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TMI Tax Updates - e-Newsletter July 12, 2022 Case Laws in this Newsletter: GST Income Tax Customs Insolvency & Bankruptcy Service Tax CST, VAT & Sales Tax Indian Laws Articles Critical study of provisions of CENTRAL GOODS AND SERVICES TAX ACT, 2017–( in (short CGST) from clause 51 to clause 75 of section 2. – Third article REVOCATION OF ARBITRATION CLAUSES AND RECALLING OF ARBITRAL AWARDS News Globalisation of Inflation and Conduct of Monetary Policy (Speech by Shri Shaktikanta Das, Governor, Reserve Bank of India - July 9, 2022 - Delivered at the Kautilya Economic Conclave, organised by Institute of Economic Growth in New Delhi) Circulars / Instructions / Orders Customs Instruction No.14/2022 - dated 11-7-2022 Amendment in Export Policy of Wheat Flour (atta) Instruction No.13/2022 - dated 9-7-2022 Warehousing of solar power generating units or items like solar panel, solar cell etc. for power plants with resulting goods ‘electricity’ - In-applicability of Manufacture and Other Operations in Warehouse (no.2) Regulations, 2019 under section 65 of the Customs Act, 1962 Highlights / Catch Notes GST Violation of principles of natural justice - Service of summary SCN - Though, the petitioner submitted their concise reply vide letter dated 11-10-2018; the respondent State cannot take benefit of the said action as summary of show cause notice cannot be considered as a show cause notice as mandated under Section 74(1) of the Act - it is well settled that there is no estoppels against statute. A bonafide mistake or consent by the assesse cannot confer any jurisdiction upon the proper officer. - HC Visit to Get Source Validity of assessment order - The order, ex parte in nature, passed in violation of the principles of natural justice, entails civil consequences; (c) It is also found that the authorities not to have adjudicated the matter on the attending facts and circumstances. - HC Visit to Get Source Rejection of application for registration - As the evident, the word 'may' only refers to the discretion to reject and not to blatantly violate the principles of natural justice. If the assessing authority is inclined to reject the application, which he is entitled to, he must assign reasons for such objection and adhere to proper procedure, including due process. - HC Visit to Get Source Levy of GST - reimbursement amount - Applicant is acting as a pure agent of the industry partner - The task of providing adequate training to the enrolled trainees and payment of stipend to the trainees is an obligation on the part of the Appellant and as part of this responsibility and in their own interest they have deployed trainees to the premises of the Company. Since the deployment of trainees to the Company and ensuring that the trainees complete the training is an activity undertaken by the Appellant in his own interest as a NEEM Facilitator, the Appellant fails to satisfy the definition of 'pure agent' as given in Rule 33 of the CGST Rules. - AAAR Visit to Get Source Scope of advance ruling application - Input Tax Credit - common input services utilized for both taxable as well as exempted supply - the Appellant has sought a ruling whether the credit on such commonly used services can be availed. This question undoubtedly involves examining the admissibility of credit on the common input services which are used by them in their Mysuru unit in the course or for the furtherance of business - The lower Authority was incorrect in not giving a ruling on this question. - AAAR Visit to Get Source Income Tax Control of income-tax authorities - U/s 118 of the Income-tax Act, 1961 - the Transfer Pricing Officer - hierarchy - Seeks to amend Notification No. 60/2017 dated 3rd November, 2014 - Notification Visit to Get Source Assessment u/ 153A - Addition u/s 68 - Completed assessments can be interfered with by the Assessing Officer while making the assessment under section 153A only on the basis of some incriminating material unearthed during the course of search or requisition of documents or undisclosed income or property discovered in the course of search which were not produced or not already disclosed or made known in the course of original assessment - HC Visit to Get Source Application for settlement of cases u/s 245C - Writ petition was pending when the Settlement Commission was abolished and Interim Board was brought into operation. This court is of the view that the restrictive circumstances under which an Interim Board can entertain an application, is applicable only when an application is filed afresh or pending and not applicable to cases where the High Court in exercise of its powers under Article 226 of the Constitution of India, set asides an earlier order and remands back the matter for fresh consideration. - this court has no hesitation in remanding back the matter to the Interim Board, which shall dispose off the application - HC Visit to Get Source Exemption u/s 11 - Hon’ble High Court has categorically held that this issue cannot be reopened by the Revenue and Revenue is not entitled to state that the assessee’s trust is not carrying on charitable activity and thus, it is not in the field of education, etc. Once, Hon’ble High Court had held that the assessee is in the field of education, assessee is fully entitled for claim of deduction u/s.11 of the Act. - AT Visit to Get Source Reopening of assessment u/s 147 - addition of development charges and TDR deposits violating the principles of mutuality - The TDR premium is a payment made by a member to the Society of which he is a member, as a consideration for being permitted to make an additional utilization of FSI on the plot allotted by the Co-operative Housing Society. The Society which looks after the infrastructure, requires the payment of the premium in order to defray the additional burden that may be cast as a result of the utilization of the FSI. - It is essentially clear that the receipts of the assessee are not chargeable to tax applying the doctrine of mutuality. - AT Visit to Get Source Maintainability of first appeal before the tribunal or CIT(A) - Penalty u/s 271FA read with Section 274 - we are inclined to dismiss this appeal filed by the appellant before the tribunal as a non-est appeal being not maintainable , with a further direction that appellant, if so advised, may file first appeal before the Learned CIT(A) against the penalty order passed by A.O. under section 271FA of the I.T. Act, 1961 immediately on receipt/service of this appellate order, and if that be so, we direct Learned CIT(A) to condone the delay in filing appeal by the appellant. - AT Visit to Get Source Disallowing the loss u/s 79 - change in shareholding of the assessee company - any loss that is coming from the assessment year 2013-14 is not allowable against the income of the assessment year 2014-15. This does not mean that the losses incurred during the assessment year 2014-15 (in the financial year 2013-14) are not to be allowed to be carried forward. With this view of the matter, we find that the observations of the authorities below that the current year losses are not to be allowed to be carried forward further are untenable. - AT Visit to Get Source Computation of book profits for the purpose of computing the tax liability u/s. 115JB - two sets of books of account - there is no material on record indicating the first set of annual accounts are not in accordance with the provisions of section 210 of the Companies Act. The very fact that the annual accounts were re-cast by providing liability towards additional cane price goes to prove that the appellant company had not followed the same Accounting Polices and Accounting Standards which are adopted in the former set of annual accounts. Therefore, the second set of annual accounts cannot be adopted for the purpose of computing the tax liability under the provisions of section 115JB of the Act. - AT Visit to Get Source Customs Standard Operating Procedure (SOP) (Version 1.1) for “Implementation of Central Government notification prohibiting import of mobile phones with duplicate, fake and non-genuine International Mobile Equipment Identity” - Order-Instruction Visit to Get Source Levy of penalty on Exporter and CHA - consignments of rice were exported to Iran but delivered/diverted/discharged at Jabel Ali Port, Dubai and sold in UAE - M/s. SSIGPL lost the ownership of the goods as soon as ‘let export order’ was issued by the Customs authorities. After the said let export order it was the responsibility of the Shipping Lines to ship the goods to the foreign buyer and the exporter having no control over the goods. - M/s. SSIGPL cannot be held responsible if the importer situated at Iran had given instruction to change the port from Bandar Abbas port to Jabel Ali port as after the ‘let export order’ was issued by the Customs authorities it was the importer at Iran who became the owner of the goods. - AT Visit to Get Source DGFT Syncing of ITC (HS), 2022- Schedule-1 (Import Policy) with the Finance Act, 2022 (No. 6 of 2022) dated 30.03.2022 - Notification Visit to Get Source Amendment in registration time period of Steel Import Monitoring System (SIMS) - Notification Visit to Get Source Amendment in Export Policy of Wheat Flour (atta) - Notification Visit to Get Source SEZ Unit deemed to be in International Financial Services Centre - New Rule 19A inserted - Special Economic Zones (Second Amendment) Rules, 2022 - Notification Visit to Get Source FEMA Asian Clearing Union (ACU) Mechanism – Indo-Sri Lanka trade - eligible current account transactions including trade transactions with Sri Lanka may be settled in any permitted currency outside the ACU mechanism until further notice - Circular Visit to Get Source Investment by Foreign Portfolio Investors (FPI) in Debt - Relaxations - Exemption from the limit on short-term investments till maturity or sale of such investments in case of certain specified investments - Circular Visit to Get Source Indian Laws Dishonor of cheque - payment of interim compensation are mandatory or directory? - the provisions of Section 143-A of the N.I. Act are directory and not mandatory - The Court has to record reasons for determining the quantum of interim compensation, if it comes to the conclusion based upon the fact position availing, that it is a case which deserves award of interim compensation, which can be anywhere upto 20% of the cheque amount. - HC Visit to Get Source Concurrent sentence - dishonor of multiple check - multiple offences and thereafter seek concurrent running of the sentences - there is immense possibility that the creditor secures multiple cheques for each installment and lodges different complaints against default of each cheque and claim consecutive running of sentences in each of the said cases to seek confinement of a defaulter in custody for an indefinite period. The crucial test thus is the similarity of the transaction and not the quantum of the money involved. A Court is thus required to maintain a fine balance by imposing a sentence so that the reformatory, retributive and deterrent effects are balanced well. - HC Visit to Get Source Dishonor of Cheque - cheque was issued towards repayment of friendly loan - rebuttal of statutory presumptions - The Appellant has failed to establish, as to when the cheque in-question was issued by Respondent No.1. As noted earlier, Appellant has failed to establish the fact that, when he actually advanced the alleged hand loan to Respondent No.1. - HC Visit to Get Source IBC CIRP - role of IRP - The IRP is directed to proceed with CIRP. Obviously, the IRP has to take further proceeding in CIRP as per sections 18 to 21 of the IBC, 2016. He has to constitute CoC and proceed further in CIRP. He cannot sit idly for years together controlling the affairs of the Corporate Debtor. In our considered opinion, IRP misread some orders of the Hon'ble NCLAT. - Tri Visit to Get Source Service Tax SVLDRS - Rejection of petitioner’s rectification application - The fact that the petitioner made a mistake in stating a higher amount concerning outstanding service tax demand, cannot result in an estoppel and thus impede the petitioner from seeking the requisite benefits under the Scheme and the provisions of the Act. The calculation presented by the petitioner on the principles articulated before us, is not disputed by the respondents/revenue - rectification application allowed - HC Visit to Get Source VAT Constitutional Validity of Telangana Value Added Tax (Second Amendment) Act, 2017 - Validity of amendment after enactment of GST Law and repeal of VAT law - the Second Amendment Act is unconstitutional being devoid of legislative competence. It is accordingly declared as such. Consequently, the notices issued and orders passed under Section 32 (3) of the VAT Act which have been impugned in the present batch of writ petitions are hereby set aside and quashed. - HC Visit to Get Source Case Laws: GST 2022 (7) TMI 450 Detention of goods alongwith penalty - no summary of the order in Form GST DRC-07 has been issued in absence of which, petitioner is precluded from preferring any appeal - Section 129 (3) of the JGST Act - violation of principles of natural justice - HELD THAT:- The petitioner has a remedy of appeal under Section 107 of the JGST Act, petitioner is granted liberty to approach the appellate authority against the impugned order passed under FORM GST MOV-09. On his approaching the Deputy Commissioner, State Taxes, Dumka Circle, Dumka shall provide the GSTIN number so that petitioner can prefer an appeal online. In case the appeal is not accepted online for any technical reasons, he would be at liberty to prefer an appeal manually before the appellate authority the Deputy Commissioner, State Taxes, Dumka Circle, Dumka. The writ petition is disposed of. 2022 (7) TMI 449 Levy of GST - royalty/seignorage charges - Seeking for Transit Pass to ascertain as to whether any quarry materials transported - HELD THAT:- This Court directs the respondents to consider the petitioners' representations dated 13.06.2022 and 24.06.2022 respectively, and dispose of the same in accordance with law. The writ petition disposed off. 2022 (7) TMI 448 Violation of principles of natural justice - Service of summary SCN - Search and seizure - irregular claim of input tax credit - it is alleged that the petitioner has claimed input tax credit without making payment of value and tax of the inputs to the supplier within six months which is in contravention of 2nd/3rd proviso to Section 16(2) of the JGST Act - HELD THAT:- It appears that pursuant to the search conducted by the respondents in the premises of the petitioner-company under Section 67 of the JGST Act two summary of show cause notice in Form DRC-01 were issued, one for the period from 01.07.2017 to 13.8.2018 and another for the period from April, 2018 to 31.8.2018 under Section 74(1) of the JGST Act. It further transpires that the petitioner submitted a concise reply for both the DRC-01 vide its letter dated 11.10.2018 and finally two separate orders, both dated 25.2.2019, were passed. Subsequently, the petitioner also filed rectification application for both the period and fresh rectified orders were passed in respect of both these tax periods. The law is no more res-integra, inasmuch as, Rule 142(1)(a) of the JGST Rules provides that the summary of show cause notice in Form DRC-01 should be issued along with the show cause notice under Section 74(1). The word along with clearly indicates that in a given case show cause notice as well as summary thereof both have to be issued. As per Rule 142(1)(a) of the JGST Rules, the summary of show cause notice has to be issued electronically to keep track of the proceeding initiated against the registered persona whereas a show cause notice need not necessarily be issued electronically. This Court in the case of M/S. NKAS SERVICES PRIVATE LIMITED. VERSUS THE STATE OF JHARKHAND, THE COMMISSIONER OF STATE TAXES, RANCHI, DEPUTY COMMISSIONER OF STATE TAXES, GODDA [ 2021 (10) TMI 880 - JHARKHAND HIGH COURT] was the member, has taken note of the said position of law and has categorically held that Summary of Show Cause Notice in Form DRC-01 is not a substitute of show cause notice under Section 74(1). The foundation of the proceeding in both the cases suffers from material irregularity and hence not sustainable being contrary to Section 74(1) of the JGST Act; thus, the subsequent proceedings/impugned Orders cannot sanctify the same. Though, the petitioner submitted their concise reply vide letter dated 11-10-2018; the respondent State cannot take benefit of the said action as summary of show cause notice cannot be considered as a show cause notice as mandated under Section 74(1) of the Act - it is well settled that there is no estoppels against statute. A bonafide mistake or consent by the assesse cannot confer any jurisdiction upon the proper officer. The jurisdiction must flow from the statute itself. The rules of estoppels is rule of equity which has no role in matters of taxation. The impugned show cause notice in both the cases does not fulfill the ingredients of a proper show- cause notice and thus amounts to violation of principles of natural justice, the challenge is maintainable in exercise of writ jurisdiction of this Court. Accordingly, the summary of show-cause notices dated 14.09.2018 issued in Form GST DRC-01 at Annexure-4 (in both cases), the orders dated 25.02.2019 issued under section 74(9) of JGST Act (in both cases) and also the final orders dated 3.3.2021 passed after rectification at Annexure-11 (in both cases), are hereby quashed and set aside. Application allowed. 2022 (7) TMI 447 Rejection of appeal preferred by the petitioner under section 107 of the central goods and services tax act 2017 - opportunity of haring not provided - ex-parte order - violation of principles of natural justice - HELD THAT:- This Court, notwithstanding the statutory remedy, is not precluded from interfering where, ex facie, it is opined that the order is bad in law. This is for two reasons- (a) violation of principles of natural justice, i.e. Fair opportunity of hearing. No sufficient time was afforded to the petitioner to represent his case; (b) order passed ex parte in nature, does not assign any sufficient reasons even decipherable from the record, as to how the officer could determine the amount due and payable by the assessee. The order, ex parte in nature, passed in violation of the principles of natural justice, entails civil consequences; (c) It is also found that the authorities not to have adjudicated the matter on the attending facts and circumstances. All issues of fact and law ought to have been dealt with, even if the proceedings were ex parte in nature. Petition disposed off. 2022 (7) TMI 446 Validity of assessment order - levy of tax, interest and penalty without dealing with the grounds in the submission/reply and without stating in the order regarding the period/days of default for which the interest and penalty has been imposed - opportunity of hearing not provided - ex-parte order - violation of principles of natural justice - HELD THAT:- This Court, notwithstanding the statutory remedy, is not precluded from interfering where, ex facie, it is opined that the order is bad in law. This is for two reasons-(a) violation of principles of natural justice, i.e. Fair opportunity of hearing. No sufficient time was afforded to the petitioner to represent his case; (b) order passed ex parte in nature, does not assign any sufficient reasons even decipherable from the record, as to how the officer could determine the amount due and payable by the assessee. The order, ex parte in nature, passed in violation of the principles of natural justice, entails civil consequences; (c) It is also found that the authorities not to have adjudicated the matter on the attending facts and circumstances. All issues of fact and law ought to have been dealt with, even if the proceedings were ex parte in nature. Writ petition disposed off. 2022 (7) TMI 445 Rejection of application for registration under the provisions of the Central Goods and Service Tax Act, 2017 - the order is assailed on the ground that it is that it is cryptic and entirely non-speaking - HELD THAT:- An order of this nature is indefensive insofar as it is non-speaking, arbitrary and evidently has not taken into account the explanation furnished by the petitioner. Learned counsel for the respondent refers to Rule 9(4), particularly the deployment of the word 'may' herein, that according to him, grants discretion to the authority to assign reasons - As the evident, the word 'may' only refers to the discretion to reject and not to blatantly violate the principles of natural justice. If the assessing authority is inclined to reject the application, which he is entitled to, he must assign reasons for such objection and adhere to proper procedure, including due process. The impugned order is set aside - Petition allowed. 2022 (7) TMI 444 Levy of GST - reimbursement amount - Applicant is acting as a pure agent of the industry partner to the extent of reimbursement received towards stipend paid to Trainees on behalf of industry partner as part of training agreement - Applicant is acting as a pure agent of the industry partner to the extent of reimbursement received against cost of medical and accident insurance obtained for the benefit of Trainees by the Applicant and reimbursed by the industry partner as per the training agreement - HELD THAT:- A reading of Rule 33 gives the understanding that a pure agent is one who, while making a supply to the recipient, also receives and incurs expenditure on some other supply on behalf of the recipient and claims reimbursement, at actuals, for such supplies from the recipient of the main supply. In other words, under the pure agent concept, the expenditure which is incurred by the supplier of service for procuring supplies from a third party for the recipient, in addition to his own supplies, is excluded from his value of supply since such expenditure is one which is compulsorily levied on the recipient of service, but has been paid by the supplier of service to the third party on behalf of the recipient and is claimed as a reimbursement from the recipient at actuals. The Appellant's case does not fit into the above understanding of pure agent. In this case, the Appellant is providing the service of deploying trainees to the Company as per the NEEM Regulations. However, it is the Appellant who is obligated under the NEEM Regulations to pay the stipend to the trainees. Regulation 15 of the NEEM Regulations as well as the terms of the contract entered into with the NEEM Trainee stipulate that it is the Appellant who will pay the stipend to the trainee. Since the trainee has registered with the Appellant as NEEM Facilitator, it is the responsibility of the Appellant to deploy the trainee in a suitable industry to undergo training at the industry for a specific period and pay the stipend during the training period. Merely because the Appellant is getting the stipend amount reimbursed from the Company, will not make the Appellant a pure agent of the Company. The activity of deploying trainees to the Company to undergo training is undertaken by the Appellant in his own interest as a NEEM Facilitator. While the NEEM Regulations make provisions for the NEEM Facilitator to partner with Companies/Industries to provide the training, it makes the Facilitator responsible for payment of stipend and for issue of the training completion certificate. The Regulations do not cast any responsibility on the Company or the Industry who is providing the practical training. It is the responsibility of the Facilitator to furnish data of the trainees to AICTE - No doubt the terms of the agreement with the Company specify that the stipend amount paid to the Appellant is to be utilized only for the purpose of paying the trainees, but this does not make the Appellant a pure agent of the Company since the NEEM Regulations does not require the Company/Industry to pay a stipend to the trainees. The task of providing adequate training to the enrolled trainees and payment of stipend to the trainees is an obligation on the part of the Appellant and as part of this responsibility and in their own interest they have deployed trainees to the premises of the Company. Since the deployment of trainees to the Company and ensuring that the trainees complete the training is an activity undertaken by the Appellant in his own interest as a NEEM Facilitator, the Appellant fails to satisfy the definition of 'pure agent' as given in Rule 33 of the CGST Rules. Merely because the agreement with the Company states that the stipend amount will be utilized for payment to the trainees and the invoice shows the stipend amount separately, it does not mean that the Appellant is a pure agent and is absolved of his liability - the Appellant fails to qualify as a pure agent with regard to the payment of stipend to the trainees which is reimbursed by the Company. Application dismissed. 2022 (7) TMI 443 Scope of advance ruling application - Input Tax Credit - common input services utilized for both taxable as well as exempted supply - CISF Township Security Services - Maintenance of Water Treatment Plant - Horticulture - Maintenance of residential Quarters - Maintenance of Information System (Computers, Software Electronic Equipment) - Maintenance of Sewage Treatment Plant - method followed by the applicant in connection with claiming of input tax credit is in accordance with the provisions of law or not - turnover of which financial year to be considered in Rule 42 of the CGST Rules, 2017 while calculating ineligible ITC for the invoices which were accounted in the books of accounts in the FY 2019-20, however ITC was claimed during April to September 2020-21 as per Section 16(4) of the CGST Act, 2017. Whether the ITC can be claimed on certain common input services which are used by them in the printing press as well as the ink manufacturing unit for both taxable and exempted supplies? - HELD THAT:- This question is well within the scope of Section 97(2)(d) since the admissibility of input tax credit on the common input service will depend on whether the same are used in the course or for the furtherance of his business and whether the services are blocked under Section 17(5). The lower Authority has failed to answer this question stating that Section 97(2) does not cover situations governed by Section 17(2) of the CGST Act. It is found that the lower Authority has not appreciated the question in the proper perspective. In their application for advance ruling, the Appellant has stated that certain input services are used by them both in the manufacturing of ink and rupee notes as well as in the residential quarters in the township. In this context, the Appellant has sought a ruling whether the credit on such commonly used services can be availed. This question undoubtedly involves examining the admissibility of credit on the common input services which are used by them in their Mysuru unit in the course or for the furtherance of business - The lower Authority was incorrect in not giving a ruling on this question. We will however, not go further and decide this question on merits as this Authority is not empowered to do so in appeal proceedings. Section 101(1) of the CGST Act empowers the Appellate Authority to pass such orders either confirming or modifying the ruling appealed against. In this case, since no ruling has been given by the lower Authority on the merits of the question, the Appellate Authority cannot give a ruling ab initio in appeal proceedings. Whether the method followed in connection with claiming of ITC is in accordance with the provisions of law? - HELD THAT:- This question is not within the scope of an advance ruling. The correctness or otherwise of the method followed by the Appellant in claiming input tax credit is not a subject covered under Section 97(2) of the CGST Act. Such questions are to be raised before the assessing officer who is the proper officer to decide whether the method adopted by the Appellant in complying with the provisions of Rule 42 of the CGST Rules is correct or not. Which financial year is to be considered for calculating the ineligible ITC as per Rule 42? - HELD THAT:- This question is also not within the scope of an advance ruling. An advance ruling can be sought on matters or questions specified in Section 97(2) which are in respect of supplies being undertaken or proposed to be undertaken by the applicant. In this case, the question does not fall within the scope of any of the matters listed in Section 97(2). Moreover, we find that the question relates to input tax credit which has already been availed by the Appellant in FY 2020-21. The application filed in August 2021 seeking a ruling on an action which has already been done in the past is not covered under the advance ruling mechanism. In terms of Section 98(2), the lower Authority has to examine after hearing the applicant, whether the application for advance ruling can be admitted or rejected. If the application is rejected, an order must be passed under Section 98(2) citing the reasons for such rejection. The order passed under Section 98(2) rejecting the application is not appealable before the Appellate Authority in terms of Section 100 of the CGST Act. If the application for advance ruling is admitted, then a ruling must be passed in terms of Section 98(4) of the CGST Act. A ruling given under Section 98(4) alone is appealable before the Appellate Authority in terms of Section 100 of the said Act - the lower Authority has passed an order under Section 98(4) of the Act which means that the application has been admitted. Appeal disposed off. Income Tax 2022 (7) TMI 442 Disallowance of travel expenses - assessee had failed to explain the purpose of the journey and that it was wholly and exclusively for business - ITAT deleted the addition - whether no nexus between the utilization of borrowed funds and business activity of the assessee provided? - HELD THAT:- Both the CIT (A) and ITAT emphasised that the assessing officer had failed to provide any cogent reasoning or working, based on which such disallowances were made. Both the CIT(A) as well as ITAT have held that the assessee had carried out its business of real estate and infrastructure development during the year under consideration as it had undertaken more than nine projects and had carried inventory of Rs.53.87 crores of traded goods in the form of apartments which were ready for sale and which were sold in the subsequent years. The two authorities below have also found that the respondent-assessee had participated in joint venture projects outside India in consonance with its Memorandum of Association and there was clear connection between the money borrowed and its utilization for the purposes of business of real estate and infrastructural development. Both the appellate authorities also observed that the assessee duly demonstrated that the funds borrowed had been deployed/invested for various business projects of the assessee such as Rs.10 crores utilized for furnishing bank guarantee for bidding for lease hold rights from Rail Land Development Authority, Rs.25.50 crores for aggregation of land to develop residential/commercial complex-which is main business of the company, Rs.6.05 crore for payment of interest and other expenses, Rs.22 crores paid to AKC Developers Ltd. as equity contribution in JV of Municipal Solid Waste Project and Rs.7.35 crores to Qcell Ltd. Gambia as its contribution for Joint Venture of IT enabled services etc. This Court is of the view that the appellant, by way of the present appeal, seeks interference with finding of facts arrived at by the CIT(A) and ITAT by asking this Court to re-appreciate the evidence. In State of Haryana Ors. vs. Khalsa Motor Limited Ors., ( 1990 (8) TMI 416 - SUPREME COURT] the Supreme Court has held that the High Court would not be justified in law in reversing in second appeal, the concurrent finding of fact recorded by two Courts below. This Court is further of the opinion that the impugned order calls for no interference as it suffers from no perversity. No substantial questions of law arise in this matter. Accordingly, the present appeal and application are dismissed. 2022 (7) TMI 441 Assessment u/ 153A - Addition u/s 68 - unsecured loan treated as bogus and sham transactions - HELD THAT:- As regards AY 2012-13 it was noted by the ITAT that it was an unabated assessment and unless there was incriminating material, no addition could be made. In particular it was noticed that the statement of the two persons of UAPL was recorded on 13th November, 2014 i.e. after the search was completed on 7th November, 2014. Therefore, such statements could not be material unearthed during the course of search. Nevertheless, in those statements there was nothing brought out to show that cash was received from the Assessee by UAPL in lieu of the cheque issued by UAPL to the Assessee. Further, the name of the Assessee did not appear in the statement made to the IO by the Directors of the UAPL. The said loan amount of Rs.3.06 crores was not mentioned by them as an accommodation entry. The said two persons were not allowed to be cross-examined by the Assessee. As regards the observation of the CIT (A) that the lack of opportunity to the Assessee to cross examine the Directors of UAPL was not fatal to the addition made by the AO, the ITAT found the said proposition to be contrary to the law explained by the Supreme Court in its decision in M/s. Andaman Timber Industries [ 2015 (10) TMI 442 - SUPREME COURT] Completed assessments can be interfered with by the Assessing Officer while making the assessment under section 153A only on the basis of some incriminating material unearthed during the course of search or requisition of documents or undisclosed income or property discovered in the course of search which were not produced or not already disclosed or made known in the course of original assessment - See KABUL CHAWLA [ 2015 (9) TMI 80 - DELHI HIGH COURT] Since the findings of the ITAT are factual, based on the documents placed on record and have not been shown to be perverse by the Revenue and are consistent with the settled legal position as explained above, the Court finds that no error has been committed by the ITAT in either order deleting the additions sought to be made by the AO. - Decided in favour of assessee. 2022 (7) TMI 440 Reopening of assessment u/s 147 - Only submission of learned counsel for the petitioner is that the impugned notice under Section 148 issued by the respondent No.1 [ITO-2(1)] is without jurisdiction inasmuch as the ITO Ward 2(1) is not the jurisdictional assessing officer for the Assessment Year 2017-18 - HELD THAT:- Subject to the provisions of sub-section (3), where an assessee calls in question the jurisdiction of an Assessing Officer, then the AO shall, if not satisfied with the correctness of the claim, refer the matter for determination under sub-section (2) before the assessment is made. Notwithstanding anything contained in this section or in any direction or order issued under section 120, every Assessing Officer shall have all the powers conferred by or under this Act on an Assessing Officer in respect of the income accruing or arising or received within the area, if any, over which he has been vested with jurisdiction by virtue of the directions or orders issued under sub-section (1) or sub-section (2) of section 120. While the judgment is being dictated, learned counsel for the petitioner has prayed for time to place before this court some judgments in support of his submissions and with regard to interpretation of the aforenoted provisions. As prayed by learned counsel for the petitioner, put up in the additional cause list for further hearing on 14.07.2022 at 02:00 P.M. 2022 (7) TMI 439 Reopening of assessment u/s 147 - notice under Section 148 A (b) to correct address or not? - HELD THAT:- As petitioner has not been able to make out a case that the address on which the notice under Section 148 A (2) (b) sent was not one in the ITR furnished by the assessee to which the communication related. Moreover, in the absence of the ITR for assessment year 2021-22, the department cannot also be blamed for sending the e-mail notice on the address indicated in the ITR 2020-21 assessment year. We are also of the opinion that such communication could have been delivered or transmitted electronically on any of the e-mail addresses made available by the addressee to the Income Tax Authority including the one on which he has filed ITR 6 for assessment year 2020- 21 on which such notice under Section 148 A (b) has been delivered. We may also passingly observe that considering the strict time line stipulated for a preliminary enquiry under Section 148A before re-opening assessment proceedings, interference on such issues at this stage, when facts and documents on record do not substantiate the contention of the petitioner, are wholly uncalled for. 2022 (7) TMI 438 Application for settlement of cases u/s 245C - HELD THAT:- It is completely Unnecessary and beyond the scope of the commission to find fault or with the modus operandi of the assessee in arranging his tax liability, while deciding an application under Section 245D. In the present case, we are satisfied that the assessee has fully disclosed all the primary facts and produced the documents in support of the same. At the cost of repetition, all materials placed before the Commission are to be considered as per Section 245D (5). Therefore, we do not agree with the casual finding of the Learned Judge that the disclosure must be acceptable disclosure. It is relevant to point out that no new materials were produced by the department to enable the settlement commission to take a different view that there was no true and full disclosure. Rather, the department and the settlement commission have embarked upon to alter their earlier view or inference, which cannot be a reason to thwart the application as not maintainable. The paradox in the functioning of settlement commission, comprising of senior members from the department, deviating from the neutrality of a quasi-judicial authority, would have invited our much attention if it had not been abolished and replaced with interim board. As rightly contended by the learned senior counsel for the Appellant, ought to have gone into the merits of the contentions advanced on behalf of the appellant and rendered specific findings, more particularly, when the allegations of principles of natural justice and violation of the procedures as alleged. Even if the Learned Judge was to disagree with the contentions, all the contentions ought to have been discussed and specific findings ought to be given. Therefore, we have no hesitation to hold that the order has been passed in violation of the principles of natural justice and against the procedures prescribed under the Income Tax Act and hence, the order is liable to be set aside and remanded back for fresh consideration after giving opportunity to both the parties. Whether the Interim Board can now decide the matter? - Writ petition was pending when the Settlement Commission was abolished and Interim Board was brought into operation. This court is of the view that the restrictive circumstances under which an Interim Board can entertain an application, is applicable only when an application is filed afresh or pending and not applicable to cases where the High Court in exercise of its powers under Article 226 of the Constitution of India, set asides an earlier order and remands back the matter for fresh consideration. The powers of the High Court which emanate from the Constitution cannot be curtailed by a law made by the legislature, such law being subordinate to the Constitution. It is not out of place to mention here that it is evident from the press release which was followed by the order dated 28.09.2021, various High Courts had earlier issued directions to entertain the applications for settlement and such applications were also entertained. While so, the contention of the counsel for the department that the interim board cannot entertain the old application, cannot be accepted. Upon the matter being remanded, the application filed by the Appellant would have to be treated as a pending application and appropriate orders are to be passed after giving the appellant sufficient opportunity and by considering all the materials placed by him. Another point that was raised by the counsel for the department before us was that the pendency of the Appeal for the year 2013-14 would be an embargo, which we do not think so. The assessment order for 2013-14 was passed only on 20/06/2021 after the disposal of the Writ Petition. The appeal though has been preferred is yet to be numbered. Once the order of the Settlement Commission is set aside and the matter is remanded back, status quo ante is restored. The orders of assessment and the unnumbered appeal would become otiose. Therefore, this court has no hesitation in remanding back the matter to the Interim Board, which shall dispose off the application within a period of six weeks from the date of receipt of this order on merits and in accordance with law, after giving sufficient opportunity to the appellant and also by considering all the documents placed. Insofar as the attachment proceedings are concerned, the relief has become infructuous as the attachment was made before six years and maximum period for which such provisional attachment could be in force is only two years. 2022 (7) TMI 437 Additions on recasted value of closing stock - CIT(A) allowing the claim of the assessee that it had correctly valued the closing stock - whether CIT(A) failed to appreciate that value determined by the AO in respect of value of closing stock was based on facts and as per accounting principles? - HELD THAT:- CIT(A) has deleted the addition on the basis that the same was considered in the re-casted profit and loss account of earlier assessment year i.e., AY 2011-12 and hence he deleted the addition. We find no infirmity in the order of CIT(A) but in case the addition is deleted in AY 2011-12 and that re-casted profit and loss on account of valuation of closing stock is made and that addition is deleted on same reasoning, that this year the issue has to be dealt with on merits. In view of the above, we remand this matter back to the file of the AO for verification whether this addition is already considered in AY 2011-12 while making addition by the AO at Rs. 16,52,72,766/-. In case that addition is deleted on merits, the AO will verify and accordingly decide the issue afresh after confronting to the assessee. This issue of the Revenue appeal is allowed for statistical purposes. Addition on notional interest on interest bearing funds advanced for non-business purposes interest free - assessee has not explained any commercial expediency for giving interest free loans - CIT-A deleted the addition - HELD THAT:- We noted that the Revenue now before us could not controvert the above facts situation that there are funds available with both interest free in making these interest bearing advances and few there are opening balance also. Once interest free funds available with the assessee, which is more than the interest free advances, no disallowance can be made by resorting the provision of section 36(1)(iii) of the Act. We noted no infirmity in the order of CIT(A) and hence this issue of Revenue appeal is dismissed. Validity of assessment as beyond the limitation period prescribed vide sec. 153 - HELD THAT:- We noted that the assessment order was framed vide order dated 31.03.2015 and passed within time limit i.e., 31.03.2015, but it was served on the assessee only on 13.04.2015. The limitation expires on 31.03.2015. The assessment order passed was within the limitation and accordingly, we dismiss this ground of appeal. 2022 (7) TMI 436 Exemption u/s 11 - CIT(A) confirming the action of AO denying the benefit of exemption u/s.11 of the Act by invoking the proviso to section 2(15) of the Act, as applicable w.r.e.f. 01.04.2009 as amended by the Finance Act, 2010 - HELD THAT:- We noted that this case is fully covered in favour of assessee by the decision of Hon ble High Court of Madras in assessee s own case [ 2020 (11) TMI 267 - MADRAS HIGH COURT] , wherein the issue of registration u/s.12A of the Act was challenged and Hon ble High Court has categorically held that this issue cannot be reopened by the Revenue and Revenue is not entitled to state that the assessee s trust is not carrying on charitable activity and thus, it is not in the field of education, etc. Once, Hon ble High Court had held that the assessee is in the field of education, assessee is fully entitled for claim of deduction u/s.11 of the Act. We order accordingly. Therefore, in all the four years, appeals of the assessee are allowed. 2022 (7) TMI 435 Exemption u/s 11 - rejecting the application for registration u/s 12A - As alleged activities of the appellant fell under category of advancement of any other object of general public utility u/s 2(15) - HELD THAT:- Undoubtedly, the activities of the assessee are for the promotion of sporting activities. We find that whether the trust carrying on the sport activities is entitled to registration under Section 12AA of the Act or not. The objects of the trust placed before us at page no. 15 of the Paper Book shows that it is for the promotion of sport as well education, social, arts and cultural advancements. We find that this issue is squarely covered in favour of the assessee by the decision of the co-ordinate Bench [ 2022 (3) TMI 250 - ITAT MUMBAI] held that income derived from the sport activities are held to be charitable in nature. The co-ordinate Bench in that decision has followed the decision of Hon'ble Bombay High Court in the case of Director of Income-tax (Exemption) vs. Chembur Gymkhana [ 2012 (8) TMI 611 - BOMBAY HIGH COURT] - thus hold that the learned CIT (E) is not correct in holding that assessee is not eligible for registration under Section 12AA of the Act so far as the activities of the sports are concerned. Further in Assistant Commissioner of Income-tax (Exemptions) v. Surat District Cricket Association [ 2022 (5) TMI 540 - ITAT SURAT] it is held that Where predominant object of assessee-society was to promote cricket and other sports at State as well as at National level and receipts shown under income from other sources were from activities undertaken in furtherance of various sports, profit earning was not predominant purpose of assessee and thus, proviso to section 2(15) could not be invoked to decline benefit of section 11 of The Act . Thus at least assessee which is promoting Gymnastic Sports is entitled to Registration u/s 12 AA of The ACT. We set aside the order of the learned CIT holding that the sports and activities are following under the category of advancement of other object of general public utility. We also find that assessee is not given the address of the donors to the learned CIT (E). The CIT is also required to verify the activities of the trust at the time of granting of registration under Section 12AA of the Act. In view of this, we direct the assessee to submit the requisite details called for by the learned CIT (E) with respect to the activities of the trust. In view of this, the learned CIT (E) is directed to grant registration to the assessee under Section 2(15) of the Act holding that the objects of the assessee are charitable in nature. Further, he is also directed to examine the activities of the trust and decides the application of the assessee afresh. 2022 (7) TMI 434 Reopening of assessment u/s 147 - addition of development charges and TDR deposits violating the principles of mutuality - basic allegation against the assessee was, assessee society received Development charges and TDR deposits through developers as mentioned in assessment order - As during the referred year i.e. F.Y. 2010-11 relevant to A.Y. 2011-12 there is increase from F.Y. 2009-10 to F.Y. 2010-11 in reserve fund and the income was not offered for the taxation - HELD THAT:- The doctrine of mutuality, based on common law principle, is premised on the theory that a person cannot make a profit from himself and amount received from oneself, cannot be regarded as income and taxable under section-4. The essence of the principle of mutuality lies in the commonality of the contributors and the participants who are also the beneficiaries. The contributors to the common fund must be entitled to participate in the surplus and participator in the surplus are contributors to the common fund. The law envisages a complete identity between the contributors and the participants in this sense. Any surplus in the common fund shall therefore not constitute income but will only be an increase in the common fund meant to meet sudden eventualities and liabilities. In CIT, Bihar Vs. M/s Bankipur Club Ltd. [ 1997 (5) TMI 392 - SUPREME COURT ] considering the surplus of receipts over expenditure generated from the facilities extended by a club to its members and its exemption from tax on principles of mutuality. In the present case, the facts are not in dispute the assessee is a Cooperative Housing Society formed of plot owners who had obtained a lease of land from the Maharashtra Housing Board. The society looks after the maintenance and infrastructure. If any members desire to avail of the benefit of transferable development rights for carrying out construction or additional construction on his plot, the member has to pay certain premium to the society. AO is of the view that TDR premium is charged by the society from its member but paid by the developer on members behalf to permit them to commercially exploit the potential for the development of the plot; whereas in reality it was a profit sharing arrangement of the commercial nature. The admitted facts would indicate that the TDR premium is liable to be paid by a member of the Society who desires to utilize additional FSI in the form of Transferable Development Rights. The principle of mutuality would clearly apply to a situation as to the present. In the context of the payment of non occupancy charges by a member of a Co-operative Housing Society to the Society, a Division Bench of this Court held in Mittal Court Premises Co-operative Society Ltd. vs. Income Tax Officer [ 2009 (7) TMI 689 - BOMBAY HIGH COURT ]' that the principle of mutuality would apply. The Division Bench noted that the object of the Society is to provide service, amenities and facilities to its members. Non-occupancy charges are payable by a member on account of the fact that the member is not in occupation of the premises. In our view, the same principle would apply to the present case. The TDR premium is a payment made by a member to the Society of which he is a member, as a consideration for being permitted to make an additional utilization of FSI on the plot allotted by the Co-operative Housing Society. The Society which looks after the infrastructure, requires the payment of the premium in order to defray the additional burden that may be cast as a result of the utilization of the FSI. The point however, is that there is a complete mutuality between the Co-operative Housing Society and its members. It is essentially clear that the receipts of the assessee are not chargeable to tax applying the doctrine of mutuality. As alleged by the AO that the payments have been made by the developer on assessees behalf is not material in the given circumstances. Just because payments had been made by the developer, doctrine of mutuality cannot be taken away from the assessee society. In our considered view amount of TDR deposit and development charges received for A.Y. 2011-12, for A.Y. 2012-13 and amount of TDR Utilization Charges/TDR Premium and amount of development charges are not chargeable to tax on the concept of mutuality Based on above discussions and factual finding, if an assessee is entitled for the benefit under the doctrine of mutuality, no expense disallowed on ad-hoc basis can be added back to the income of the assessee. 2022 (7) TMI 433 Reopening of assessment u/s 147 - addition on account of share capital and share premium treating the same as an unexplained cash credit u/s 68 - HELD THAT:- We find that assessee has filed its return of income, the same return of income has been accepted as it is without any scrutiny, later on the information is available in the form of statement during the course of survey of the directors of one of the group companies that the share capital obtained by the assessee is bogus, the learned assessing officer cannot be found fault for issuing a notice u/s 148 of the act beyond four years as assessee has failed to disclose the true character of the share capital issued by it. The case of the assessee is squarely covered in favour of the revenue by the decision of the honourable Supreme Court in case of Raymond woolen Mills Ltd versus ITO ( 1997 (12) TMI 12 - SUPREME COURT] and ACIT versus Rajesh Jhaveri stockbrokers private limited ( 2007 (5) TMI 197 - SUPREME COURT] . Therefore, we hold that there is a tangible material available with the assessing officer to form a reason to believe that the income of the assessee has escaped assessment. Accordingly, ground numbers 1 3 of the appeal are dismissed. Addition on account of share capital and share premium treating the same as an unexplained cash credit u/s 68 - the assessee could able to substantiate its case and satisfy three ingredients being identity, creditworthiness and genuineness of the transactions - As elaborately on the net worth of these companies and percentage of the investments are comparatively lower than total net worth of the investor companies. Accordingly, set aside the order of the CIT(A) and direct the assessing officer to delete the addition and allow this ground of appeal in favour of the assessee 2022 (7) TMI 432 Maintainability of first appeal before the tribunal or CIT(A) - Penalty u/s 271FA read with Section 274 - non-compliance of provisions of Section 285BA(1) - HELD THAT:- We are of the considered view that first appeal against penalty order passed by A.O. levying penalty u/s 271FA would lie before CIT(A), and not before the tribunal. Thus, the assessee erred in filing this appeal directly before the tribunal, and hence this appeal is non-est and not maintainable before the tribunal. In this connection, reference is drawn to provisions of Section 246A(1)(q) which provides that an appeal against order imposing penalty under Chapter-XXI would lie with CIT(A). Section 271FA of the 1961 Act falls under Chapter-XXI of the 1961 Act. It is also relevant to reproduce the appellate order passed by ITAT, Varanasi Circuit Bench, Varanasi in the case of Sub-Registrar, Gola Bazar, Dist. Gorakhpur etc., v. DIT (I CI), DTRTI, Lucknow, [ 2022 (3) TMI 1394 - ITAT VARANASI ], whereby the Division Bench had taken a view that first appeal against penalty order passed by A.O. levying penalty under section 271FA of the 1961 Act would lie with Learned CIT(A), keeping in view provisions of Section 246A(1)(q) of the 1961 Act. CIT(A) has dismissed all the appeals taking a view that first appeal against penalty order passed by A.O. under section 271FA levying penalty for non-compliances of Section 285BA(1) of the 1961 Act, would lie directly to ITAT, which view of the Learned CIT(A) was held to be an erroneous view by the tribunal vide common order dated 24.03.2022. There could be a bonafide belief on the part of the appellant to file an appeal directly with the tribunal against penalty order passed by A.O. u/s 271FA of the 1961 Act for non compliance of provisions of Section 285BA of the 1961 Act, but however the fact of the matter is that the first appeal against the penalty order passed by AO u/s 2711FA shall lie with ld. CIT(A) and not with tribunal. Thus, we are inclined to dismiss this appeal filed by the appellant before the tribunal as a non-est appeal being not maintainable , with a further direction that appellant, if so advised, may file first appeal before the Learned CIT(A) against the penalty order passed by A.O. under section 271FA of the I.T. Act, 1961 immediately on receipt/service of this appellate order, and if that be so, we direct Learned CIT(A) to condone the delay in filing appeal by the appellant. 2022 (7) TMI 431 Disallowing the loss u/s 79 - Reason for such disallowance is that during the previous year there is change in shareholding of the assessee company - HELD THAT:- Section 79 of the Act reads that where a change in shareholding has taken place in any previous year in the case of a company, not being a company in which the public are substantially interested, no loss incurred in any year prior to the previous year shall be carried forward and set off against the income of the previous year, but subject to certain conditions. Here in this case the previous year is 2013-14 and the relevant assessment year is 2014-15. With reference to these, the losses that are not allowable to be carried forward to be set off against the income of the assessment year 2014-15 or the losses relating to the period prior to the assessment year 2014-15. It means that any loss that is coming from the assessment year 2013-14 is not allowable against the income of the assessment year 2014-15. This does not mean that the losses incurred during the assessment year 2014-15 (in the financial year 2013-14) are not to be allowed to be carried forward. With this view of the matter, we find that the observations of the authorities below that the current year losses are not to be allowed to be carried forward further are untenable. We accordingly allowing the grounds of appeal, direct the learned Assessing Officer to delete the disallowance made under section 79 - Appeal of assessee allowed. 2022 (7) TMI 430 Computation of book profits for the purpose of computing the tax liability u/s. 115JB - two sets of books of account - which one to be followed - HELD THAT:- The provisions of section 115JB(2) stipulate that the Profit Loss Account for the relevant period is to be prepared in accordance with the provisions of the Companies Act, 1956. The preparation of annual accounts including the Profit Loss Account and Balance Sheet should be in consonance with the provisions of section 210 of the Companies Act, 1956 as well as the Accounting Policies and Accounting Standards - As provided that the annual accounts including Profit Loss Account prepared for the purpose of Income Tax Act shall follow the same Accounting Policies and Accounting Standards, adopted for preparing the annual accounts for the purpose of Companies Act as laid before the AGM in accordance with the provisions of the Companies Act - in case where the company had adopted a financial year under the Companies Act, which is different from the previous year for the purpose of Income Tax Act, the same Accounting Policies and Accounting Standards which are adopted for the purpose of preparing annual accounts under the Companies Act shall be adopted. This would clearly show the Legislative intent that while preparing the annual accounts for the purpose of Income Tax Act and the Companies Act, there should not be any difference in the Accounting Policies and Accounting Standards adopted for the purpose of preparation of annual accounts for both the purposes i.e. Income Tax Act and the Companies Act. In the present case, the assessee had prepared annual accounts without providing for liability towards additional cane price and the same were adopted in the annual accounts and laid before the AGM. For income-tax purposes, the appellant company had prepared a different set of annual accounts wherein the liability towards additional cane price was provided. Therefore, the question is which sets of annual accounts was prepared in accordance with provisions of section 210 of the Companies Act, 1956. One set of annual accounts prepared for the purpose of Companies Act and laid before the AGM, there is no qualification in the auditor's report on the annual accounts of the companies. Moreover, the liability towards additional cane price had not accrued as on the date when the annual accounts were approved by the AGM. Second set of annual accounts providing the liability towards additional cane price were not even approved by the AGM and even not submitted to the Registrar of the Companies. Therefore, there is no material on record indicating the first set of annual accounts are not in accordance with the provisions of section 210 of the Companies Act. The very fact that the annual accounts were re-cast by providing liability towards additional cane price goes to prove that the appellant company had not followed the same Accounting Polices and Accounting Standards which are adopted in the former set of annual accounts. Therefore, the second set of annual accounts cannot be adopted for the purpose of computing the tax liability under the provisions of section 115JB of the Act. Therefore, the Assessing Officer had rightly rejected second set of annual accounts prepared by the appellant company for the purpose of computing the tax liability u/s. 115JB of the Act. Therefore, we do not see any reasons to interfere with the orders of the lower authorities. Argument relating to the 'principle of consistency ', we are of the considered opinion that the principle of res-judicata, has no application in the income-tax proceedings. The principle of consistency comes into play only in cases where two views are possible and the Assessing Officer had adopted one of the possible view and that view is legally sustainable. The principle of consistency cannot be applied in the present case, as the approach of the Assessing Officer is in accordance with settled position of law. Thus, the contention of the appellant on 'principle of consistency' cannot be accepted. Hence, the grounds of appeal filed by the appellant company stand dismissed. 2022 (7) TMI 429 Reopening of assessment u/s 147 - period of limitation - Notice issued before or after expiry of time limit available with the AO for issuance of notice u/s. 143(2) - HELD THAT:- As we noted that the assessee filed its return of income on 22.10.2003 u/s. 139(1) of the Act. This return was processed and intimation u/s. 143(1) was issued vide dated 05.03.2004. However, the AO did not serve notice u/s. 143(2) of the Act on the assessee before 31.10.2004, despite the fact that the time limit was available for sending notice u/s. 143(2)(ii) of the Act. But before that, the notice u/s. 148 was issued on 03.06.2004 before the expiry of time limit for completion of assessment. As the issue is covered and the facts are very clear that once the time limit for issuance of notice u/s. 143(2) of the Act was available with the Assessing Officer up to 31.10.2004, the AO can resort to the notice u/s. 143(2)(ii) of the Act and no need for issuing of the notice u/s. 148 of the Act as held in TCP LTD. [ 2009 (4) TMI 396 - MADRAS HIGH COURT] and we quash the assessment proceedings and allow this CO of the assessee. 2022 (7) TMI 428 Cash deposits during the demonetization period - assessee having two PAN - AO passed the assessment u/s 144 for failure to submit the ITR and details - CIT(A) set aside the order - HELD THAT:- Cash deposits are made out of the cash sales of the assessee and have been duly recorded in the books of account and reflected in the P L Account of the assessee submitted before the Revenue Authorities. We also find merit in the arguments of the Ld. AR that considering the peculiar circumstances to this business cash being received by the dealer in automobiles for making payments to various authorities such as registration charges, insurance, life tax etc. - The cash is collected from the customers as reimbursements and hence it does not form part of the revenue of the assessee. We also note that from the paper book submitted by the AR that the Account Number has been typographically wrongly mentioned in the Note-9 in Schedule to Balance Sheet as on 31/3/2017 appended to financial statements, but the balances are properly disclosed in the books of accounts thus, mere a typographical error of the account number of the bank account does not mean that the assessee has not disclosed proper information about the bank account details. The assessee while filing ITR-V has disclosed the bank account ending with No. 38301 in the list of bank accounts which was demonstrated by the Ld. AR before us. We also note from the records available before us that the income appearing in Form 26AS with another PAN was also shown under the head other income by the assessee while filing the return of income. In view of the above facts, we find no infirmity in the order of the Ld. CIT(A) and hence no interference is required. Customs 2022 (7) TMI 419 Confiscation - penalty - export of Rice - consignments were originally booked for Iran, Shipping Bills/Export documents were filed for export to Iran, but investigation alleged that the consignments were delivered to UAE - violation of provisions of para 2.40 and 2.53 of the Foreign Trade Policy - rejection of cross-examination - admissibility of statements - reliable evidences or not - HELD THAT:- The revenue in support of allegations rely upon the statements of Director, CHAs and the officials of Shipping Lines. However We find that these persons were not examined in the adjudication proceedings even after the request of Appellant and as such their statements are not admissible as evidence under the provisions of Section138B of Customs Act, which provides that - if an authority in any proceedings under the Act wants to rely upon the statement of any person (made during enquiry), such person is required to be examined as witness and if the adjudicating authority finds the evidence of the witness admissible , then such witness should be offered for cross-examination and only thereafter the evidence is admissible. In absence of compliance with the provision of Section138B of the Act, the statements are not admissible as evidence. Rejection of cross-examination - violation of principles of natural justice - HELD THAT:- The rejection of cross-examination in the impugned matter tantamount to violation of principles of natural justice. Request for cross-examination has been denied and the witnesses have not been examined despite specific reliance by the appellant on Section138B - in the present matter all the documents in respect of disputed consignments were in the name of Iranian buyers. There is nothing on record to show that the said documents were amended at any stage so as to permit import of goods at UAE. Further Revenue nowhere produced any documentary evidence to show that the exports documents produced by the Appellant were false and fabricated. Once all the export documents were in the name of Iranian buyers there was no scope for clearance of the goods in UAE and its subsequent sale. In the present matter none of buyer at Iran have claimed that the goods have been short shipped /not received by them. None of the remittance receipts furnished to the concerned Bank, have been objected to by the concerned Indian Bank. None of the remittance receipts have been alleged to be fake. As per RBI regulations payment against exports can be received from consignee (foreign buyer) as shown in export documents and cannot be received from any other party. Therefore the contention of revenue that payment has come from third party and not from actual buyer in UAE not supported by any evidences is not sustainable. In this case the only allegation and finding against Appellant is that they had violated para 2.53 of the FTP i.e. to say that since according to the Customs the goods were actually exported to UAE, the payments should have been received in convertible foreign exchange. The whole case revolves around irregularities in respect of receipt of currency with regard to exported goods. These violations relate to post export conditions. There is no doubt that any violation relating to foreign exchange are covered under FEMA, 1999 and not under the Customs Act. Though the show cause notice invoked Section 113(d) and 113(i) of the Customs Act but these provisions were invoked by only alleging violation of para 2.53 of the FTP and section 8 of FEMA, 1999. Thus, there was no violation of Customs Act in any manner. There is no dispute about the description of the goods, its quantity and value. The export of rice was neither prohibited nor restricted. It is a well settled law that in respect of alleged violation of foreign exchange, it is the erstwhile FERA authorities or FEMA authorities who are competent to initiate the proceedings against the party - since it was only a case of alleged violation of the provisions of Foreign Trade (Development Regulation Act) and rules made there under as well as that of Foreign Exchange Management Act, the Customs authorities did not have jurisdiction to issue the show cause notice for said violation. Penalty on M/s. V. Arjoon, CHA - HELD THAT:- The CHA had filed shipping bills as per the documents provided to him by exporter. Therefore the bonafide act of the Appellant cannot be doubted. The act of filing the export documents for customs clearances shows that the appellant has no mens rea and filed the documents being a bona fide facilitators - since it is already held that the goods were ultimately delivered to the buyers at Iran, there is no justification for imposing penalty upon the appellants, therefore, the penalty imposed on all the co-appellantsis set aside. The order of the Commissioner (Appeals) is set aside and all the appeals filed by the Appellants are allowed. 2022 (7) TMI 418 Levy of penalty on Exporter and CHA - consignments of rice were exported to Iran but delivered/diverted/discharged at Jabel Ali Port, Dubai and sold in UAE whereas the payments were received from Iranian buyers in Indian currency - whether 50 consignments of rice exported by M/s. SSIGPL were sold in UAE or ultimately reached Iran after these consignments were off loaded at Jabel Ali Port, Dubai? - HELD THAT:- M/s. SSIGPL lost the ownership of the goods as soon as let export order was issued by the Customs authorities. After the said let export order it was the responsibility of the Shipping Lines to ship the goods to the foreign buyer and the exporter having no control over the goods. We have already held that M/s. SSIGPL had given instructions to change the port only in five cases out of 50 that too after the cargo had left the port. In remaining 45 cases there is no material on record that M/s. SSIGPL had given any instruction to change the port. Hence M/s. SSIGPL cannot be held responsible if the importer situated at Iran had given instruction to change the port from Bandar Abbas port to Jabel Ali port as after the let export order was issued by the Customs authorities it was the importer at Iran who became the owner of the goods. The whole case revolves around irregularities in respect of receipt of currency with regard to exported goods. We find that these violations relate to post export conditions. There is no doubt that any violation relating to foreign exchange are covered under FEMA, 1999 and not under the Customs Act. Though the show cause notice invoked Section 113(d) and 113(i) of the Customs Act but these provisions were invoked by only alleging violation of para 2.53 of the FTP and section 8 of FEMA, 1999 - FEMA authorities had initiated inquiries against M/s. SSIGPL and its director and they have penalized them with respect to only one consignment which was mentioned at S.No. 25 of the table which was presented before the FEMA authorities. But the crucial aspect of the matter is that in the adjudication proceedings by FEMA authority it has been held that all the 50 consignments ultimately reached Iran through Jabel Ali port, Dubai. Levy of penalty on M/s. SSIGPL again on the ground that the goods were actually sold in UAE and export proceeds were received from a third party in Iran - HELD THAT:- The overwhelming evidence clearly establishes that Jabel Ali port was only used as transit port wherefrom the goods were further exported to Iran. Hence there is no justification for sustaining penalty upon M/s. SSIGPL under Section 114 and 114AA of the Customs Act. We therefore set aside the penalty upon M/s. SSIGPL. Levy of penalty on Shri Aman Gupta, Director of M/s. SSIGPL - HELD THAT:- Since there is no violation committed by M/s. SSIGPL there is alsono warrant for sustaining penalty on Shri Aman Gupta, Director of M/s. SSIGPL, which is also set aside. Levy of penalty on M/s. V. Arjoon, CHA, Shri Tushar H. Anam, partner of M/s. V. Arjoon - HELD THAT:- As it is already held that the goods were ultimately delivered to the buyers at Iran, there is no justification for imposing penalty upon the CHA. Appeal allowed - decided in favor of appellant. Insolvency & Bankruptcy 2022 (7) TMI 427 Direction to the Interim Resolution Professional (IRP) to constitute the Committee of Creditors (CoC) and call CoC's meeting - HELD THAT:- The Hon'ble NCLAT took note of the fact that IRP to continue in the management of the Corporate Debtor and CIRP to be proceeded with. The order not to constitute the CoC was not extended after 24.08.2021 by the Hon'ble NCLAT and we have to take that order for our consideration. The IRP is directed to proceed with CIRP. Obviously, the IRP has to take further proceeding in CIRP as per sections 18 to 21 of the IBC, 2016. He has to constitute CoC and proceed further in CIRP. He cannot sit idly for years together controlling the affairs of the Corporate Debtor. In our considered opinion, IRP misread some orders of the Hon'ble NCLAT. The IRP are directed to proceed with the CIRP as per sections 18 to 21 of the IBC, 2016 and constitute CoC forthwith - application allowed. 2022 (7) TMI 426 Liquidation of the Corporate Debtor - Section 33(1), 33(2) and 34(1) of the Insolvency and Bankruptcy Code, 2016 (IBC, 2016) - HELD THAT:- In the present case two Resolution Plans were received, but the same were not approved by the CoC. The applicant in support of the present application has annexed relevant documents which include copy of the Minutes of the various Meetings of the CoC conducted by the RP. In the 11th meeting of the CoC, Union Bank of India, being the sole member of the CoC, passed resolution for Liquidation of the Corporate Debtor. The liquidation of the Corporate Debtor is ordered - application allowed. Service Tax 2022 (7) TMI 425 SVLDRS - Rejection of petitioner s rectification application preferred under Section 128 of the Finance Act, 2019 - nub of the problem which obtains in the instant case, concerns the amount that the petitioner could have been called upon to pay by the Designated Committee i.e., respondent no.3 - HELD THAT:- Mr Lakshmikumaran is right; the reason being, that the Designated Committee cannot go beyond either the counters of the show-cause notice dated 07.01.2014 or the operative directions contained in the order-in-original dated 20.04.2015 - A careful perusal of the directions would show that the demand, as is contended by Mr Lakshmikumaran, is pegged at Rs. 16,61,78,084/-. CENVAT credit - Credit wrongly availed and utilised against payment of service tax liability - invocation of Rule 14 of CCR 2004 - HELD THAT:- It is important to highlight that Rule 14 of the 2004 Rules is a recovery provision, which entitles the respondents to straightaway proceed to recover CENVAT credit which has been taken or utilised wrongly or has been erroneously refunded, along with interest - The intrinsic evidence, which, is available in this case, indicates that this amount i.e., the CENVAT credit which has been disallowed, is embedded in the demand of Rs. 16,61,78,084/-. The fact that the petitioner made a mistake in stating a higher amount concerning outstanding service tax demand, cannot result in an estoppel and thus impede the petitioner from seeking the requisite benefits under the Scheme and the provisions of the Act. The calculation presented by the petitioner on the principles articulated before us, is not disputed by the respondents/revenue - What the respondents/revenue dispute is that the demand cannot be limited to Rs. 16,61,78,084/-, as the amount which was disallowed by way of CENVAT credit i.e., Rs. 8,07,72,766/-, had to be added to the same. The impugned statement dated 24.12.2019 and the order dated 23.01.2020, passed in the rectification application, are set aside - Petition allowed. CST, VAT & Sales Tax 2022 (7) TMI 424 Shifting of point of levy of Entry Tax - whether assessment order suffers vice of infirmity whereby the assessing authority has shifted the point of levy of entry tax, i.e. from manufacturer (karigar) to the point of selling, i.e. trader-petitioner - gross error of law in restoring the assessment order or not? - absence of service of notice in Form E30 prescribed under Rule 15B of the Odisha Entry Tax Rules accompanied with audit visit report in Form E27 by the assessing authority - assessment framed under Section 9C of the Odisha Entry Tax Act, 1999 can be held to be valid or not - HELD THAT:- Without the basic material on the basis of which the demand was raised under the OET Act provided to the Assessee, it cannot be expected that the Assessee would be able to meet the queries raised on the work done by the karigars. Consequently, neither the levy of entry tax nor the consequential penalty is sustainable in law. The questions framed by this Court are answered in favour of the Assessee and against the Department by holding that the Tribunal erred in restoring the assessment order and further that in the absence of service of notice in Form E-30 in terms of Rule 15B of the OET Rules accompanied by the AVR in Form E27, the assessment framed under Section 9C of the OET Act is not valid. The revision petition is disposed of. 2022 (7) TMI 423 Eligibility to pay taxes under the scheme of composition - purchase of machinery in the course of interstate trade for use in business activity of the Respondent - Section 15(1) (c) of KVAT Act, 2003 - HELD THAT:- Undisputed facts of the case are, respondent is in the business of sale of food and drinks. It has purchased Sealing Machines, PP Cups etc., from outside the State as equipments and consumables for its business. Assessee is not a dealer of said goods. In the case of Shri. Anantha Padmanabha Bhat [ 2016 (7) TMI 546 - KARNATAKA HIGH COURT ], rightly relied upon by the KAT, this Court has held that the vitrified tiles used in the restaurant owned by the assessee therein were not sold by him in the regular course of business but they were used for the flooring of the restaurant where it was held that When so fixed in the floor, the Vitrified Tiles of-course became the part of the immovable property, and it is beyond the common sense and basic commercial prudence to even comprehend that the Vitrified Tiles fixed on the floor of the restaurant could be treated by an assessing authority as the 'goods in stock' dealt with by the assessee or sold in the course of regular course of business. The assessing authorities trained and well acquainted with the commercial terms, cannot be allowed to take such perverse views. In the instant case, admittedly, respondent is in the business of sale of food and beverages. The goods purchased by the respondent are for running its business. Hence, they cannot be considered as 'goods held in stock' - the view taken by this Court in Anantha Padmanabha Bhat s case is fully applicable for the present case. The question framed by the Revenue is answered in favour of the assessee - This revision petition fails and it is accordingly dismissed. 2022 (7) TMI 422 Eligibility for payment of tax under Composition Scheme - denial of benefit of composition scheme on the ground that respondent had made interstate purchases - business of sale of bakery items - purchase of bakery machinery, its parts and aluminum trays from outside the State - HELD THAT:- Respondent is not engaged in the business of sale of machinery. In the case of Shri. Anantha Padmanabha Bhat [ 2016 (7) TMI 546 - KARNATAKA HIGH COURT ], rightly relied upon by the KAT, this Court has held that the vitrified tiles used in the restaurant owned by the assessee therein, were not sold by him in the regular course of business but they were used for the flooring of the restaurant where it was held that When so fixed in the floor, the Vitrified Tiles of-course became the part of the immovable property, and it is beyond the common sense and basic commercial prudence to even comprehend that the Vitrified Tiles fixed on the floor of the restaurant could be treated by an assessing authority as the 'goods in stock' dealt with by the assessee or sold in the course of regular course of business. In the instant case, admittedly, respondent is engaged in sale of bakery items. The goods purchased by the respondent are for preparing the bakery items. Hence, they cannot be considered as 'goods held in stock'. The questions framed by the Revenue are answered in favour of the assessee - revision petition dismissed. 2022 (7) TMI 420 Constitutional Validity of Telangana Value Added Tax (Second Amendment) Act, 2017 - Validity of amendment after enactment of GST Law and repeal of VAT law - it is prayed that all notices and orders issued or passed on the strength of the extended period of limitation of six years in terms of the aforesaid amendment Act should be declared as illegal - legislative competence - HELD THAT:- The power to make laws either by the Parliament or by the State Legislatures is traceable to Article 246 of the Constitution of India. The Lists in the VII Schedule defines and limit the respective competence of the Union and the States. The various entries in the three lists of the VII Schedule are not sources of legislative power. These are legislative heads demarcating the field of legislation; of course, being the field of legislation, the entries should be given the widest possible amplitude - On and from 16.09.2016, the competence of the State Legislature got truncated; it had competence to enact law only on the fields mentioned in Entry 54 as substituted i.e., regarding taxes on sale of petroleum crude, high speed diesel, motor spirit (petrol), natural gas, aviation turbine fuel and alcoholic liquor for human consumption. However, there is a further restriction in as much as the taxes should not be on sale of such goods in the course of inter-State trade or commerce or sale in the course of international trade or commerce of such goods. The Second Amendment Act, as already noticed, enhances the limitation period from four years to six years with respect to assessment, reassessment, revision etc. It covers all general goods and is not confined to the five petroleum products and alcoholic liquor for human consumption as mentioned in the substituted Entry 54 of List II. Therefore, State Legislature of Telangana did not have the competence post 16.09.2016 to legislate the Second Amendment Act which could be traceable to Article 246 read with Entry 54 of List II of the VII Schedule to the Constitution. Article 246 A of the Constitution of India came up for analysis before the Supreme Court in UNION OF INDIA ORS. VERSUS VKC FOOTSTEPS INDIA PVT LTD. [ 2021 (9) TMI 626 - SUPREME COURT] which according to the Supreme Court, Article 246A defines the source of power as well as the field of legislation with respect to GST, obviating the need to travel to the VII schedule. This power is available both to Parliament as well as to the State Legislatures except in the course of supply of goods or services or both in the course of inter-State trade or commerce. What Article 246A embodies is the principle of simultaneous levy by both the Parliament and by the concerned State Legislature, distinct from the principle of concurrence. In BAIJU A.A. AND OTHERS VERSUS STATE TAX OFFICER, STATE OF KERALA AND OTHERS [ 2019 (12) TMI 469 - KERALA HIGH COURT] the challenge before a single bench of the Kerala High Court was to the legality of the notices and assessment orders issued in connection with the assessments under the Kerala Value Added Tax Act, 2003 for the assessment years 2010-2011 and 2011-2012. The challenge was made on the ground that the concerned authorities did not have the jurisdiction to issue the notices and assessment orders since the amendments introduced to Section 25 (1) of the Kerala Value Added Tax Act, 2003 through the Kerala Finance Acts of 2017 and 2018 notified on 19.06.2017 and 31.03.2018 respectively did not contemplate a retrospective operation of the amended provisions. According to the Kerala High Court, after the Constitution Amendment Act, the State Legislatures stood denuded of their power to legislate in respect of taxes on sale or purchase of goods covered under Entry 54 of List II of the VII Schedule; rather they were conferred with legislative powers to be exercised simultaneously with the Parliament in respect of taxes on supply of goods or services or both. While the new legislative power could justify the inclusion of a savings clause in the new legislation enacted in respect of the new levy of tax to save accrued rights etc., under the erstwhile enactment, the truncation of Entry 54 of List II automatically denuded the State Legislatures of the power to further legislate on the subject of taxes on sale or purchase of goods, except to the limited extent retained under the Constitution. It has been held that the power to amend a statute being a facet of the legislative power itself, the State Legislature could not have exercised a power to amend the Kerala Value Added Tax Act, 2003 except to the extent permissible when it did not retain any residual right to further legislate on the subject of taxes on sale or purchase of goods. Kerala High Court in HINDALCO INDUSTRIES LIMITED AND ORS. VERSUS STATE OF KERALA AND ORS. [ 2019 (12) TMI 1604 - KERALA HIGH COURT] following the same line of reasoning adopted by the previous bench in BAIJU A.A. (10 supra) it has been held that after the Constitution Amendment Act, State Legislatures stood denuded of their power to legislate in respect of taxes on sale or purchase of goods that was covered under Entry 54 of List II of the VII Schedule; they have instead been conferred with legislative powers to be exercised simultaneously with the Parliament in respect of taxes on supply of goods or services or both. Consequence of amendment of Entry 54 of List II is denuding the State Legislature of the power to levy tax on sale of goods other than those as provided in amended Entry 54; invalidation of State legislations existing as on 16.09.2016 levying tax on sale of goods other than those finding place in amended Entry 54. Section 19 does not save or postpones deprivation or denuding of legislative competence of State Legislature for levying tax on sale of goods other than those mentioned in amended (substituted) Entry 54 of List II. Section 19 only allows operation and levy of tax under the VAT Act which is inconsistent with the GST regime for a period of one year or until the VAT Act is repealed or amended, whichever is earlier. This would mean that the State could continue to levy tax under the VAT Act for the window period of one year or till the VAT Act was amended or repealed to align it with the GST regime, whichever was earlier. This transitional provision does not enable the State Legislature to make amendments to the VAT Act in contravention of the amended Entry 54 of List II. Thus, it can be held that Section 19 of the Constitution Amendment Act cannot be understood or cannot be construed as a source of legislative power. It is also not a saving provision in respect of suspending legislative competence to amend the VAT Act - Section 19 of the Constitution Amendment Act is not a source of power to enable the State Legislature to enact the Second Amendment Act, which is clearly inconsistent with the Constitution Amendment Act. There are no conflict or contradiction between Section 19 of the Constitution Amendment Act and Section 174 of the TGST Act. While Section 19 has deferred invalidity of inconsistent legislations till such time those are amended or repealed or for a period of one year whichever is earlier, Section 174 of the TGST Act has repealed amongst other enactments the VAT Act with effect from 01.07.2017 except in respect of goods covered by the substituted Entry 54 of List II. Thus Section 174 of the TGST Act is in consonance with Section 19 of the Constitution Amendment Act. The above position only supports the case of the petitioners that the State was denuded of its competence to legislate on GST after 16.09.2016 and certainly after 01.07.2017. Can a repealed act be saved by the General Clauses Act, 1897 or by the Telangana General Clauses Act, 1891? - HELD THAT:- Section 8 A of the Telangana General Clauses Act, 1891 says that where any act repeals any enactment by which the text of any previous enactment was amended by express omission, insertion or substitution of any matter then unless a different intention appears, the repeal shall not affect continuance of any such amendment made by the enactment so repealed and in operation at the time of such repeal - Article 367 of the Constitution of India speaks about the interpretation of the Constitution of India. Clause (I) of Article 367 is relevant. It says that unless the context otherwise requires, the General Clauses Act, 1897, subject to any adaptations and modifications that may be made therein under Article 372, shall apply for the interpretation of the Constitution as it applies for the interpretation of an Act of the Legislature. The Constitution Amendment Act came into force on and from 16.09.2016. Section 19 of the Constitution Amendment Act provided for a window period to the States to remove any inconsistent enactments by way of amendment or repeal or until expiration of one year from such commencement whichever was earlier. Telangana Ordinance No.2 of 2017 was promulgated by the Governor of Telangana on 17.06.2017 to further amend the VAT Act. Though the Ordinance was promulgated after coming into force of the Constitution Amendment Act on 16.09.2016, it was so promulgated within the window period of one year as provided by Section 19 of the Constitution Amendment Act. At this stage we may mention that following the Constitution Amendment Act, State of Telangana enacted the TGST Act with effect from 01.07.2017. The Ordinance was promulgated by the Governor on 17.06.2017. As per preamble to the Ordinance, it is stated that Government of India had enacted the CGST Act and Government of Telangana had enacted the TGST Act. But both the Acts had not been brought into force. Referring to the provisions of the VAT Act, it is stated that it empowers the State Government to levy tax on alcoholic liquor for human consumption and on petroleum products. According to the Constitution Amendment Act, levy of tax on those petroleum products and alcoholic liquor for human consumption is within the competence of the State Legislature - the Ordinance, in fact, introduced certain provisions extending limitation to enable initiation of fresh proceedings, such as, revisional proceedings which are completely inconsistent with the scheme of the Constitution Amendment Act. On this ground itself, the Ordinance can be said to have no legal consequence. Intention of Parliament in ushering in the GST regime through the Constitution Amendment Act and enactment of the CGST Act and simultaneous enactment of various State GST Acts by the State Legislatures is to avoid multiplicity of taxes by subsuming those indirect taxes in a single tax called GST - the amendments brought in by the Second Amendment Act, are wholly inconsistent with the scheme of the Constitution Amendment Act read with the CGST Act and the TGST Act. Thus, it is held that the Second Amendment Act is unconstitutional being devoid of legislative competence. It is accordingly declared as such - the notices issued and orders passed under Section 32 (3) of the VAT Act which have been impugned in the present batch of writ petitions are hereby set aside. Petition allowed. 2022 (7) TMI 417 Violation of conditions of the composition scheme prescribed under the KVAT Act and Rules or not - purchasing goods from outside the State of Karnataka for use in the course of its business - whether prohibition on purchase of goods from outside the State by composition dealer under the KVAT Act does not apply to capital goods? - HELD THAT:- Undisputed facts of the case are, respondent owns a Fast Food Restaturant. He has purchased Refrigerators, Freezers etc., from outside the State as capital equipment to run the restaurant. Its main business is not dealing in the said goods. In the case of SRI. ANANTHA PADMANABHA BHAT VERSUS COMMISSIONER OF COMMERCIAL TAXES IN KARNATAKA, BENGALURU AND COMMERCIAL TAX OFFICER (AUDIT) , BENGALURU [ 2016 (7) TMI 546 - KARNATAKA HIGH COURT] , rightly relied upon by the KAT, this Court has held that the vitrified tiles used in the restaurant owned by the assessee therein, were not sold by him in the regular course of business but they were used for the flooring of the restaurant - It was held in the case that When so fixed in the floor, the Vitrified Tiles ofcourse became the part of the immovable property, and it is beyond the common sense and basic commercial prudence to even comprehend that the Vitrified Tiles fixed on the floor of the restaurant could be treated by an assessing authority as the 'goods in stock' dealt with by the assessee or sold in the course of regular course of business. The assessing authorities trained and well acquainted with the commercial terms, cannot be allowed to take such perverse views. In the instant case, admittedly, respondent is in the Restaurant business. The goods purchased by him are in the nature of capital goods for the Restaurant. Hence, they cannot be considered as 'goods held in stock'. The view taken by this Court in Anantha Padmanabha Bhat s case is fully applicable to the facts of present case. The questions framed by the Revenue are answered in favour of the assessee - this revision petition fails and it is accordingly dismissed. 2022 (7) TMI 416 Eligibility to pay taxes under the scheme of composition - purchase of machinery in the course of interstate trade for use in business activity of the Respondent - Section 15(1) (c) of KVAT Act, 2003 - HELD THAT:- Undisputed facts of the case are, respondent owns a stone crushing unit. He has bought stone crushing machinery from outside the State by giving C-Form. His main business is not dealing in stone crushing equipments. In the case of SRI. ANANTHA PADMANABHA BHAT VERSUS COMMISSIONER OF COMMERCIAL TAXES IN KARNATAKA, BENGALURU AND COMMERCIAL TAX OFFICER (AUDIT) , BENGALURU [ 2016 (7) TMI 546 - KARNATAKA HIGH COURT] , rightly relied upon by the KAT, this Court has held that the vitrified tiles used in the restaurant owned by the assessee therein were not sold by him in the regular course of business but they were used for the flooring of the restaurant where it was held that When so fixed in the floor, the Vitrified Tiles of-course became the part of the immovable property, and it is beyond the common sense and basic commercial prudence to even comprehend that the Vitrified Tiles fixed on the floor of the restaurant could be treated by an assessing authority as the 'goods in stock' dealt with by the assessee or sold in the course of regular course of business. The assessing authorities trained and well acquainted with the commercial terms, cannot be allowed to take such perverse views. In the instant case, it would be incongruous to construe the capital equipments purchased by the assessee for stone crushing as goods in stock . The question framed by the Revenue is answered in favour of the assessee - This revision petition fails and it is accordingly dismissed. Indian Laws 2022 (7) TMI 421 Dishonor of Cheque - cheque was issued towards repayment of friendly loan - rebuttal of statutory presumptions - Section 138 of N.I. Act - HELD THAT:- In the present case, perusal of evidence available on record clearly indicates that, there is not a whisper in the complaint so also in the examination-in-chief of Appellant that on which date or in month he advanced the alleged friendly loan to Respondent No.1. His evidence is also silent with respect to the fact that, as to how he advanced friendly loan of Rs.5,00,000/- to Respondent No.1, i.e. in cash or by way of bank transfer. There is no agreement in writing on record or any receipt executed by Respondent No.1 towards acceptance of the said friendly loan. It is to be noted here that, the Appellant in his evidence has admitted that, his annual income was Rs.2,00,000/- and he is a income tax payer. The Appellant has failed to establish, as to when the cheque in-question was issued by Respondent No.1. As noted earlier, Appellant has failed to establish the fact that, when he actually advanced the alleged hand loan to Respondent No.1. In this context, it is to be noted here that, Respondent No.1 on 24th August 2005 itself had intimated the fact of loss or theft of her signed cheques/cheque book to the Manager of Central Bank of India, Sion Branch, Mumbai, by issuing a letter. She had also given intimation to the Manager of the said bank for closure of her bank account by a separate letter - the presumptions as contemplated under Sections 118 139 of N.I. Act are not available to Appellant. A minute scrutiny of the evidence on record leads to draw a safe inference to hold that, the Respondent No.1 has rebutted the statutory presumptions by leading cogent evidence in that behalf. Taking into consideration the defence put forth by Respondent No.1, it can further be inferred that the Appellant might have misused the lost or stolen cheques while initially issuing the statutory notice and subsequently lodging the present complaint. Perusal of entire record would clearly lead to a safe conclusion that, the Appellate Court has appreciated the evidence available on record in its proper perspective and has not committed any error either in law or on facts while passing the impugned Judgment and Order. Appeal dismissed. 2022 (7) TMI 415 Dishonor of cheque - payment of interim compensation are mandatory or directory? - In case it is held that the same is directory, whether the Court has to record reasons for determining the quantum of interim compensation to be awarded? - Section 143-A of the Negotiable Instruments Act, 1881 - HELD THAT:- The basic purpose for enacting Section 143-A of the N.I. Act appears to be to address the delay in decision of cheque dishonour cases and to discourage frivolous and unnecessary litigation. In SURINDER SINGH DESWAL @ COL. S.S. DESWAL ORS. VERSUS VIRENDER GANDHI ANR. [ 2020 (1) TMI 263 - SUPREME COURT] , while considering the provisions of Section 148 of the N.I. Act, in light of the aims and objects, for its enactment, and whether the said provision was prospective or retrospective, it was held that Section 148 of the N.I. Act as amended, shall be applicable in respect of the appeals against the order of conviction and sentence for the offence under Section 138 of the N.I. Act, even in a case where the criminal complaints for the offence under Section 138 of the N.I. Act were filed prior to Amendment Act 20 of 2018 i.e. prior to 1/9/2018. It is thus apparent that there are inherent differences between the provisions of Section148 and Section 143-A of the N.I. Act, due to which what has been held in respect of the word may , as occurring in Section 148 of the N.I. Act in Surinder Singh Deswal, may not be true in respect of the word may , as occurring in Section 143-A(1) of the N.I. Act, specifically so when both these provisions operate in different arenas. From a plain reading of Section 143-A of the N.I. Act, it is clear that it is a provision enacted as an interim measure, during the pendency of the trial, when the guilt of the accused is still to be determined. The word may , thus used in Section 143-A (1) of the N.I. Act, has to be construed in light of the fact that the direction to award compensation, is at the trial stage and as an interim measure. The fact that even in cases under Section 138 of the N.I. Act, the presumption under Section 139 of the N.I. Act, is not absolute, but is rebuttable, also has to be borne in mind. That apart, in a particular case, given the requirement of Section 138 of the N.I. Act, it may so happen that the complaint itself may not be maintainable, for the cheque not having been presented during the period of its validity; the notice not having been issued in the stipulated time; the complaint not having been filed within the time stipulated therefor; the debt may not be a legally enforceable debt or liability; the memo/advice regarding dishonor not having been placed on record etc. - It is further material to note that the power to direct interim compensation under Section 143-A of the N.I. Act, can be equated with the provisions as contained in Order XXXVIII Rule 5 of the C.P.C., which confers a power upon the Court to direct the defendant to furnish security in such sum as may be specified, during the pendency of the suit, which provision is directory in nature and the use of the power is discretionary. It is further material to note that the legislature was aware of the provisions of Sections 138 to 147 of the N.I. Act, the purpose for which they were enacted, the delays which were being caused in the disposal of the proceedings, which is evident from the aims and object of the amending Act 20 of 2018, it was thus open for the legislature to have used an express language that in all cases under Section 138 of the N.I. Act, which were pending trial, the complainant was entitled to compensation upto 25% of the cheque amount. However, such express words, have not been used, though it was open for the Legislature to do so, which again indicates that the use of the word may , as occurring in Section 143-A(1) of the N.I. Act, was not mandatory but was directory and a discretion was conferred upon the Court, to either grant or not to grant interim compensation. It has to be held that Section 143-A of the N.I. Act, is discretionary and not mandatory and the view taken in L.G.R. ENTERPRISES, SINDU @ LAKSHMI VERSUS P. ANBAZHAGAN [ 2019 (7) TMI 1840 - MADRAS HIGH COURT] holding that the word may , as occurring in Section 143-A(1) of the N.I. Act empowers the Court with a discretion to direct interim compensation and it is not necessary that in all cases the trial Court must necessarily direct the interim compensation to be paid and such direction should be given only on a case to case basis based upon the facts of each case - The exercise of any discretion conferred upon a Court, must be for reasons to be spelt out, indicating application of mind by the Court to the facts available before it in the application of the law to such facts. It can thus be concluded that the provisions of Section 143-A of the N.I. Act are directory and not mandatory - The Court has to record reasons for determining the quantum of interim compensation, if it comes to the conclusion based upon the fact position availing, that it is a case which deserves award of interim compensation, which can be anywhere upto 20% of the cheque amount. The matters are remanded back to the learned Special Court to decide the applications under Section 143-A of the N.I. Act afresh - Petition allowed by way of remand. 2022 (7) TMI 414 Seeking grant of Bail - fraudulent mismanagement of Company - petitioner is the Company Secretary and a signatory of the Financial Statements of FY 2013-14 and 2014-15 of BEL, which was a subsidiary of BSL - It was claimed that the petitioner being the Company Secretary of BEL was privy to all Board meetings and was a signatory to the financial statement, wherein there was a major irregularity with respect to investment in BSL - Section 212(6) of the Companies Act - HELD THAT:- The accused was not arrested either by the Investigating agency during the period of investigations or even thereafter when the charge-sheet was filed in the Court. In fact, the bail application was heard for about three years and the accused was not taken into judicial custody despite being present in Court on every date. The respondent has nowhere averred that the custody of the accused was required for the purpose of the investigations or thereafter not any assertion was made for taking the petition into consideration. Interestingly, the petitioner had no interim protection of any superior Court during investigation or while his bail was being heard by the learned Trial Court after taking cognizance, but was never, taken into custody for three years and suddenly on 01.06.2022 when the allegations were still continuing, he was abruptly taken into custody for a reason which existed since last about three years. Moreover, being the Trial Court, it was competent to pass appropriate orders in the circumstances. The bail application was listed for further arguments for 02.06.2022 on which date the application was dismissed. The accused has been appearing before the Investigating Officer and thereafter before the Court diligently and his custody was never sought by the respondent. The petitioner was the Company Secretary in the Company of the accused no. 2 and his main accusation was that he had signed the Financial Statements in his capacity as the Company Secretary. The primary accused, namely, Mr. Neeraj Singhal and Mr. Nitin Johari have already been granted interim bail. The allegations pertain to years-2014-2015 and 2015-2016 and the petitioner neither before nor after has been involved in any criminal offence. The petitioner is hereby admitted to bail on submitting a Bail Bond and Surety Bond in the sum of Rs.1,00,000/- to the satisfaction of the trial court/Special Judge - Application allowed. 2022 (7) TMI 413 Second bail application under Section 439, The Code of Criminal Procedure, 1973 - inflation of some figures of the Stock in Transit in order to avail Drawing Power (DP) facilities from the cash credit accounts - it is claimed that the accused had conducted stock audits based on the information and documents provided by the Companies - HELD THAT:- The petitioner is a Chartered Accountant and a partner in M/s. A.C.Gupta Company, Chartered Accountant. They were appointed as Stock Auditor for the Financial Year 2015-16 of Punjab National Bank to conduct stock audit of Bhushan Steel Limited first limited. The role of the petitioner is that of a data aggregator who conducted stock audit based on the information and the documents provided by the Company. The allegations against the petitioners are that they were negligent in conducting the audits by not verifying the documents diligently and to raise a red flag about the deficiencies in the documents in respect of the Bhushan Steel Limited Company. It is significant to note that the accused had been summoned to appear before the Investigating Officer on 29.6.2018 and he thereafter, joined the investigation on 27.09.2018, 29.10.2018 and 20.03.2018. The statements of the petitioner were duly recorded under Section 207 of the Companies Act, 1956. It is evident that the petitioner had also co-operated and joined the investigations - The chargesheet had been filed in the court on 16.8.2019 when the cognizance was taken by the learned Trial Court. Even thereafter, the petitioner continued to appear before the learned trial court regularly. Bail application was filed by the petitioner on 7.11.2019 which and was heard on various dates till 01.06.2022. However, on the said date, the learned Trial Court directed the accused to be taken into judicial custody since he had no interim protection from any superior Court. Thus, it is evident that the accused was not arrested either by the Investigating agency during the period of investigations or even thereafter when the chargesheet was filed in the Court. In fact, the bail application was heard for about three years and the accused was not taken into judicial custody despite being present in Court on every date. The respondent has nowhere averred that the custody of the accused was required for the purpose of the investigations or thereafter not any assertion was made for taking the petition into consideration - The accused has been appearing before the Investigating Officer and thereafter before the Court diligently and his custody was never sought by the respondent. The role of the petitioner is that of the Stock Auditor wherein the Stock verifications of the documents and statements as submitted by the Company to the Banks was carried out by the accused. The main accusations against him are that he did not conduct the Stock Audits diligently and did not raise red flag about the inconsistency as submitted in the documents to the Banks by the Companies. Further, the primary accused, namely, Mr. Neeraj Singhal and Mr. Nitin Johari have already been granted interim bail. The allegations pertain to years-2014-2015 and 2015-2016 and the petitioner neither before nor after has been involved in any criminal offence. The petitioner is hereby admitted to bail on submitting a Bail Bond and Surety Bond in the sum of Rs.1,00,000/- to the satisfaction of the trial court/Special Judge - Bail application allowed. 2022 (7) TMI 412 Dishonor of Cheque - concurrent running of sentences - whether the sentences should be ordered to be run concurrently under Section 427 of the Code of Criminal Procedure, 1973 where the petitioner-accused is being prosecuted for having issued four different cheques in discharge of his liability and four independent complaints have been filed relating to dishonour of each cheque? - HELD THAT:- A perusal of the custody certificate shows that the petitioner has already undergone his complete sentence in the revision petition arising out of Appeal No. 47 dated 12.07.2017. Since concurrent running of sentences would only be considered when a person is undergoing actual imprisonment and keeping in view the fact that the petitioner has undergone his complete sentence in the Criminal Revision bearing No. 3403-2019 arising out of Criminal Appeal No. 47 dated 12.07.2017, the revision petition has been rendered infructuous as the petitioner is not undergoing any sentence in the said conviction. Therefore, no relief can be granted in the same. While reiterating the principles expounded in the case of NAGARAJA RAO VERSUS CENTRAL BUREAU OF INVESTIGATION [ 2015 (1) TMI 1480 - SUPREME COURT] the Hon ble Supreme Court stated that it is legally obligatory upon the Court of first instance while awarding multiple punishments to specify as to whether the sentences are to run concurrently or consecutively. Concurrent sentence - dishonor of multiple check - multiple offences and thereafter seek concurrent running of the sentences - HELD THAT:- A transaction in the nature of issuance of multiple cheques towards discharge of one single liability has a potential of great misuse on either sides and just as it may incite an accused to swell his liability and to not pay the same despite issuance of multiple cheques, at the same time, there is immense possibility that the creditor secures multiple cheques for each installment and lodges different complaints against default of each cheque and claim consecutive running of sentences in each of the said cases to seek confinement of a defaulter in custody for an indefinite period. The crucial test thus is the similarity of the transaction and not the quantum of the money involved. A Court is thus required to maintain a fine balance by imposing a sentence so that the reformatory, retributive and deterrent effects are balanced well. In the matter of STATE OF PUNJAB VERSUS MADAN LAL [ 2009 (3) TMI 912 - SUPREME COURT ], the accused was convicted in 03 complaints filed under Section 138 of Negotiable Instruments Act, 1881. The High Court ordered the sentence to run concurrently in all the 03 cases. The said order of the High Court was upheld by the 3-Judge Bench of the Supreme Court. However, a full Bench of this Court in the matter of titled as Jang Singh versus State of Punjab [ 2007 (10) TMI 712 - PUNJAB AND HARYANA HIGH COURT ] had held that if an accused is a habitual offender and is found guilty on various counts and is suspected that he would be a menace to society if let loose, then the consecutive sentence should be awarded. An habitual offender should not be given the same treatment which may be extended to an offender who is not habitual. A perusal of the custody certificate shows that the petitioner has already undergone his complete sentence in the revision petition arising out of Appeal No. 47 dated 12.07.2017. Since concurrent running of sentences would only be considered when a person is undergoing actual imprisonment and keeping in view the fact that the petitioner has undergone his complete sentence in the Criminal Revision bearing No. 3403-2019 arising out of Criminal Appeal No. 47 dated 12.07.2017, the revision petition has been rendered infructuous as the petitioner is not undergoing any sentence in the said conviction. Therefore, no relief can be granted in the same. Remaining 03 petitions arising out of 3 different complaints that were all filed within a period of less than 10 days from one another - applicability of Section 219 Cr.P.C. - HELD THAT:- The present case would not apparently label the petitioner as a habitual offender. In a matter of dishonor of cheque, such a presumption may be drawn where an accused has defaulted in repayment of various persons in a similar manner over a period of time in distinct, independent and unrelated events. But in a case of mere institution of separate complaints upon dishonour of multiple cheques issued in discharge of one single liability, the accused should not be categorized as a habitual offender. Hence, taking into consideration the nature of transaction and the precedent judgments as well as the statutory principles laid down by the Hon ble Supreme Court, and the statutory objective, it is opined that the complaints in question can be safely construed as a part of one single transaction. Sentencing of the petitioner - HELD THAT:- The Hon ble Supreme Court has held in the matter of State of Punjab versus Madan Lal that the benefit of concurrent running of the sentence should be extended to the petitioner. It is, however, held by the Hon ble Supreme Court that the single transaction has to be carefully construed - The Hon ble Supreme Court has also held in the matter of SHYAM PAL VERSUS DAYAWATI BESOYA ANR. [ 2017 (4) TMI 955 - SUPREME COURT ] while dealing with the scope of Section 427 Cr.P.C., in a matter relating to proceedings under Section 138 of the Negotiable Instruments Act, 1881 that the power to direct concurrent running of sentence is discretionary. The accused in the said case was convicted in respect of two cases arising out of successive transactions in a series between the same parties and tried together. A transaction in the nature of issuance of multiple cheques towards discharge of one single liability has a potential of great misuse on either sides and just as it may incite an accused to swell his liability and to not pay the same despite issuance of multiple cheques, at the same time, there is immense possibility that the creditor secures multiple cheques for each installment and lodges different complaints against default of each cheque and claim consecutive running of sentences in each of the said cases to seek confinement of a defaulter in custody for an indefinite period. The crucial test thus is the similarity of the transaction and not the quantum of the money involved. A Court is thus required to maintain a fine balance by imposing a sentence so that the reformatory, retributive and deterrent effects are balanced well. As the question of sentence has been kept open by the petitioner and the High Court is seized of the said matter regarding sentence in exercise of the powers under Section 401 Cr.P.C., it is thus necessary to examine the issue of sufficiency of the punishment so imposed and as to whether, the High Court can, in exercise of the power conferred under Section 401 (2) Cr.P.C. read with Section 482 Cr.P.C. alter or modify the sentence so imposed by the Courts below to the prejudice of an accused. The lower Appellate Court having directed compensation to be paid to the respondent-complainant, a default punishment can be so imposed by the High Court in exercise of the powers vested in it under Section 357 (4) read with Section 401(2) Cr.P.C. and the order awarding sentence can be suitably modified - thus, even though compensation under Section 357 Cr.P.C. has been awarded by the lower Appellate Court in exercise of the powers under Section 357 (3) Cr.P.C., however, no default sentence has been imposed. Hence, while exercising powers under Section 357(4) read with Section 401 (2) Cr.P.C., the High Court seized of the matter in exercise of its revisional jurisdiction, the order awarding compensation is partly modified and it is directed that in the event of the petitioner-accused committing default in payment of compensation as directed by the Lower Appellate Court, he shall undergo a sentence of 06 months of simple imprisonment, as a maximum punishment prescribed for the offence under Section 138 of the Negotiable Instruments Act, 1881 is 02 years and by virtue of Section 65 of the Indian Penal Code, 1860 the default sentence ought not to exceed 1/4th of the maximum sentence so prescribed for the substantive offence. Petition allowed in part.
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