TMI Tax Updates - e-Newsletter
June 26, 2021

Case Laws in this Newsletter:

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

Articles

1. Balance sheet may be a written confirmatory statement for limitation purposes a discussion in view of judgment of honorable Supreme Court.

   By: DEVKUMAR KOTHARI

2. REVOCATION OF CANCELLED GST REGISTRATION CERTIFICATE

   By: DR.MARIAPPAN GOVINDARAJAN

News

1. Government grants further extension in timelines of compliances

2. CCI approves acquisition of Zuarinagar plant of Zuari Agro Chemicals Limited by Paradeep Phosphates Limited

3. Public Debt Management report for the quarter of January March 2021

4. APEDA in collaboration with Indian embassy organize virtual buyer seller meet for boosting agricultural and processed food products exports to Algeria

5. Finance Minister Smt. Nirmala Sitharaman addresses US-India Strategic Partnership Forum (USISPF) Board of Directors Investment Roundtable

6. IFSCA constitutes a committee for development of avenues for Ship Financing and Leasing in IFSC

Notifications

Companies Law

1. F. No. 17/151/2013-CL-V(Pt.) - dated 23-6-2021 - Co. Law

Companies (Accounting Standards) Rules, 2021

GST - States

2. G.O.Ms.No.139 - dated 18-6-2021 - Andhra Pradesh SGST

Amendment to G.O.Ms.No 259, Revenue (CT-II) Department, dated.29-6-2017 so as to notify APGST rates of various services as recommended by GST Council in its 43rd meeting held on 28.05.2021

3. G.O.MS.No.138 - dated 18-6-2021 - Andhra Pradesh SGST

Amendment to notification issued in G.O.Ms.No. 258, Revenue (CT-II) Department, Dated 29-6-2017 prescribing change in APGST rate of goods

4. G.O.MS.No. 140 - dated 18-6-2021 - Andhra Pradesh SGST

Amendment to G.O.Ms.No.259, Revenue (CT-II) Department, dated 29-6-2017 so as to notify APGST rates of various services as recommended by GST Council in its 44th meeting held on 12.6.2021

5. G.O.MS.No. 137 - dated 18-6-2021 - Andhra Pradesh SGST

Providing the concessional rate of SGST on Covid-19 relief supplies, up to and inclusive of 30th September 2021

6. F.12(1)FD/Tax/2021-29 - dated 23-6-2021 - Rajasthan SGST

Corrigendum to Notification no. F.12(1)FD/Tax/2021-28 dated 14.06.2021.

Indian Laws

7. 1-CA(7)/196/2021 - dated 22-6-2021 - Indian Law

Chartered Accountants (Amendment) Regulations, 2021

Circulars / Instructions / Orders

DGFT

1. 9/2015-20 - dated 24-6-2021

Memorandum of Understanding (MoU) between Government of the Republic of India and the Government of the Republic of the Union of Myanmar for import of toor and urad

2. 8/2015-20 - dated 24-6-2021

Memorandum of Understanding (MoU) between Government of the Republic of India and the Government of the Republic of Malawi for import of toor

Companies Law

3. 10/2021 - dated 23-6-2021

Clarification on passing of ordinary and special resolutions by companies under the Companies Act, 2013 read with rules made thereunder on account of COVID-19- Extension of time

Highlights / Catch Notes

Income Tax

• Draft Order Mandatory u/s 144C; Tribunal Says No Need to Repeat Procedures After Remand Decision.

  Case-Laws - HC : Assessment u/s 144C - issuance of draft order as mandatory and contemplated u/s 144(C) not adhered to - Once the procedure has been followed and the Appellate Tribunal remitted the matter back to decide the particular issue with a specific finding, then it is sufficient if the remitted issue was decided by the AO / TPO and a final assessment order is passed. - Repetition of the same procedures would become an empty formality, which is not intended under the provision - HC
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• Court Rules in Favor of Educational Institution for Tax Exemption u/s 10(23C)(vi) of Income Tax Act.

  Case-Laws - HC : Exemption u/s 10 (23C) (vi) - The main object of the petitioner indicates that it is in the field of education. There are also indication that the petitioner had not otherwise indulged in any other activity to make profit and it was engaged only in the field of education in all the years of its existence since 1992. - Denial of approval to the petitioner u/s 10 (23C)(iv) is not justified. The respondents ought to have granted approval but at the same time and laid down on strict conditions for the petitioner to comply with the said requirements. - HC
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• Court Clarifies "Relevant Assessment Year" in Section 153A, Limits Assessment Period to Six Years Per Finance Act 2017.

  Case-Laws - HC : Assessment u/s 153A - “relevant assessment year” - It is not for me to fathom the wisdom of the parliament. We cannot assume that the amendment introduced by the Finance Act, 2017 intended to bring in four more years over and above the six years already provided within the scope of the provision. When the law has prescribed a particular length, it is not for the court to stretch it. Plasticity is the new mantra in neuroscience, thanks to the teachings of Norman Doidge. It implies that contrary to settled wisdom, even brain structure can be changed. But not so when it comes to a provision in a taxing statute that is free of ambiguity. Such a provision cannot be elastically construed. - HC
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• Interest on Partner's Capital: Averaging Opening and Closing Balances for Accurate Pro-Rata Allowance by Assessing Officer.

  Case-Laws - AT : Allowability of the interest paid to the partner by the assessee firm calculating on the opening balance of the capital account of the partner without considering the subsequent withdrawals made by the partner - the Assessing Officer has rightly allowed the claim on pro-rata basis i.e. the average of opening and closing balance was taken as eligible amount while allowing the interest paid to the partner - AT
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• Special Bench to Examine Dividend Distribution Tax Limits u/s 115-O and Indo-French Treaty Article 11.

  Case-Laws - AT : Tax payable u/s 115-O - dividend distribution tax rate being restricted by the treaty provision dealing with taxation of dividends in the hands of the shareholders (i.e. Article 11 of the Indo French tax treaty, as in this case) - it is a fit case for the constitution of a special bench, consisting of three or more Members, so that all the aspects relating to this issue can be considered in a holistic and comprehensive manner. - AT
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• Assessee's unexplained cash deposits attributed to potato sales; benefit of doubt granted due to plausible agricultural production.

  Case-Laws - AT : Unexplained cash deposited in the bank account - source of receipt - sale of agriculture produce to non-existing firm - The assessee has supported the closure of the business of Dariyalal Aloo Bhandar by way of affidavit from the surrounding farmers who were having the personal knowledge of the fact of the closure of the shop since 2016. The agricultural land of 46 Bigha appears sufficient to support the production of potato as claimed - the benefit of doubt, in our mind, must go to the assessee - AT
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• Section 148 Assessment Reopening: Dismissal of Revenue's Claim on Commission Siphoning Allegations in Firm's Profit Case.

  Case-Laws - AT : Reopening of assessment u/s 148 - siphoning of profits of the firm - Amply clear that the plea of the Revenue that though the commission was initially paid to the agents through banking channels, it was received back in cash to be paid to the doctors, falls to ground - AT
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• Software Purchase Not Taxable in India: No Need to Deduct Tax at Source u/s 195, Section 9(1)(vi) Inapplicable.

  Case-Laws - AT : TDS u/s 195 - Royalty - purchase of software in the present facts does not amount to give rise to any taxable income in India as a result of which provisions of sec. 195 of the Act are not attracted. The assessee does not have any obligation to deduct tax at source. Therefore, provisions of sec. 9(1)(vi) along with Explanation 2 is not applicable to present assessee's. - AT
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• AO Must Allow Deductions for Partner Payments After Rejecting Books u/s 145(3), Section 184(5) Not Applicable.

  Case-Laws - AT : Estimation of income - interest and salary paid to partners - The AO made the assessment by estimating the income of the assessee by rejecting the books of account by invoking the provisions of section 145(3) of the Act as he was not satisfied about the correctness of the book results of the assessee. - Provisions of Section 184(5) restricting the deduction not applicable - AO directed to allow the interest and salary paid to partners - AT
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• Court Rules Against Double Taxation on Partner's Interest Income Already Included in Firm's Taxable Income.

  Case-Laws - AT : Taxability of interest income in the hands of Partner instead of Partnership firm - Allegation that assessee did not disclosed the receipt of Interest in his return of income - Since amount has already been offered for taxation in the hands of the firm, the said amount to be taxed in the hands of the individual partner i.e. assessee would amount to double taxation, which is not permissible under law. - AT
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• CIT(A) Overturned: Delay in Appeal Filing u/s 234E Should Be Condoned; Merits Must Be Addressed.

  Case-Laws - AT : Levy of fee/interest u/s 234E of the Act by the CPC, Bangalore - CIT(A) was of the opinion that the delay was not to be condoned - the delay ought to have been condoned. Hence, we set aside the order of learned CIT(A) and hold that delay ought to have been condoned. CIT(A) has further erred as after noting that he is not condoning the delay in filing the appeal, he has gone on a different tangent saying that actually this appeal is against the order under Section 154 of the Act, hence the issue on merits cannot be adjudicated - AT
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Customs

• High Court Sets Aside Order Issued Without Pre-Assessment Notice, Citing Natural Justice and Section 153 Violations.

  Case-Laws - HC : Principles of Natural Justice - assessment order is not preceded by a pre-assessment notice or show cause notice - Service by indirect methods, such as publication and affixture (S.153 (1) (d) and (e) must be only after service by direct means set out in Section 153(1)(a),(b) and (c) have been attempted and established to have failed. - The impugned order has been passed in violation of the principles of natural justice, the same is set aside - HC
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• Appellant Escapes Penalty: No Involvement in Import or Handling Under Customs Act Section 112(b.

  Case-Laws - AT : Levy of penalty u/s 112 (b) of the Customs Act - appellant did not file the IGMs in question - Undisputed peculiar facts of the case are that the appellant is neither the importer nor the owner who had acquired possession nor in any way concerned with the carrying, removing, etc., of the goods in question, and Revenue has nowhere ascribed knowledge of the appellant as to the confiscation - the Revenue has also nowhere offered redemption in lieu of the confiscation in so far as the appellant is concerned - No penalty - AT
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• Customs broker's license revocation overturned; broker not liable for importer's pricing details. Penalties ruled disproportionate.

  Case-Laws - AT : Revocation of Customs Broker License - alleged undervaluation - It is not within the remit of the customs broker to be conversant with the negotiations on price or the manner of transference of agreed recompense and, therefore, compliance with the said obligations would not have altered the allegations leveled against the importer, whether on the beneficial owner or of that on record. - The detriments invoked against them are highly disproportionate - AT
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Indian Laws

• Court Rules Missing Original Documents Don't Invalidate Application; No Police Report Needed for Credibility.

  Case-Laws - HC : Dishonor of Cheque - primary or secondary evidence - Just because respondent No.2 has not lodged any complaint with the police concerned about lost of original documents, the said application cannot be thrown away. There is no reason as to why the petition filed by respondent No.2 signed by its GPA holder and Authorized Signatory stating that the originals were misplaced cannot be believed. - HC
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IBC

• Gifts to related parties ruled undervalued u/s 45 of IBC 2016; Liquidator's claims against Respondents upheld.

  Case-Laws - Tri : Avoidable transactions - undervalued or preferential transactions - gifts made to related party - It is concluded that the impugned transactions as alleged by the Liquidator in relation to Respondents 1 to 3 constitute undervalued transactions as envisaged under Section 45 of IBC, 2016 and in the circumstances, the relief as sought for by the Applicant in clause (a) of Para VII is granted - Tri
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Service Tax

• Refund Mistaken Service Tax Payments Regardless of Period; Comply with Article 265, No Tax Without Legal Authority.

  Case-Laws - AT : Refund of the Service Tax - Tax was paid under mistake of law - change in tax regime - the Service Tax paid under mistake of law has to be refunded irrespective of the period covered as refusal thereof would be contrary to the mandate of Article 265 of the Constitution of India. - AT
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• Department's Demand on Trading Activities Unfounded; Extended Limitation Period Invocation Unjustified Under CENVAT Rules.

  Case-Laws - AT : CENVAT Credit - trading of service (exempted service) - The appellants have been meticulously reversing the proportionate credit attributable to the trading activity. However, the Department has demanded 6%/8% of the value of the trading activity considering the same as an exempted service. - invoking extended period of limitation in such circumstances is unwarranted. - AT
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VAT

• Jurisdictional Errors in Assessment: Higher Authorities' Role and Petitioner's Obligation to Exhaust Appellate Remedies First.

  Case-Laws - HC : Jurisdiction of AO - The procedures to be followed in the department for assessment are well settled. Thus, the authorities competent are not expected to commit such jurisdictional errors in a routine manner. In these circumstances, review of such orders by the higher authorities are imminent to form an opinion that there is willful or intentional act for commission of such jurisdictional errors, enabling the assesses to get exonerated from the liability. Liability and jurisdictional errors are distinct factors, and therefore, Courts are expected to provide an opportunity to the Department to decide the liability on merits and in accordance with law with reference to the provisions of the Act and Rules and guidelines issued by the Department. - the petitioner is bound to exhaust the statutory appellate remedy - HC
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Case Laws:

• GST

• 2021 (6) TMI 874
  Permission to approach the appellate authority under the Goods and Service Tax Act, 2017 - HELD THAT:- Limitation for filing of appeal has been extended by the Supreme Court in a series of decisions viz., In Re: Cognizance for Extension of Limitation [ 2020 (5) TMI 418 - SC ORDER ], [ 2020 (5) TMI 671 - SC ORDER ], [ 2021 (1) TMI 261 - SC ORDER ] and [ 2021 (3) TMI 497 - SC ORDER ]. Since this writ petition is pending on the file of this Court from 12.03.2021, the petitioner is granted four (4) weeks from today, within which time, a statutory appeal may be filed challenging the order of assessment dated 20.05.2020 before the Commissioner (Appeals) - Petition disposed off.

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• 2021 (6) TMI 869
  Grant of parole/interim Bail - offence under Section 132(1) (b) (c) and (i) of CGST Act - directions issued by HPC not followed - HELD THAT:- On perusal of direction issued by HPC on 30.4.2021, it is found that no such condition on the basis of which impugned order has been passed by Special Chief Judicial Magistrate, Meerut, therefore, impugned order lacks merit and is liable to be quashed. The order passed by Special Chief Judicial Magistrate, Meerut is quashed and petition is allowed - Special Chief Judicial Magistrate, Meerut is directed to reconsider the application of petitioner and pass reasoned order within one week from the date of production of computer generated copy of this order strictly in accordance with direction issued by HPC vide letter dated 30.4.2021.

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• Income Tax

• 2021 (6) TMI 875
  Assessment u/s 144C - issuance of draft order as mandatory and contemplated u/s 144(C) not adhered to - whether the draft assessment order has been passed in the present case or not? - HELD THAT:- Considering the findings of the ITAT, this Court is of the considered opinion that once again following the procedures right from the beginning as contemplated under Section 144C would not arise at all. Admittedly, the procedures contemplated u/s 144C in the present case had been scrupulously followed by the respondent by passing a draft assessment order on 31.03.2016 and the assessee filed an objection before the Disputes Resolution Panel, who in turn, also passed an order and thereafter, a final assessment order under Section 143(3) was passed on 25.03.2016. Once again commencing from the beginning is not the idea behind the provision and therefore, the very principles mooted out by the petitioner to commence the proceedings right from the initial stage deserves no merit consideration and stands rejected. Once the procedure has been followed and the Appellate Tribunal remitted the matter back to decide the particular issue with a specific finding, then it is sufficient if the remitted issue was decided by the AO / TPO and a final assessment order is passed. Repetition of the same procedures would become an empty formality, which is not intended under the provision and therefore, this Court is of the considered opinion that when the matter was remitted with reference to a particular issue to be clarified or decided by the competent authority, it is sufficient if such an issue is decided and thereafter, a final assessment order is passed. Even in such circumstances, the assessee is having a right of appeal under the provisions of the Act and therefore, in the event of any grievance with reference to an assessment order subsequent passed after remitting the matter by the ITAT, the petitioner is at liberty to file an appeal and thus, the grounds raised once again to pass the draft assessment order would not arise at all. The procedures as contemplated u/s 144C must be meaningfully followed and constructive interpretation is to be adopted. Repeatedly passing draft assessment order is not the spirit of the provision. The legislative intention is to provide an opportunity to an assessee before passing the final assessment order. Such an opportunity is already provided and the assessee also availed of the opportunity by submitting an objection before the Disputes Resolution Panel and the Assessing Officer and thereafter, a final assessment order is passed and after remitting the matter by ITAT to decide a particular issue, the same procedure in entirety contemplated under Section 144 C of the Act need not be followed and such a repetition is not only unnecessary, but not contemplated. The very intention of the provision is to provide an opportunity to the assessee. The opportunity has already been provided. The opportunity is made available before the Appellate authority to redress the grievances. In the event of again directing the authorities to follow the procedures right from the beginning, the proceedings would not only be prolonged, it will be protracted, which would provide an undue advantage to the assessee in the matter of payment of income tax.

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• 2021 (6) TMI 873
  Exemption u/s 10 (23C) (vi) - Denial of approval - HELD THAT:- Approval has to granted if an educational institution satisfies the fundamental requirement of existence for educational purpose and does not exist solely for the purposes of the profit. Merely because an educational institution generates surplus is not a ground for disqualifying it from granting approval to it. Once an approval is granted, it is to be in force for a period of three years. As open for the prescribed authority to stipulate the conditions for ensuring there is no misuse by such an educational institution of the approval. Clause 51 of the Articles of Association clearly states that shareholders are not entitled to share the surplus of each year i.e., the excess of the income over the expenditure by way of dividend, bonus share. Surplus generated is not available for being declared either dividend or as a bonus share to the shareholders. Thus, there is no scope for inferring profit motive. Similarly, clause 52 which has been extracted above also indicates that there is no profit motive. Clauses 55 and 56 of the Articles of Association of the petitioner do not allow an interference of profit motive. These two clauses clearly indicate that the surplus generated by the petitioner is to be ploughed back. The Memorandum of Association of the petitioner also does not indicate the profit motive. The main object of the petitioner indicates that it is in the field of education. There are also indication that the petitioner had not otherwise indulged in any other activity to make profit and it was engaged only in the field of education in all the years of its existence since 1992. Denial of approval to the petitioner u/s 10 (23C)(iv) is not justified. The respondents ought to have granted approval but at the same time and laid down on strict conditions for the petitioner to comply with the said requirements. Therefore, the present writ petition deserves to be allowed. Since the petitioner had applied for exemption as early as 15.09.2010, though approached the wrong forum, it was incumbent on the part of the office of the Chief Commissioner of Income Tax-I to have either returned the application to the petitioner for a proper presentation or transferred to the 1st respondent immediately. On the other hand, the Income Tax Department took about three years for the application to be jostled from the office of the Chief Commissioner of Income Tax-I to the office of the 1st respondent. Since this Court has come to conclusion that the petitioner is entitled to approval, we direct the 1st respondent to issue Approval Certificate to the petitioner for the past period within a period of ninety (90) days from the date of receipt of this order. The 1st respondent may stipulate such stringent conditions in the approval as are necessary for an educational institution to operate so that the legitimate benefit of exemption under the aforesaid provision are not abused by the petitioner keeping the views expressed in American Hotel and Lodging Association Educational Institute Vs CBDT [ 2008 (5) TMI 17 - SUPREME COURT] and the views expressed by the Hon ble Supreme Court in Queens Educational Society Vs CIT [ 2015 (3) TMI 619 - SUPREME COURT] . As found that the petitioner had deviated in any of the assessment years of the conditions that may be prescribed in the approval, the Assessing Officer may pass appropriate orders in respect of those assessments and complete the same within a period of ninety (90) days thereafter. The petitioner has complied with the requirements of such approval, appropriate orders may be passed to revise the assessment order by extending such benefits.

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• 2021 (6) TMI 870
  Reopening of assessment - alternate remedy - TP Adjustment - Arm s Length Price (ALP) towards Corporate Service Fee was considered as Nil - downward adjustment towards corporate support service fees - HELD THAT:- Payments made during each of the assessment year may differ. Therefore, the orders passed by the Tribunal in respect of reference made against an order passed under Section 92C(A) for a particular assessment year is not binding for the subsequent assessment years. The decision of the Supreme Court in Union of India vs. Kamalakshi Finance Corporation Ltd., [ 1991 (9) TMI 72 - SUPREME COURT ] cannot be quoted as an authority to quash the impugned order of the 1st respondent. There the order of the Assistant Collector s was set aside by the Appellate Collector and the matter was remitted back to the Assistant Collector to pass a speaking order. Instead of following the said order of the Appellate Collector, there the Assistant Collector reiterated the order which had been set aside. It was in that context the decision of the Hon ble Supreme Court made the above observations. In this case, the assessment years are different and the transactions are different and the nature of payments are different. During the assessment year 2013-14 the issue was pertaining to certain payments made to the associated enterprises alone. Whereas the impugned order there are indications that there are adjustments of payments made for the services received and services provided to the associated enterprises. Therefore, it cannot be said that the said order of the Tribunal was binding for the assessment year in question. That apart, the challenge to the impugned order is premature. The petitioner has options under the Act to approach the Dispute Resolution Panel and if such was orders are passed the order, liberty is always available by way of statutory appeal before the income tax appellate Tribunal. Whether the High Court was justified in interfering with the order passed by the Assessing Authority under Section 148 of the Act in exercise of its jurisdiction under Article 226 when an equally efficacious alternate remedy was available to the assessee under the Act? - When in a fiscal statute, hierarchy of remedy of appeals are provided, the party has to exhaust them instead of seeking relief by invoking the jurisdiction of this Court under Article 226 of the Constitution of India and as held in Commissioner of Income Tax and Others vs. Chhabil Dass Agarwal [ 2013 (8) TMI 458 - SUPREME COURT ] the Court will have to take into consideration of the legislative intent enunciated in the enactment in such cases. It is not as if the alternative remedy is neither efficacious nor effective . Thus we are not convinced with the present writ petition. Accordingly, this writ petition is dismissed.

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• 2021 (6) TMI 867
  Assessment u/s 153A - relevant assessment year - tenth year calculated from the end of the assessment year - whether the assessing officer/respondent herein is possessed of the power to issue the notice? - HELD THAT:- In the case on hand, the statute has prescribed one mode of computing the six years and another mode for computing the ten years. Section 153 A(1)(b) states that the assessing officer shall assess or reassess the total income of six years immediately preceding the assessment year relevant to the previous year in which search is conducted. Applying this yardstick, the six years would go up to 2013-14. The search assessment year, namely, 2019-20 has to be excluded. This is because, the statute talks of the six years preceding the search assessment year. But, while computing the ten assessment years, the starting point has to be the end of the search assessment year - search assessment year has to be including in the latter case. It is not for me to fathom the wisdom of the parliament. We cannot assume that the amendment introduced by the Finance Act, 2017 intended to bring in four more years over and above the six years already provided within the scope of the provision. When the law has prescribed a particular length, it is not for the court to stretch it. Plasticity is the new mantra in neuroscience, thanks to the teachings of Norman Doidge. It implies that contrary to settled wisdom, even brain structure can be changed. But not so when it comes to a provision in a taxing statute that is free of ambiguity. Such a provision cannot be elastically construed. One other contention urged by the standing counsel has to be dealt with. It is pointed out that the petitioner has invoked the writ jurisdiction at the notice stage. Since the petitioner has demonstrated that the subject assessment year lies beyond the ambit of the provision, the respondent has no jurisdiction to issue the impugned notice. Once lack of jurisdiction has been established, the maintainability of the writ petition cannot be in doubt.

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• 2021 (6) TMI 864
  Allowability of the interest paid to the partner by the assessee firm calculating on the opening balance of the capital account of the partner without considering the subsequent withdrawals made by the partner - HELD THAT:- Assessee has taken a stand that since the partnership deed provides the payment of interest on the opening balance of the capital account of the partner, therefore, the subsequent withdrawals of the amount from the capital account of the partner is irrelevant. It is pertinent to note that Section 40(b)(iv) is restrictive in nature and not a provision enabling the deduction. For allowing the claim of interest paid to the partner it has to be first considered in terms of Section 36(1)(iii) or the section 37(1) of the Act and then the claim has to be restricted as per the provisions of section 40(b)(iv) of the Act. In the case in hand, there is no dispute that the opening balance in the capital account of the partner, Shri Satish Kumar Agarwal was Rs. 8,72,785/- but during the year the said partner has withdrawn a sum of Rs. 8,55,587/- which means the substantial amount except a meager sum of Rs. 3,80,630/- was withdrawn by the partner and was not available with the partnership firm for its business purpose. Hence, the claim of interest for full year @ 12% is otherwise not allowable in terms of Section 36(1)(iii) or Section 37(1) of the Act as the case may be. Once the basic condition as prescribed u/s 36(1) (iii) or Section 37(1) of the Act was not satisfied regarding allowability of particular claim of interest then the said claim cannot be allowed by invoking the Section 40(b)(iv) of the Act, which is a restrictive provisions and not enabling provision. Accordingly, the Assessing Officer has rightly allowed the claim on pro-rata basis i.e. the average of opening and closing balance was taken as eligible amount while allowing the interest paid to the partner. This ground of the assessee s appeal is dismissed. Disallowance of 5% of repair and maintenance expenditure - AO asked the assessee to explain the details of TDS payment on transport expenses - HELD THAT:- Except the narration of being cash paid for plant repair and maintenance no other particulars or details are mentioned in the ledger account. Even the vouchers claimed by the assessee are not produced before the Tribunal and the same are claimed as self-made vouchers. Since the assessee has not produced the vouchers, therefore, the only inference can be drawn from ledger account of the repair and maintenance expenses is that these expenses are not substantiated by the assessee by producing a verifiable supporting documentary evidence. The nature of payment being each less than 20,000/- shows that the assessee has carried out the entries to avoid the TDS provisions. Since all the payments are made in cash and no details are provided by the assessee to whom the payments are made therefore, the assessee has failed to prove that the claim of expenditure incurred by the assessee on account of repair and maintenance is a genuine claim. Accordingly, in the facts and circumstances of the case 5% disallowance made by the Assessing Officer is found to be reasonable and justified. Accordingly, this ground of the assessee s appeal is dismissed. Valuation of closing stock of dust - HELD THAT:- AO in the assessment order has made an adhoc addition to the closing stock of dust without even considering the volume or any other para meters for such adhoc valuation. Even the Assessing Officer has not tried to estimate by wild guess work but the addition is purely on adhoc addition without any reasonable basis. Once the Assessing Officer is not satisfied about the valuation of the closing stock of the dust then it is incumbent upon the Assessing Officer to conduct a proper enquiry and to apply proper criteria or basis for valuation of the closing stock. The wrong valuation of the closing stock on the part of the assessee does not authorized the Assessing Officer to make a wrong addition. Therefore, even if the valuation of the closing stock made by the assessee is not found to be correct the Assessing Officer has to make the valuation on some proper guidance and criteria. In the absence of any basis the adhoc addition made by the Assessing Officer is not justified and the same is deleted. It is pertinent to note that since the closing stock shown by the assessee is regarding the dust of the stone chip which is generated during the course of the manufacturing of the stone chip. Therefore, the assessee has explained the reasons for not maintaining the quantitative details and maintaining the stock register of such dust stock. Once the explanation of the assessee is reasonable keeping in view the nature of scrap generating during the manufacturing process then the action of the Assessing Officer in making the adhoc addition is not justified. Hence, the addition made by the Assessing Officer is deleted. Disallowance of entertainment expenses @ 20% - HELD THAT:- It is noted that the Assessing Officer has made disallowance of 20% of the entertainment expenses on the ground of not fully verifiable. The Assessing Officer made a similar disallowance in respect of the repair and maintenance expenses but @ 5% which has been confirmed by this Tribunal in the preceding part of this order. Accordingly to maintain the rule of consistency the disallowance made by the Assessing Officer is restricted to 5%. This ground of the appeal is partly allowed. Disallowance @ 20% of telephone expenses on the ground of personal use of partners - AO made the disallowance on the ground of personal use in respect of telephone expenses - HELD THAT:- AO has not discussed anything about the personal use of telephone. Hence, except the suspicion of the AO regarding the possible personal use of telephone by the partners nothing has been brought on record by the Assessing Officer to substantiate such suspicion of personal use. Further, since the telephone expenses are fully verifiable and supported by the bills and other details therefore, once the assessee has claimed the telephone expenses based on actual payment/due then the disallowance on the ground of personal use cannot be allowed without bringing some tangible material or facts on record. Accordingly, the disallowance made by the Assessing Officer on account of telephone expenses is not justified, the same is deleted.

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• 2021 (6) TMI 863
  Undisclosed investment in land - income in the hands of the partners - assessee submitted before us that the Ld. AO failed to appreciate the fact that the partners of the appellant firm has invested in the said land for and on behalf of the assessee firm out of the unaccounted income earned from the scheme Savvy Serene belonging to the partnership firm Savvy Infrastructure Company - HELD THAT:- The case of the assessee is this that the partners of the firm have invested in the land for and on behalf of the firm out of undisclosed receipt of Savvy Infrastructure. It is also the further case of the assessee that the firm was incorporated on 23.02.2007 and majority payments in respect of such purchase of land was made prior to the date of incorporation and therefore, the same is not out of the undisclosed income of the firm. It is an admitted position that the appellant firm was incorporated on 23.02.2007. As appears from the Audited Annual Accounts of the appellant firm relevant portion whereof has been reproduced in the order passed by the CIT(A) evidencing that there was no working capital funds available in the first year of incorporation i.e. 2007-08. The particular facts that the assessee firm was incorporated only on 23.02.2007 and gained the legal status as a firm only on that particular date upon such incorporation and, thus, the assessee company did not exist when the impugned income was earned. Thus, the assessee cannot be made responsible for evasion of tax on the ground of alleged payment made prior to such incorporation and/or registration of the partnership firm. The present addition has been made in the case of the appellant also states that one payment is made on 01.04.2007 which falls in A.Y. 2008-09 and not in A.Y. 2007-08 and therefore, even balance payment cannot be considered as undisclosed payment in the hands of the appellant for the current Assessment Year. Since the AO has not been able to establish that the appellant had any source of making for such huge unaccounted payment particularly with the payment towards on-money of land purchase were prior to the incorporation of the appellant firm and part payment was in subsequent Assessment Year, the condition of addition is not satisfied. Addition made by the Ld. AO to the tune on the ground that on-money payment towards land is made by the appellate firm has been rightly decided against the Revenue by the CIT(A). Admittedly before making such a direction upon the Ld. AO the aggrieved party being the partners of the farm have not been given an opportunity of being heard which is sine qua non in terms of Explanation 2 of Section 153 - respectfully relying upon the judgment we observe that the direction given by the Ld. CIT(A) upon the Ld. AO to initiate proceedings to assess this income in the hands of the partners, if deemed fit be expunged. Finally the appeal preferred by the Revenue is found to be devoid of any merit and hence dismissed. Appeal filed by the Revenue is dismissed.

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• 2021 (6) TMI 862
  Exemption u/s 11 - denying the benefits of registration u/s 12A - assessee has spent the amount as per the direction of the Director Marketing, thus, the claim of the assessee was allowed - HELD THAT:- From the order of the AO, there is no dispute that the AO had accepted the claim of the assessee with regard to spending the sum and the same was allowed. On perusal of the statement of receipts and payments, it is seen that the total receipts of the assessee for the year under consideration and the total payments and the AO had accepted the claim of the assessee. Thus, the assessee has spent more than the actual receipts, accordingly, it is seen that the AO has not made out a case of violation of provisions of section 11(2). Once it is accepted that the expenditure is allowable against the total receipts of the year for charitable purpose it is established that the assessee has spent more than 85% of the receipts and thus there is no case for making further addition. We set aside the order of the Ld.CIT(A) and delete the addition made by the AO. The appeal of the assessee is allowed.

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• 2021 (6) TMI 855
  Tax payable u/s 115-O - dividend distribution tax rate being restricted by the treaty provision dealing with taxation of dividends in the hands of the shareholders (i.e. Article 11 of the Indo French tax treaty, as in this case) - tax at the rate prescribed in the DTAA between India and France in respect of dividend paid by the assessee to the non-resident shareholders i.e. Total Marketing Services and Total Holdings Asie, a tax resident of France - HELD THAT:- A tax treaty protects taxation of income in the hands of residents of the treaty partner jurisdictions in the other treaty partner jurisdiction. In order to seek treaty protection of an income in India under the Indo French tax treaty, the person seeking such treaty protection has to be a resident of France. The expression resident is defined, under article 4(1) of the Indo French tax treaty, as any person who, under the laws of that Contracting State, is liable to tax therein by reason of his domicile, residence, place of management or any other criterion of a similar nature . Obviously, the company incorporated in India, i.e. the assessee before us, cannot seek treaty protection in India- except for the purpose of, in deserving cases, where the cases are covered by the nationality non-discrimination under article 26(1), deductibility non-discrimination under article 26(4), and ownership nondiscrimination under article 24(5) as, for example, article 26(5) specifically extends the scope of tax treaty protection to the enterprises of one of the Contracting States, the capital of which is wholly or partly owned or controlled, directly or indirectly, by one or more residents of the other Contracting State . The same is the position with respect of the other non-discrimination provisions. No such extension of the scope of treaty protection is envisaged, or demonstrated, in the present case. When the taxes are paid by the resident of India, in respect of its own liability in India, such taxation in India, in our considered view, cannot be protected or influenced by a tax treaty provision, unless a specific provision exists in the related tax treaty enabling extension of the treaty protection. Taxation is a sovereign power of the State- collection and imposition of taxes are sovereign functions. Double Taxation Avoidance Agreement is in the nature of self-imposed limitations of a State s inherent right to tax, and these DTAAs divide tax sources, taxable objects amongst themselves. Inherent in the self-imposed restrictions imposed by the DTAA is the fact that outside of the limitations imposed by the DTAA, the State is free to levy taxes as per its own policy choices. The dividend distribution tax, not being a tax paid by or on behalf of a resident of treaty partner jurisdiction, cannot thus be curtailed by a tax treaty provision. For all these reasons independently, as also taken together, we are of the considered view that it is a fit case for the constitution of a special bench, consisting of three or more Members, so that all the aspects relating to this issue can be considered in a holistic and comprehensive manner. In any case, it is a macro issue that touches upon the tax liability of virtually every company which has residents of a tax treaty partner jurisdiction as shareholders, and has substantial revenue implications. The question which may be referred for the consideration of special bench consisting of three or more Members, subject to the approval of, and modifications by, Hon ble President, is as follows:- Whether the protection granted by the tax treaties, under section 90 of the Income Tax Act, 1961, in respect of taxation of dividend in the source jurisdiction, can be extended, even in the absence of a specific treaty provision to that effect, to the dividend distribution tax under section 115 O in the hands of a domestic company? The registry is directed to place the matter before the Hon ble President for his kind consideration and for the appropriate orders.

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• 2021 (6) TMI 849
  Unexplained cash deposited in the bank account - source of receipt from sale of agriculture produce or not - sale of agriculture produce to non-existing firm - HELD THAT:- Assessee has failed to prove the source of the cash deposits and explanation offered towards cash deposit does not pass the test of human probabilities and surrounding circumstances. On weighing the rival contentions, we find considerable merits in the plea raised on behalf of the assessee. It is noticed that assessee is having sufficient land alongwith other family members to support the case of cultivation of potato sold. CIT(A) has accepted the fact of production of potato and has taken the receipt of cash from one of the parties (Noor Traders) as explained. The CIT(A) has rejected the source of cash from other party (Dariyalal Aloo Bhandar) primarily on the ground of lack of confirmation. The assessee has supported the closure of the business of Dariyalal Aloo Bhandar by way of affidavit from the surrounding farmers who were having the personal knowledge of the fact of the closure of the shop since 2016. The agricultural land of 46 Bigha appears sufficient to support the production of potato as claimed - the benefit of doubt, in our mind, must go to the assessee who happens to be a farmer and from whom the due diligence of highest level for storage of evidence is not necessarily expected - existing in the case to enable us to agree with the contention raised on behalf of the assessee. We thus set aside the order of the CIT(A) and direct the AO to delete the addition in question - Decided in favour of assessee.

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• 2021 (6) TMI 848
  Bogus purchases - HELD THAT:- We find that the assessee, vide letter dated 26/09/2018 has filed confirmation of accounts from 4 parties under consideration. The ledger extracts as placed on record would reveal that the assessee has made the payment to these parties though banking channels. Going by the factual matrix, it is evident that assessee s sales turnover was not in doubt. There could be no sale without actual purchase of material keeping in view the assessee s nature of business. The facts of the case made it a fit case to estimate the profit element embedded in these transactions. Therefore, as pleaded by Ld. AR and to put an end to litigation, we estimate the additions against these purchases @8% which comes to Rs. 1,83,266/-. The balance additions stand deleted. AO is directed to recomputed assessee s income in terms of our above order.

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• 2021 (6) TMI 847
  Reopening of assessment u/s 148 - commission to doctors in cash for the use of stents supplied to various hospitals - as argued cash was actually given to some other person who may be the partner of the firm M/s. Cardio Technovention and for siphoning of profits of the form, the hospital; National Heart Institute as discount on purchases; the purchase manager at the hospital for placing the order, the accounts personnel at the hospital for releasing payments, in a trustee of the hospital, a new employee at the hospital, the patient who was operated upon, the vendor from home stands were purchased, any other facilitator or mediator so on and so forth - HELD THAT:- As submitted by the Revenue, in the diaries the relevant notings read in a cryptic form like NHI/PS/CO/548 15000 and the Revenue read it as Hospital name/Doctors initial/product name/date/bill number commission amount paid . While reading so, Revenue stopped at the second position, namely, Doctors initial to fasten the liability. Even if we go by the decoding of the code as done by the Revenue, as argued by the Ld. AR and rightly also, there is no reason as to why we should stop at our select the 2nd position to fasten the liability or to conclude that the doctor received the amount. It could equally be possible that the hospital might have received such amount in respect of a particular patient attended by such Doctor to use such instrument. This possibility cannot be ruled out. When there are more possibilities than one, and many of such possibilities exclude the involvement of a particular person suggesting the involvement of somebody else also, in our considered opinion it would be unreasonable to conclude that such person who also been exonerated by one of the possibilities, to have received the commission. As rightly argued on behalf of the assessee, this code could also be indicative of a transaction and for the purpose of identification of transaction, the name of the hospital/name of the doctor/name of the instrument so on and so forth could have been noted in respect of the commission paid. Without any supporting material supplying a direction to this entry towards the doctor and doctor alone, is unreasonable and such an entry does not take us anywhere more particularly to point out the doctor to have received the commission. As seen from the record and the orders in case of M/s. Cardio Technovention that the plea of the Revenue was that the commission that was paid to the agent through banking channels was received back by M/s. Cardio Technovention in cash to pay the same to the doctors. In the order for the assessment year 2014-15 in the case of M/s. Cardio Technovention, in appeal, Ld. CIT(A) on a consideration of the entire material reached the conclusion that in respect of the commission paid to the agent, the same was confirmed by the agents, by cogent record and supported by the denial of the hospitals and the facts and circumstances did not prove that there was any withdrawal in cash by the commission agent from their bank accounts nor any evidence to show that it was paid to the doctors. It was further observed that such commission paid to the agents was accepted in the earlier assessment years by the Department. It was the specific finding of the Ld. CIT(A) in such order that the rough noting in the notebook referred to by the Revenue does not confirm the fact that commission was not paid to the agents or that it was received back from the agents. Amply clear that the plea of the Revenue that though the commission was initially paid to the agents through banking channels, it was received back in cash to be paid to the doctors, falls to ground. There is no material before us to disturb this finding returned by the learned Commissioner of Income Tax (Appeals) in the case of M/s. Cardio Technovention. Apart from that there is no denial of the fact that in the subsequent assessment year of a 2011-12 the additionunder section 68 of the Act was deleted by the learned Commissioner of Income Tax (Appeals) by invalidating the reopening whereas for the assessment year 2012-13, the proposed addition on account of the alleged cash commission was dropped and the learned Assessing Officer accepted the return filed by the assessee. All these things cumulatively go to show that M/s. Cardio Technovention was given a clean chit from the accusation of receiving the commission paid to agent through banking channels, in cash and paid to the doctors, which the doctors could not show as the receipt due to the prohibition of the regulations of the Medical Council of India. It further establishes that, when once the very allegation of cash commission is ruled out, no further inference could be drawn against the doctors to say that they have received such non-est commission. No merit in the argument of the Revenue and accordingly, hold that the addition cannot be sustained. Consequently, we direct the learned Assessing Officer to delete the addition. Appeal of the assessee is allowed.

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• 2021 (6) TMI 846
  Ex parte order confirming the order passed by the AO determining the total income as against the returned loss - HELD THAT:- It is an admitted fact that despite number of opportunities granted by the CIT(A), the assessee did not appear before him for which the CIT(A) was constrained to pass the ex parte order. As submission of the ld. Counsel for the assessee that given an opportunity the assessee is in a position to explain his case before the ld. CIT(A). We deem it proper to restore the issue back to the file of the CIT(A) with a direction to grant one final opportunity to the assessee to substantiate its case and decide the issue as per fact and law. The assessee is also hereby directed to appear before the CIT(A) and explain its case without seeking any adjournment under any pretext failing which, the ld. CIT(A) is at liberty to pass appropriate order as per law. Thus we hold and direct accordingly. The grounds raised by the assessee are accordingly allowed for statistical purposes.

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• 2021 (6) TMI 845
  TDS u/s 195 - assessee received as consideration towards software licensed to Indian distributors/customer - Royalty u/s. 9(1)(vi) of the Act and Art 12 of India-Singapore DTAA - AO also proposed to tax the consideration received from Indian distributors/customers for sale of hardware as royalty on the basis that hardware and software are inseparable and that the software cannot function in the obscene of hardware - HELD THAT:- Respectfully following the above view in case of Engineering Analysis Centre of Excellence Pvt. Ltd. [ 2021 (3) TMI 138 - SUPREME COURT ] we hold that purchase of software in the present facts does not amount to give rise to any taxable income in India as a result of which provisions of sec. 195 of the Act are not attracted. The assessee does not have any obligation to deduct tax at source. Therefore, provisions of sec. 9(1)(vi) along with Explanation 2 is not applicable to present assessee s.

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• 2021 (6) TMI 843
  Addition u/s 68 - failure to establish the identity and creditworthiness of the three companies from whom the assessee had receive application money - HELD THAT:- In the present case, the assessee has furnished each and every detail of the share applicant companies in response to the queries raised by the AO during the assessment proceedings and even during the appellate proceedings. In our considered view the assessee has prima facie discharged the onus of establishing identity and creditworthiness of the aforesaid three companies and further in establishing the genuineness of the transaction. Since, the assessee has discharged the primary onus, we find merit in the contention of the Ld. Counsel that the Ld. CIT(A) has wrongly affirmed the action of the AO and conformed the addition made u/s. 68 - So far as the cases relied upon by the department are concerned, the same are distinguishable on facts and the evidence on record. We therefore, set aside the impugned order passed by the Ld. CIT(A) and allow the appeal of the assessee. Accordingly, we direct the AO to delete the addition made u/s.68. Appeal of the assessee is allowed.

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• 2021 (6) TMI 842
  Estimation of income - interest and salary paid to partners - CIT(A) directing the AO to estimate the profit at 3% in the place of 4% estimated by the AO - HELD THAT:- Section 184(5) provides that where in respect of any assessment year, there is on the part of a firm any such failure as mentioned in section 144 of the Act, deduction by way of any payment of interest, salary, bonus, commission or remuneration etc. to any partner of such firm shall not be allowed in computing the income chargeable under the head Profits and gains of business or profession . Section 144 of the Act provides that if any person fails to make the return required under sub-section (1) of Section 139 and has not made a return or a revised return under sub-section(4) or sub-section (5) of that section, or fails to comply with all the terms of a notice issued under sub-section (1) of section 142 or fails to comply with a direction issued under sub-section (2A) of that section and having made a return, fails to comply with all the terms of a notice issued under sub-section (2) of section 143, the AO after taking into account all relevant material shall make the assessment of the total income or loss to the best of his judgment and determine the sum payable by the assessee on the basis of such assessment. In the instant appeal it was not a case of the AO where the assessee had not filed its return of income. It was also not a case where the assessee failed to comply with the notice u/s. 142(1) and also it was not a case where the assessee failed to comply with all the terms of a notice issued under section 143(2) of the Act by the AO. The AO made the assessment by estimating the income of the assessee by rejecting the books of account by invoking the provisions of section 145(3) of the Act as he was not satisfied about the correctness of the book results of the assessee. As relying on M/S JAI HANUMAN ENTERPRISES (FIRM) VERSUS ITO, ANGUL WARD, ANGUL, ODISHA [ 2019 (3) TMI 1606 - ITAT CUTTACK] direct the AO to allow the salary paid to partners and allow this ground of appeal

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• 2021 (6) TMI 841
  Taxability of interest income in the hands of Partner instead of Partnership firm - Allegation that assessee did not disclosed the receipt of Interest in his return of income - TDS on the interest amount received against NSC and saving account - HELD THAT:- It is not disputed that the licence of the assessee was utilised by partnership firm and all the receipts, TDS, interest and other sources of revenue were being shown in the hands of the firm, M/s. Biraja Construction. This practice is being followed by the assessee and partnership firm consistently from year to year and accepted by the Revenue, which is supported by the order of the Tribunal in assessee s own case for the assessment year 2009-2010 wherein, it has been held that the contract receipt in the name of the partner was to be considered as the amount received by the firm. Since amount has already been offered for taxation in the hands of the firm M/s. Biraja Construction, the said amount to be taxed in the hands of the individual partner i.e. assessee would amount to double taxation, which is not permissible under law. Even otherwise, there is no provision of law to deduct TDS on the interest amount received against NSC and saving account. Hence, we direct the AO to delete the amount and allow the appeal of the assessee.

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• 2021 (6) TMI 838
  Disallowance of finance brokerage paid - CIT(A) allowed the deduction under section 37 (1) admitting additional evidences - HELD THAT:- Revenue is in appeal with the ground that assessing officer was not given proper opportunity to examine the document submitted by the assessee as per rule 46(A)(3) - we notice that assessee filed detailed chart with the bifurcations of brokerage paid to different brokers. These details are part of Ledger account of brokerage expenses which was already submitted before AO. AO treated the above expenses as capital in nature and never bothered to verify the same. The assessee has filed the details of brokerage expenses which was paid along with details of TDS deduction and other details. Moreover, these documents were never filed as additional evidence but submitted as further details for the expenses claimed. Therefore in our considered view there is no violation of rule 46A in this case. Accordingly ground No.1 raised by the revenue is dismissed. Deduction for a stamp duty expenses - CIT(A) allowed the ground raised by the assessee - HELD THAT:- Aggrieved with the above order, revenue is in appeal before us raising the ground that there is violation of rule 46 of Income Tax Rules. We notice that the assessee has substantiated the claim of the expenditure by filing Ledger accounts of this expenditure. From the Ledger copy, Ld CIT(A) observed that the assessee has actually incurred the expenditure for the purpose of business. Again the above said Ledger was not filed before Ld CIT(A) as additional evidence but substantiated for the expenditure incurred. CIT(A) accepted the above evidences. There is no violation of rule 46 in this case. Accordingly the ground raised by the revenue is dismissed. Addition u/s 14A - Assessee has earned exempt income from dividend income and share of profit from partnership firm respectively - HELD THAT:- AO calculated the 14A disallowance as per rule 8D. While calculating average investment in earning the exempt income he calculated average investment in equity, average investment in closing stock of shares and average investment in partnership firm. AO included as average investment in the firm. While adjudicating this issue, CIT(A) observed that credit balances with the firm are actually liability of the partner accordingly the appellant has shown the said balances under the head current liabilities of the balance-sheet. Before us, both the parties have not brought to our notice the financial statement which was submitted before tax authorities. In our considered view when an exempt income is earned, the disallowance under section 14A should be calculated based on the relevant expenditure incurred to earn the above said exempt income. The disallowance under rule 8D, the investments in the assets through which exempt income is earned should include only those investments which has actually earned exempt income. In the given case, assessee has earned exempt income from dividend earned out of investment in shares held for stock as well as investment. Similarly, assessee also earned exempt income of share of profit from the partnership firm. There s no dispute that assessee has earned exempt income through partnership firm. The portion of investment made by the assessee in the partnership firm should also be part of investment in earning the exempt income. Since no financial statements were submitted before us, we are not in a position to appreciate the findings of Ld CIT(A). In our view, partnership firm is separate entity and the investment made by the assessee in the firm should be part of the assets of the statement of affairs of the assessee. CIT(A) observed that the credit balances disclosed by the assessee in the liability side is liability to the assessee. We are in agreement with the findings but it is also fact that assessee must have invested capital in the partnership firm or the assessee should submit the document before the tax authorities that assessee has not invested anything in the firm but sharing only share of profit without investment. Partnership firm is separate entity, the balance sheet of the firm should be evaluated to determine the actual investment in the firm. Therefore, in our considered view, we are remitting this issue back to the file of AO to determine the actual investment made by the assessee in the partnership firm to earn the exempt income should be considered for the calculation of disallowance under rule 8D. With regard to submissions of the Ld AR and relying on various case law, in our view the facts in those cases are distinguishable. Accordingly ground raised by the revenue is allowed for statistical purpose. Addition u/s 43(5)(d) for trading in derivatives and not for trading in shares - HELD THAT:- We notice that assessee has declared loss from its share trading business in the consolidated format which included loss from speculative transactions as well as cash transaction involving actual delivery of shares. From the record we notice that AO disallowed the loss of speculative transactions based on the financial statement without actually calling for the details. Assessee has submitted detailed submission on the loss incurred by the assessee from both segments based on delivery and non-delivery of the securities. The loss incurred by the assessee based on delivery can never be part of speculative transactions as per the provisions of section 43(5)(d).

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• 2021 (6) TMI 837
  Levy of fee/interest u/s 234E of the Act by the CPC, Bangalore - CIT(A) was of the opinion that the delay was not to be condoned - Rectification application u/s 154 - HELD THAT:- The enabling provision for levy of fee/interest was not in the statute books at that time and hence, the assessee filed a rectification application u/s 154 - section154 application was rejected. Thereupon assessee filed appeal before the learned CIT(A) did not condone the delay. CIT(A) has erred in not condoning the delay pertaining to assessee s appeal. The assessee was waiting for the outcome of application under Section 154 - This is a reasonable cause and the delay attributable to it deserves to be condoned. CIT(A) by not condoning the same has erred. This is also when the adjustment was done by the CPC which was not permissible by the law in operation at that time. Hence, the delay ought to have been condoned. Hence, we set aside the order of learned CIT(A) and hold that delay ought to have been condoned. CIT(A) has further erred as after noting that he is not condoning the delay in filing the appeal, he has gone on a different tangent saying that actually this appeal is against the order under Section 154 of the Act, hence the issue on merits cannot be adjudicated - CIT(A) has further erred in going on to adjudicate the merits academically and rejecting the assessee s appeal without dealing with the case laws submitted. In the interest of justice, we remit the issue to file of learned CIT(A). Learned CIT(A) is directed to decide the appeal on merits by passing a speaking order as per law. Appeals by the assessee stand allowed for statistical purposes.

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• 2021 (6) TMI 834
  Rejection of books of accounts u/s 145(3) - GP estimation - bogus purchases - trading addition by disallowing 15% of the alleged unverifiable purchases made from 12 parties - HELD THAT:- CIT(A) has affirmed the rejection of books of accounts on account of non-genuine purchases which could not be verified during the course of assessment proceedings relying on the decision in case of Vimal Singhvi [ 2014 (12) TMI 66 - RAJASTHAN HIGH COURT ]. No infirmity in the said findings of the ld CIT(A) and the same is hereby confirmed. Regarding disallowance of 25% of the alleged purchases, the ld CIT(A) has followed the Coordinate Bench decision in assessee s own case for A.Y 2008-09 and has restricted the disallowance to 15% of alleged purchases. It is also noted from the assessee s assessment history, for instance, A.Y 2010-11, where under similar facts and circumstances of the case, disallowance of 15% of unverifiable purchases were made by the CIT(A) which has been affirmed by the Coordinate Bench and similar disallowances have been made in other years - we donot see any infirmity in the findings of the ld CIT(A) in restricting the addition to 15% of unverified purchases. Appeal of the assessee is dismissed.

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• 2021 (6) TMI 830
  Validity of assessment u/s 144C - whether the 1 st respondent was justified in passing the impugned order dated 14.11.2017 without passing a Draft Assessment Order as was done in the 1 st round of the litigation? - HELD THAT:- When the law mandates a particular thing to be done in a particular manner, then it has to be done in the manner Once the case was remitted back to the respondents, it was incumbent on the part of the 1 st respondent to have passed a draft Assessment Order under section 143 (3) read with Section 92CA (4) and Section 144C (1) of theIncome Tax Act, 1961. It was not open for the 1 st respondent to bypass the statutory safeguards prescribed under the Act and thereby deny the right of the petitioner to approach the Dispute Resolution Panel. It is only thereafter, Final assessment order can be passed by the 1 st respondent to Assessing Officer. It would have been different if the appeal that was dismissed by the Income Tax Appellate Tribunal in first round of litigation We find sufficient force in the arguments advanced by the learned counsel for the petitioner. In my view, the impugned order has been passed without jurisdiction. It was passed by by passing statutory safeguards prescribed under the provisions of theIncome Tax Act, 1961. Therefore, the present Writ Petition deserves to be allowed. The impugned order is quashed and case is remitted back to the 1 st respondent to pass a Draft Assessment Order. Since the dispute pertains to the assessment years 2009- 10, the 1 st respondent shall endeavour to pass Draft Assessment Order within period of 3 month

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• Customs

• 2021 (6) TMI 876
  Principles of Natural Justice - Issuance of pre-assessment notice or show cause notice - assessment order is not preceded by a pre-assessment notice or show cause notice - HELD THAT:- In the present case, the Revenue has not placed on record any proof for receipt of acknowledgement of the show cause notice alleged to have been sent via Registered Post Acknowledgement Due (RPAD) and hence till one can hardly assume that the respondent has exhausted the direct methods of service. Service by indirect methods, such as publication and affixture (S.153 (1) (d) and (e) must be only after service by direct means set out in Section 153(1)(a),(b) and (c) have been attempted and established to have failed. The impugned order has been passed in violation of the principles of natural justice, the same is set aside - Petition allowed - decided in favor of petitioner.

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• 2021 (6) TMI 871
  Recovery of duty draw back - Rule 16 of the Customs and Central Excise Duties Drawback Rules, 1995 - non-application of mind - proceedings vitiated by delay and latches - HELD THAT:- This Court is unable to appreciate the challenge for more than one reason. Firstly, the grounds raised in the writ petition do not merit any serious consideration and also the grounds are not worthwhile enough for this Court to intervene in the matter of impugned proceedings, for the present. The conclusion is on the basis of the reason that the appellate remedy is available under the provisions of the Customs Act and in matters like this, it is always better for the petitioner to approach the Appellate Authority and convince the Authority on the basis of the grounds raised in the present writ petition. This Court finds that the writ petition is not maintainable - Petition dismissed.

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• 2021 (6) TMI 861
  Levy of penalty u/s 112 (b) of the Customs Act - appellant did not file the IGMs in question - fake items of leading brands were being imported into India - HELD THAT:- It is not the case of the Revenue that it was the appellant who filed the Bill-of-Lading. From the documents placed on record, this aspect also becomes clear since the appellant has maintained all along that it did not file the IGMs in question which fact not denied by the Revenue. Section 112 of Customs Act has wide amplitude to cover any person dealing with any goods which he knows or has reason to believe are liable to confiscation under Section 111 ibid. This implies that the requirement of mens rea is sine qua non to fasten the impugned penalty. Admittedly, the appellant is only a shipping liner who not only did not file the IGMs in question, but also did not file even the Bill-of-Lading. Facts borne on record reveal that the appellant has maintained all along that it never had the possession of the impugned goods nor was in any way concerned with the carrying, removing, etc., of the consignments in question and hence, it was beyond their comprehension that the goods in question were per se liable for confiscation under Section 111 (d) ibid. Undisputed peculiar facts of the case are that the appellant is neither the importer nor the owner who had acquired possession nor in any way concerned with the carrying, removing, etc., of the goods in question, and Revenue has nowhere ascribed knowledge of the appellant as to the confiscation - the Revenue has also nowhere offered redemption in lieu of the confiscation in so far as the appellant is concerned, which establishes that the appellant is in no way concerned nor was it responsible in any way for carrying, removing, etc., of the goods in question. The penalties, as levied under Section 112 (b) of the Customs Act, 1962, are not justified - Appeal allowed - decided in favor of appellant.

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• 2021 (6) TMI 859
  Re-assessment/amendment of its Bills-of-Entry - Section 149 of the Customs Act, 1962 - correct classification of Laptops - HELD THAT:- Any amendment/re-assessment has to be in terms of Section 149 of the Customs Act, 1962 and by the Proper Officer. Hence, it serves no purpose if the case is remanded to the Commissioner (Appeals) since it is the Proper Officer who could call for any documents and then exercise his discretion to order amendment or reject, subject to the provisions of Section 149 ibid. Therefore, the matter is remanded to the file of the Adjudicating Authority/Proper Officer to verify the claim of the appellant strictly in terms of Section 149 ibid. and thereafter, pass an appropriate speaking order after giving reasonable opportunities to the appellant. All the contentions are left open.

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• 2021 (6) TMI 858
  Absolute Confiscation - smuggling - Gold Jewellery - eligible passenger in terms of N/N. 12/2012 - personal baggage - prohibited goods or not - onus of proof - penalty u/s 112 and 114 AA of the Customs Act - HELD THAT:- The appellant was a passenger in transit from Bangkok to Kathmandu. The appellant was admittedly found in the transit lounge at IGI Airport, T-3, Delhi, meant for international passengers, where they can wait for the purpose of changing flight without entering into India, as such they are not required to go though any formality of immigration as well as under the provision of Customs Law. It is also found that it is admitted fact that the appellant was waiting for his next flight in the transit lounge of Terminal No. 3 of IGI Airport, Delhi, and he was not intermixing with any other person or trying to deliver any goods or any packet or jewellery for the purpose of smuggling. It is further found that the appellant have not violated any of the provisions under the Customs Act, 1962 read with the Foreign Trade Policy. The whole case of Revenue is misconceived and has no legs to stand. Also, the source of gold jewellery he was wearing is cogently explained, which has not been found to be untrue. Penalty set aside - appeal allowed - decided in favor of appellant.

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• 2021 (6) TMI 833
  Conversion of free shipping bills to drawback scheme - speaking order also not given, even after sought for - ground of rejection also not clear to appellant, nor it was informed to them - principles of natural justice - HELD THAT:- The order of rejection of the request for conversion of free shipping bills to drawback scheme passed by the competent authority has been communicated by the concerned Assistant Commissioner of Customs to the appellants. There are no grounds have been disclosed to the appellants in rejecting their claim of conversion of free shipping bills to drawback claim shipping Bill. Needless to mention this has resulted in gross violation of principle of natural justice. Also in absence of reasoning while passing the order, affecting the rights of the parties, it would be difficult for appellate Court to read the minds of the adjudicating authority in deciding the issues raised in the appeal. The matters are remanded to the adjudicating authority with a direction to record specific reasons and grounds in disposing the request of the appellants for conversion of free shipping bills to drawback scheme after observing the principles of natural justice in the event rejection is warranted - Appeal allowed by way of remand.

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• 2021 (6) TMI 832
  Revocation of Customs Broker License - forfeiture of security deposit - penalty under regulation 18 of Customs Broker Licensing Regulations, 2013 - alleged undervaluation - physical verification of the premises, or the person, of the importer - fictitious import export code (IEC) - breach of regulation no. 11(a), 11(d), 11(e), 11(m) and 11(n) of Customs Broker Licensing Regulations, 2013 - HELD THAT:- Though the inquiry, prescribed under Customs Broker Licensing Regulations, 2013, held that, while the breach of several of the obligations in regulation no. 11 had been substantiated, that failure to discharge duties with speed, as stipulated in regulation no. 11(m), was not, the licensing authority did, nonetheless, consider it fit to disregard that finding to conclude that the acceptance of documents from an unrelated person was indication of inefficiency but for which loss of revenue could have been avoided. The obligation to advice the client to comply with the provisions of Customs Act, 1962, the obligation to exercise due diligence by ascertaining the veracity of all information pertaining to client, the obligation to discharge duties as customs broker with utmost speed and efficiency and without any delay and the obligation to verify antecedents, correctness of importer exporter code, to identify his client and functioning of his client at the declared address were, according to the licencing authority, breached - The appellant had dealt with the beneficiary importer of the imported goods but against authorization furnished by the importer on record. It is also equally clear that the appellant, while dealing with Shri Anil Kumar Vachhar, did not appear to have evinced any interest in ascertaining the identity, or connection with the goods, of the importer on record. This is certainly not in accordance with the obligations that devolve upon a customs broker authorised to act on behalf of the importers under Customs Broker Licensing Regulations, 2013. At the same time, the existence of the importer on record not being in doubt and the role of such person vis- - vis beneficial owner of the imported goods is yet to be decided upon in adjudication proceedings, it would, therefore, be improper to proceed on the assumption of any detrimental consequence to Revenue arising, directly or indirectly, from that breach. The appellant has dealt with only one bill of entry out of the several that were taken up for investigation and included in the show cause notice issued under Customs Act, 1962. The allegation against the imports is limited to undervaluation and it is difficult to appreciate that the breach of regulation no. 11(a) had, in any way, contributed to suppression of the value of the goods imported against the bill of entry. It is not within the remit of the customs broker to be conversant with the negotiations on price or the manner of transference of agreed recompense and, therefore, compliance with the said obligations would not have altered the allegations leveled against the importer, whether on the beneficial owner or of that on record. The detriments invoked against them are highly disproportionate. For not having insisted upon contact with the importer on record, revocation of licence and, that too, for first breach is, indeed, drastic - the ends of justice would be served by confirming the forfeiture of security deposit and the imposition of penalty of Rs. 50,000/- while setting aside the revocation of the customs broker licence - Appeal disposed off.

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• Insolvency & Bankruptcy

• 2021 (6) TMI 854
  Maintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its dues - Operational Creditors - existence of debt and dispute or not - service of demand notice - time limitation - HELD THAT:- Notice with respect to the application was issued to the Corporate Debtor vide order dated 03.03.2020 of the Adjudicating Authority. Further, it has been observed that neither a reply to the Demand Notice nor to Section 9 application was filed by the Corporate Debtor. The Corporate Debtor has never appeared before the Adjudicating Authority hence vide order dated 12.01.2021 the Corporate Debtor was proceeded ex-parte. The date of default is 21.01.2019 which is the date of the last invoice issued which was unpaid, and the present application is filed on 24.02.2020. Hence the application is not time barred and filed within the period of limitation - The registered office of corporate debtor is situated in Delhi and therefore this Tribunal has jurisdiction to entertain and try this application. The Application filed by the Operational Creditor is complete in all respect. This authority is satisfied that an amount of Rs. 31,32,820/- towards unpaid invoices for the goods supplied by the Operational Creditor, is due and payable by the Corporate Debtor to the Operational Creditor, which it failed to pay. Therefore, the Application is admitted and the commencement of the CIRP is ordered - Application allowed.

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• 2021 (6) TMI 853
  Maintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its dues - Operational Creditors - existence of debt and dispute or not - time limitation - issuance of demand notice - HELD THAT:- The demand notice was sent to the registered address of the corporate debtor as per the master data at Page No. 46 of the petition in which registered office is shown as Second Floor, Block No. 40, B-3, Sector-6, Parwanoo, Solan, HP-173220. Copy of postal receipt and tracking report showing duly service of notice are part of Annexure -VI(Colly) at Page Nos. 34 to 36. Whether the operational debt was disputed by the corporate debtor? - HELD THAT:- The respondent-corporate debtor has filed reply and admitted the occurrence of default towards operational creditor. Thus, there is no dispute as to the liability between the corporate debtor and the operational creditor. Time Limitation - HELD THAT:- As a statutory requirement under Section 9(3)(b) of the Code, an affidavit dated 18.11.2019 has been placed by the operational creditor stating that despite the service of notice dated 02.11.2019, corporate debtor did not raise any dispute qua the outstanding payment. The bank statement for the period from 01.04.2018 to 31.10.2019 has been annexed as Annexure-V of the petition. It has been shown that the corporate debtor has failed to make payment of the aforesaid amount due as mentioned in the statutory notice till date. It is also observed that the conditions under Section 9 of the Code stand satisfied. Accordingly, the petitioner proved the debt and the default, which is more than Rs. 1 lakh by the respondent-corporate debtor. The present petition being complete and having established the default in payment of the Operational Debt for the default amount being above Rs. 1,00,000/-, the petition is admitted in terms of Section 9 of the IBC - Petition admitted - moratorium declared.

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• 2021 (6) TMI 852
  Maintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its dues - Operational Creditors - existence of debt and dispute or not - time limitation - HELD THAT:- The registered office of the Respondent Corporate Debtor is situated in Jaipur and therefore this Adjudicating Authority has jurisdiction to entertain and try this Application - The first default had occurred on 23.12.2017 which continued till 18.11.2019, hence the debt is not time barred and the Application is filed within the period of limitation. The application in Form 5 is complete; no payment of the unpaid operational debt of Rs. 2,32,02,842/-has been made and demand notice in Form No. 3 was duly served on the Corporate Debtor through registered post and the amount due has been acknowledged by the Respondent. The Applicant has filed an affidavit under Section 9(3)(b) of the Code to the effect that there is no notice given by the Respondent relating to dispute of the unpaid operational debt. In view of the satisfaction of the conditions provided for in Section 9(5)(i) of the Code, the Application is admitted and the initiation of CIRP of M/s. ADIG Jemtex Pvt. Ltd. is directed. Application admitted - moratorium declared.

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• 2021 (6) TMI 851
  Liquidation of Company - appointment of Resolution professional as Liquidator of the Corporate Debtor - Section 33(2) of Insolvency and Bankruptcy Code, 2016 - HELD THAT:- The Interim Resolution Professional has produced the 6th and 7th CoC resolutions. In the 6th meeting of the COC it was resolved with 100% voting right to liquidate the Corporate Debtor M/s. Moonriver Resorts Private Limited and in the 7th CoC it was resolved to appoint the Interim Resolution Professional Shri K.T. Mathew as the Liquidator. From Section 33(2) of the Insolvency and Bankruptcy Code, it is clear that when a Resolution Professional at any time during the CIRP but before confirmation of Resolution Plan approaches the Adjudicating Authority with the decision of the COC approved by not less than sixty six percent of the voting share, the Adjudicating Authority shall pass a liquidation order. In this case the CoC with 100% voting right approved the resolution for liquidation of the Corporate Debtor. Hence this is a fit case to order liquidation under Section 33(2) of the IBC, 2016. The Corporate Debtor M/s. Moonriver Resorts Private Limited is hereby put under liquidation with immediate effect under Section 33(2) of IBC, 2016 - application allowed.

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• 2021 (6) TMI 844
  Seeking dissolution of the Corporate Debtor - Sections 54 and 60(5) of the Insolvency Bankruptcy Code, 2016 (the Code) read with Rule 11 of the National Company Law Tribunal Rules, 2016 - HELD THAT:- It appears that the affairs of the Corporate Debtor have been wound up and its assets have been completely liquidated. We are satisfied from the documents on record that the liquidation is not with intent to defraud any person. The bank account for the purpose of liquidation has been closed. The above facts and circumstances indicate that due process of liquidation, as per extant provisions and in the manner indicated in the Code and Regulations, have been followed by the Liquidator to liquidate the assets of Company and the realized amounts have also been distributed among the respective claimants. The liquidation process has been duly completed as per the provisions of the Code. Thus, it would be just and equitable for this Authority to dissolve the Corporate Debtor. No party is going to be adversely affected thereby. Application allowed.

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• 2021 (6) TMI 840
  Approval of the Resolution Plan - Section 30(6) of the Insolvency and Bankruptcy Code, 2016 - HELD THAT:- In K. Sashidhar v. Indian Overseas Bank Others [ 2019 (2) TMI 1043 - SUPREME COURT ] the Hon ble Apex Court held that if the CoC had approved the Resolution Plan with requisite percent of voting share, then as per section 30(6) of the Code, it is imperative for the Resolution Professional to submit the same to the Adjudicating Authority (NCLT). On receipt of such a proposal, the Adjudicating Authority is required to satisfy itself that the Resolution Plan as approved by CoC meets the requirements specified in Section 30(2). The Hon ble Court observed that the role of the NCLT is no more and no less . The Resolution Plan as approved by the CoC under Section 30(4) of the Code meets the requirements of Section 30(2) of the Code and Regulations 37 and 38 of the Regulations. The Resolution Plan is not in contravention of any of the provisions of Section 29A of the Code and is in accordance with law - Application allowed.

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• 2021 (6) TMI 839
  Avoidable transactions - conduct of liquidator - undervalued or preferential transactions - gifts made to related party - loss caused to the creditors of the Corporate Debtor - company under Liquidation process - composite application - reliance placed upon Ledger accounts - Requirement to file application within 135 days from the date of commencement of CIRP - HELD THAT:- The requirement of filing application within 135 days, does not have much force in view of the fact that the avoidance transactions as found in Section 43, 45 and 50 can be filed either by the RP or by the Liquidator and that the model timeline prescribed under the attendant Regulations is only directory in nature and if the same is construed as mandatory then the avoidance transactions as stipulated under Section 43, 45 and 50, which entitles the Liquidator also to file an Application, would be rendered as otios - Moreover, section 12 of IBC, 2016 states that CIRP period has to be completed within a period of 330 days, while the model timeline as found in Regulation 40A has been arrived at taking into consideration a period of 180 days. In any case, Regulations do not prevail over the Act and thus, the arguments as advanced by the Respondents in relation to this issue are required to be brushed aside. Whether the impugned transactions have been made during the ordinary course of business ? - HELD THAT:- The impugned transactions which have been carried out by the Respondents do not have any characteristics of transactions made during ordinary course of business and thus the contentions raised by the Respondents in this regard stand rejected as being devoid of merits - It is also required to be noted that section also do not specify the related party in relation to the Corporate Debtor or Individual being a Director of the Corporate Debtor, as both the definitions under Section 5(24) and 5(24-A) fall under Part-II concerning Insolvency Resolution and Liquidation for Corporate Persons. Validity of composite Application - Respondent contends that in view of the Judgment passed by the Supreme Court in ANUJ JAIN VERSUS AXIS BANK LTD. [2020 (2) TMI 1259 - SUPREME COURT ] , this Application being a composite Application, is not maintainable - HELD THAT:- It is seen that the present Application was filed by the Liquidator, much before the judgment rendered by the Supreme Court in Anuj Jain and also the Liquidator, as already alluded in paragraph supra, during the course of submissions, in all fairness, taking into consideration the decision of the Hon ble Supreme Court in Anuj Jain, has sought for withdrawal of the relief portion as reflected in clause (b) of para VII of the Application and that he will not be pressing for the said reliefs in view of the Hon ble Supreme Court holding in the Anuj Jain s case - the objections as raised by the Respondents on the said count are also liable to be rejected. Validity of relying on the Ledger accounts - the Liquidator is relying on the ledger account of the Corporate Debtor in support of his contention that the alleged impugned transactions constitute undervalued transactions - HELD THAT:- In relation to the documents being filed by the Liquidator, the same being a ledger account, in the absence of any rebuttal by the Respondents in relation to the entry being made in the books of account, this Tribunal necessarily has to presume prima facie that the entries are true and the transactions in relation to the same have been carried out. All those entries are necessarily being shown in the balance sheet of the Corporate Debtor - Further, Section 3 of the Commercial Documents Evidence Act, 1939 states that the Court shall presume that the documents as mentioned in Part II of the Schedule to the said Act, are accurate and true. In Part II of the Schedule at Sl. No. 21, the documents mentioned are the balance sheet, profit and loss account and the audit report filed under the Companies Act. Thus, these documents prima facie appear to give the true and correct details and a presumption that the same is accurate is made in favour of those documents and hence the burden of proof lies upon the Respondent to rebut the same. Validity of Transactions challenged - HELD THAT:- The same falls within the parameters as laid down under Section 45 of IBC, 2016 in relation to Respondents 1 to 3 - It is concluded that the impugned transactions as alleged by the Liquidator in relation to Respondents 1 to 3 constitute undervalued transactions as envisaged under Section 45 of IBC, 2016 and in the circumstances, the relief as sought for by the Applicant in clause (a) of Para VII is granted - The 1st, 2nd and 3rd Respondents are directed to repay the sum of Rs. 5,26,99,936/-, Rs. 11,55,142/- and Rs. 1,00,000/- respectively along with interest chargeable at bank rates to the Applicant/Liquidator within a period of 60 days from the date of this order. Application disposed off.

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• 2021 (6) TMI 836
  Maintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its dues - respondent/Corporate Debtor is NBFC or not? - RBI was under apprehension that the respondent was accepting deposits from public - existence of debt and default - applicability of Article 137 of the Limitation Act, 1963 or section 238A of Limitation Act, 1963. Whether the debt and default are proved or not - HELD THAT:- The petitioner/Financial Creditor has granted a debt or Inter-Corporate Deposit of Rs. 5,00,00,000/-, on 04.11.2011, as claimed by the petitioner. Whereas, according to the respondent/Corporate Debtor, the said amount was Inter-Corporate Deposit for a period of three months deposited towards Performance Bank Guarantee under the impugned contract. The Corporate Debtor also claimed that the said amount of Rs. 5 crores provided as security. Hence transaction dated 04.07.2011 even though termed as Inter Corporate Deposit , the same is taken as security furnished by the applicant for execution of the contract dated 12.04.2010 - certification by the respondent/Corporate Debtor can be considered as an admission of debt. Whether the present petition is hit by Article 137 of the Limitation Act, 1963 or section 238A of Limitation Act, 1963? - HELD THAT:- The alleged defaults had occurred between 01.04.2013 and 01.04.2016. Whereas the present petition is filed on 07.05.2019. If limitation period is reckoned between the date of latest default and the date of filing the present petition, there cannot be any delay. Whether the respondent/Corporate Debtor is NBFC? - HELD THAT:- This Adjudicating Authority has noticed in M/S SEW INFRASTRUCTURE LIMITED VERSUS M/S MAHENDRA INVESTMENT [ 2019 (10) TMI 1434 - NATIONAL COMPANY LAW TRIBUNAL, HYDERABAD BENCH] that the respondent/Corporate Debtor is not NBFC. The respondent has failed to provide any proof of registration as NBFC from the regulator, i.e. Reserve Bank of India. As such, we cannot rely on a mere statement made by the respondent in this regard. The Financial Creditor is able to establish the debt and default. Therefore, the petition is required to be admitted against the Corporate Debtor. After going through the documents filed by the petitioner,t the petition is liable to be admitted against the Corporate Debtor. Petition admitted.

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• Service Tax

• 2021 (6) TMI 860
  Refund of the Service Tax - Tax was paid under mistake of law - change in tax regime - freight services received from foreign shipping line - Reverse Charge Mechanism - N/N. 15/2017-ST and 16/2017-ST, both dated 13.04.2017 - HELD THAT:- The Revenue having collected per force the Service Tax along with interest, the appellant is pushed into a situation where its refund claim is denied and even the credit of Service Tax so paid is also not allowed to be availed, with the introduction of the CGST Act in 2017. It is the settled position of law that a tax payer cannot be a victim of the change in law. The reliance placed on the decision of the Hon ble High Court of Madras in the case of M/S. 3E INFOTECH VERSUS CUSTOMS, EXCISE SERVICE TAX APPELLATE TRIBUNAL, COMMISSIONER OF CENTRAL EXCISE (APPEALS-I) [ 2018 (7) TMI 276 - MADRAS HIGH COURT] is very apt, wherein it has been categorically held that the Service Tax paid under mistake of law has to be refunded irrespective of the period covered as refusal thereof would be contrary to the mandate of Article 265 of the Constitution of India. The denial of refund is contrary to the settled position of law - the rejection of refund are set aside - Appeal allowed - decided in favor of appellant.

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• 2021 (6) TMI 835
  CENVAT Credit - trading of service (exempted service) - Rule 6(3) of the CENVAT Credit Rules, 2004 - period from April, 2008 to March, 2009 and April, 2010 to March, 2011 - Time Limitation - HELD THAT:- It is not in dispute that the appellants are providing taxable services as well as engaged in trading activity during the relevant period. Also, it is not in dispute that common input services were used in providing taxable services and the trading activity. The appellants have been meticulously reversing the proportionate credit attributable to the trading activity. However, the Department has demanded 6%/8% of the value of the trading activity considering the same as an exempted service. This Tribunal in similar facts and circumstances in TRENT HYPERMARKET LTD. VERSUS COMMISSIONER OF CENTRAL EXCISE, PUNE-III [ 2019 (6) TMI 1327 - CESTAT MUMBAI] observed that invoking extended period of limitation in such circumstances is unwarranted. Appeal allowed - decided in favor of appellant.

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• Central Excise

• 2021 (6) TMI 857
  Refund of excess cost recovery charges - adjustment of cost recovery charges against amount dues - speaking order sought, was declined on the ground that adjustment of cost recovery charges is administrative in nature - HELD THAT:- The order of Hon ble High Court dated 06.10.2017 has to be read with the earlier Final Order of the Hon ble High Court dated 04.05.2017. The Hon ble High Court granted liberty to the appellant to apply for review or restoration of the writ application in case of difficulty, while disposing of the writ application on 04.05.2017. Thereafter, when the appellant approached the Hon ble High Court in review on Miscellaneous application for revival of the application, the Hon ble High Court directed the appellant to pursue the appellate remedy in view of the subsequent Order-in-original dated 19.06.2017, (allowing truncated amount of refund). Thus, in the facts and circumstances of the present case, limitation has to be computed on and from 06.10.2017 (plus the time taken in obtaining certified copy of the miscellaneous order) - thus, the appeal filed before the Commissioner (Appeals) was within time. This appeal is allowed by way of remand to the Commissioner (Appeals) with the direction to hear the appeal on merits.

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• 2021 (6) TMI 856
  Clandestine Removal - M.S. Ingot - TMT bars - shortage in the stock of ingots due to high burning loss - uncorroborative seizure of the finished goods - defective stock verification - corroborative evidence or not - HELD THAT:- The burning loss in this type of industry varies from time to time depending upon the quality of inputs, the condition of furnace, climatic condition, etc. Further, the Director of the appellant company at the time of recording of his statement under Section 14 gave a plausible explanation, that shortage is attributable to high burning loss depending upon the various factors and failure by them to record the actual burning loss, as the production is recorded on the estimate basis, whereas the sale of finished goods is recorded on actual weight basis. The appellant also manufactures M.S. Billets, for which M.S. Ingots is the raw materials, in such process also there is burning loss. Thus, the explanation given by the appellants for the apparent shortage is held to be plausible, as the same has been rejected summarily by the Department without reference to the books of accounts and other records maintained by the appellant - further, there is no other corroborative evidence brought on record with respect to the allegation of clandestine removal, which is a serious charge and has to be proved beyond doubt. Appeal allowed - decided in favor of appellant.

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• 2021 (6) TMI 850
  CENVAT Credit - duty paying documents - denial on the ground that the document on the strength of which credit has been availed is not proper - HELD THAT:- There is no finding in the adjudication order and the appeal order that the input service has neither been received by the appellant nor tax has not been paid on said service - The certificate dated 09.02.2018 issued by the Federal Bank, which duly mentions the service tax amount recovered from the appellant and the service tax registration number of the bank branch. Since there is no dispute with regard to the nature of input services, the appellant should not be deprived of the Cenvat Credit which is available under the CENVAT Credit Rules framed as a beneficial scheme of the Central Excise statute - justice would be served if the appellant is accorded an opportunity to produce the said certificate before the adjudicating authority, who would examine the same and satisfy itself in so far credit amount is involved in the present dispute. Appeal allowed by way of remand.

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• 2021 (6) TMI 831
  CENVAT Credit - waste/residue - Bagasse - process in respect of Bagasse taking place or not - period from May, 2008 to June, 2010 - HELD THAT:- This issue has been considered by the Hon ble Supreme Court in UNION OF INDIA VERSUS DSCL SUGAR LTD. [ 2015 (10) TMI 566 - SUPREME COURT] where it was held that Since it is not a manufacture, obviously Rule 6 of the Cenvat Rules, 2004, shall have no application as rightly held by the High Court, since Bagasse is held not to be result of any manufacture. There are no justification in sustaining the impugned order - appeal allowed - decided in favor of appellant.

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• CST, VAT & Sales Tax

• 2021 (6) TMI 872
  Entitlement to statutory appeal/revision - issue in this petition is that the Assessing Officer has erroneously applied the provisions of the Tamil Nadu Value Added Tax Act, 2006 and passed the assessment order which resulted exercise of jurisdiction erroneously - Section 51 of the TNVAT Act - HELD THAT:- Institutional respect is of paramount importance. Even the point of jurisdiction, limitation, error apparent on the face of the record, are on merits and all are to be adjudicated before the appellate authority and the appellate authority, more specifically, the Appellate Tribunal or the Commissioner (Appeals), as the case may be, is empowered to adjudicate all such legal grounds raised by the respective parties and make a finding on merits. Thus, usurping the powers of the appellate authorities by the High Court by invoking its powers under Article 226 of the Constitution of India is certainly unwarranted. The parties must be provided an opportunity to approach the appropriate authorities for redressal of their grievances in the manner known to law. The parties must be provided an opportunity to approach the appropriate authorities for redressal of their grievances in the manner known to law. In the event of entertaining all such writ petitions, the High Court will not only be over-burdened, but usurping the powers of the appellate authority, which is certainly not desirable - Jurisdictional error should not result in exoneration of liability. Jurisdictional error, if any committed, is technical, and thus, rectifiable. In such circumstances, the Courts are expected to quash the order passed by an incompetent authority and remand the matter back for fresh adjudication. Contrarily, if an assessee is exonerated from liability, undoubtedly, the purpose and object of the Act is defeated. The growing practice in the High Court is to file writ petitions under Article 226 of the Constitution of India without exhausting the statutory remedies provided under the Act. The points raised in this regard are statutory violations. However, even such statutory violations can be dealt with by the Appellate authorities or the Appellate Tribunals. This apart, in a writ petition, if such orders are passed with jurisdictional errors and quashed without any remand, then an injustice would be caused to the very spirit of the statute enacted for the benefit of the public at large. Thus, Courts are expected to be cautious, while granting exoneration of liability merely on the ground of jurisdictional errors, if any committed by the authorities competent - The procedures to be followed in the department for assessment are well settled. Thus, the authorities competent are not expected to commit such jurisdictional errors in a routine manner. In these circumstances, review of such orders by the higher authorities are imminent to form an opinion that there is willful or intentional act for commission of such jurisdictional errors, enabling the assesses to get exonerated from the liability. Liability and jurisdictional errors are distinct factors, and therefore, Courts are expected to provide an opportunity to the Department to decide the liability on merits and in accordance with law with reference to the provisions of the Act and Rules and guidelines issued by the Department. Large number of writ petitions are filed without exhausting the statutory appeal remedies and High Court is also entertaining such writ petitions in a routine manner. Keeping such writ petitions pending for long time would cause prejudice to the interest of the assessee also. Thus, such statutory provisions regarding the appeal are to be decided at the first instance, enabling the litigants to avail the remedy by following the procedures as contemplated under law. Such writ petitions are filed may be on the ground of jurisdiction or otherwise - In the absence of exhausting such remedies, High Court is losing the benefit of deciding the matter on merits, as the High Court cannot conduct a trial or examine the original records in the writ proceedings under Article 226 of the Constitution of India. Thus, the Courts shall not provide unnecessary opportunities to the assessee to escape from the liability merely on the ground of jurisdictional error, which is rectifiable. This Court has no hesitation in arriving a conclusion that the petitioner is bound to exhaust the statutory appellate remedy as contemplated under the provisions of the TNVAT Act - Petition disposed off.

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• 2021 (6) TMI 865
  Validity of assessment order - lesser sales turnover reported - assessments were shown both under TNVAT Act as well as Central Sales Tax Act, 1956 - period 2012-13, 2013-14 and 2014-15 - HELD THAT:- The petitioner had filed statutory appeals questioning them before the Hon ble CESTAT. As on date, the petitioner has not been able to obtain any interim order of stay. Mere pendency of the CESTAT appeals cannot by itself whittle down the effect of the findings set out in the final orders passed by the Central Excise Department. At the same time, question arises as to what would happen if the CESTAT chooses to allow the appeals filed by the petitioner herein. Interest of justice therefore requires that this Court requests the CESTAT, Chennai to dispose of the appeals filed by the petitioner herein within a period of five months from the date of receipt of copy of this order. Till then, the impugned orders shall be kept in abeyance. It is for the petitioner to obtain final order or interim order at the hands of CESTAT in the meanwhile. If the petitioner fails to obtain any interim order within a period of five months or fails to succeed in getting the appeals allowed, the orders impugned in these writ petitions will spring back to life and thereafter it will be enforced. The period during which these writ petitions were pending and the period during which the impugned orders are kept in abeyance will of course be excluded in the matter of computing limitation - Petition disposed off.

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• Indian Laws

• 2021 (6) TMI 868
  Dishonor of Cheque - efficacious remedy by way of filing appeal - compounding of the offences - amicable settlement of the dispute - Section 141 of the Negotiable Instruments Act, 1881 - HELD THAT:- Considering the object of Section 138 of the NI Act, which is mainly to inculcate faith in the efficacy of banking operations and credibility of transacting business through cheque as also taking into account the provisions of Section 147 which states that every offence punishable under this Act shall be compoundable. Further, it is mainly a transaction between the private parties where the State is not affected. This Court is aware that the ideal remedy for the parties ought to have been to prefer an appeal as available under the law. The guidelines as prescribed in the case of DAMODAR S. PRABHU VERSUS SAYED BABALAL H. [ 2010 (5) TMI 380 - SUPREME COURT ] also provide for instituting proceedings for compounding the offence before the appellate court as the present proceedings are preferred after an order of conviction by a competent court. Taking into account the fact that the parties have settled the dispute amicably,in view of this court the compounding of the offence is required to be permitted - Application allowed. Generally the powers available under Section 482 of the Code would not have been exercised when a statutory remedy under the law is available, however considering the peculiar set of facts and circumstances it would not be in the interest of justice to relegate the parties to appellate court. Additionally when both the parties have invoked the jurisdiction of this Court and there is no bar on exercise of powers and the inherent powers of this court can always be invoked for imparting justice and bringing a quietus to the issue between the parties and hence, the present application is entertained.

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• 2021 (6) TMI 866
  Dishonor of Cheque - legally enforceable debt or not - admissible evidence or not - primary or secondary evidence - section 138 of the Negotiable Instruments Act, 1881 - HELD THAT:- There is no dispute that respondent No.2 filed a complaint under Section - 200 of the Code for the offence under Section - 138 of the Act, 1881 against the petitioners herein and others and it is also not in dispute that respondent No.2 herein has filed original documents as mentioned in the list of documents appended to the complaint. In the Photostat copy of the certified copy of the said complaint, it is specifically mentioned that the original documents filed in the Court along with complaint returned to respondent No.2 herein on 19.06.2012. In view of the law laid down by the Division Bench in KRISHNAPATNAM PORT COMPANY LTD. VERSUS CARGILL INDIA PVT. LTD. AND ORS. [ 2018 (7) TMI 2188 - TELANGANA HIGH COURT] , respondent No.2 has filed original documents along with the complaint and the same were returned to it after verification of the same upon obtaining an undertaking from respondent No.2 to the effect that it would produce the same at the time of trial. On verification of the same only, the learned Magistrate has taken the cognizance of the offence under Section - 138 of the Act, 1881 vide C.C. No. 5 of 2019. The learned Magistrate then issued summons to the petitioners herein and other accused. There is an endorsement to the said effect in the complaint itself. Respondent No.2 has filed an application under Section 65 (c) of the Act, 1872 which was signed by its GPA Holder, specifically contending the aforesaid facts. Just because respondent No.2 has not lodged any complaint with the police concerned about lost of original documents, the said application cannot be thrown away. There is no reason as to why the petition filed by respondent No.2 signed by its GPA holder and Authorized Signatory stating that the originals were misplaced cannot be believed. According to this Court, respondent No.2 has laid down a factual foundation by filing an application under Section 65 (c) of the Act, 1872 - the learned Magistrate has rightly allowed the application filed by respondent No.2 under Section 65 (c) of the Act, 1872. Petition dismissed.

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