LIMITED VERSUS COMMISSIONER CGST CENTRAL EXCISE ALWAR (VICE-VERSA) [ 2019 (7) TMI 1606 - CESTAT NEW DELHI] wherein it was observed The fact that the duty which was in the first instance was paid from accumulated Cenvat credit have later been paid from cash by debiting through PLA account. It is only adjusted as the duty on the same goods cannot be paid twice and as the required amount of duty on the wagons cleared was on payment from PLA.. They were certainly entitled for taking the cenvat credit which was debited in the first instance. The respondent has correctly taken suo moto credit of the duty paid by utilizing CENVAT Credit account, which has been ultimately paid, in cash, along with interest - there are no infirmity in the impugned order and hence, the same is upheld - appeal of Revenue dismissed.

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• 2024 (6) TMI 578
  Levy of penalty u/s 11AC of the Central Excise Act, 1944 - duty paid before issuance of SCN - existence of mens rea or not - fatty acid / waste - by-product - HELD THAT:- It is observed that immediately on pointing out the short payment of duty, the appellant have voluntarily paid the duty along with interest, before issue of the Show Cause Notice. Thus, the provisions of sub-section 2B of Section 11A is applicable in this case. It is also observed that even when the appellant was not paying duty on the waste fatty acid, they have filed E.R.-1 returns regularly intimating the duty payment details. Thus, there are no suppression of fact with intention to evade payment of duty exists in this case. Accordingly, the penalty under Section 11AC is not imposable in this case and hence the penalty imposed on the appellant under Section 11AC of the Central Excise Act, 1944 is set aside. Quantum of duty liability - HELD THAT:- There is a difference between the duty liability determined by the appellant and the duty liability calculated by the Department - even though the appellant accepted the duty liability, the ld. adjudicating authority contended that there was a short payment of Rs.17,770/-. However, the appellant insists that as per their calculation, they have rightly paid the differential duty and there is no short payment. If the adjudicating authority finds that there is a short-payment of duty by the appellant, then the appellant should pay the differential duty along with interest. Since there is no suppression of fact involved with intention to evade payment of duty exist in the present case, no penalty is imposable on the appellant even if there is a differential duty payable by the appellant over and above the amount of duty already paid by them. Accordingly, the matter is remanded to the adjudicating authority only for the limited purpose of quantification of the differential duty liability, if any, payable by the appellant, along with interest. Petition allowed by way of remand.

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• 2024 (6) TMI 577
  Dutiability of molasses used in the manufacture of non-excisable goods - captive consumption - negation of N/N. 67/95-CE dated 16th March 1995 on goods manufactured - wrongful availment of CENVAT Credit - HELD THAT:- The impugned notification is intended to facilitate captive consumption which, particularly in a continuous integrated manufacturing process, would have involved assessment to duty of central excise at several stages with its own controversies over rate of duty and value that are not exactly not superfluous as the chain of value addition ensures that duty is, in any case, charged on the final value of the goods from the factory of production. Furthermore, the availability of credit of duties paid at each stage neutralizes intermediate assessment including ascertainment of classification and value. Spirits are denatured to render unfit for human consumption; levy of commodity taxation in the constitutional scheme excludes the jurisdiction of the Union on spirits intended for human consumption. Central Excise law is this applicable to all, and any spirit, that is not intended for human consumption. Denaturing is only the mark of that intention as it does not alter the product for further use except in human consumption. Therefore, the intermediate product that emerges, and to the extent that it is not intended for human consumption, is not marketable as such and all the indicators of goods adheres to it upon denaturing. There is no dispute that denatured spirits are manufactured, are excisable and are not exempt. Consequently, the molasses that have been deployed captively for the purpose are exempted from duty. The order of Commissioner of Central Excise is set aside to allow appeal of assessee.

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• 2024 (6) TMI 576
  Recovery of CENVAT Credit with interest and penalties - input service - garden maintenance service - catering service - housekeeping service - input service credit distribution - HELD THAT:- If the claim of the appellant that it is the transformer division that was billed for the impugned services is correct, the proceeding acquire a different complexion; the credit would have been taken by the proper entity. Furthermore, the case made out against the appellant is that the they could not have taken the entire credit pertaining to common input service to the transformer division which would be a plausible proposition if the credit was to be distributed. Such contingency would not arise of the service was procured by the transformer division and not by an office of the appellant-company. The claim of the appellant has not been controverted in the impugned order. The appellant, too, has not evinced any documents in support of the claim. Determination of this claim is crucial as it has a bearing on the process by which credit of input service could be distributed. Only then would it be possible to ascertain if the failure to obtain registration as input service distributor did impact distribution of credit. The impugned order is set aside to ascertain the correctness of the claim that bills were raised on a department of the transformer division and, if not, to determine the correctness of the contention that procedural irregularity would not stand in the way of taking the credit entirely as the rule, then in existence, allowed. Appeal allowed by way of remand.

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• CST, VAT & Sales Tax

• 2024 (6) TMI 575
  Validity of assessment order - applicability of time limitation period u/s 25(1) of KVAT Act - HELD THAT:- The assessing authority appears to have ignored the said contention on limitation apparently, because the assessment order was passed pursuant to an audit objection raised in terms of Section 25A of the KVAT Act. At any rate, since the issue of applicability of the limitation provision under Section 25 (1) on the facts of the instant case is under consideration before this Court, the appellant herein had established a prima facie case for the grant of a stay pending disposal of the writ petition. This is more so because the express provisions of Section 25 (1) of the KVAT Act clearly indicate that the limitation period for completion of assessment is six years from the end of the relevant assessment year. It is not in dispute that Ext. P2 order was passed beyond the said period since the assessment year in question is 2016-17. It is deemed appropriate to allow this writ appeal by setting aside that part of the impugned order of the learned Single Judge that directs the appellant to deposit 25% of the dues of tax assessed within a period of two weeks as a condition for grant of stay of recovery of balance tax, interest and penalty pending disposal of the writ petition. Petition allowed.

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