Newsletter: Where Service Meets Reader Approval.
TMI Tax Updates - e-Newsletter
July 14, 2022
Case Laws in this Newsletter:
GST
Income Tax
Benami Property
Customs
Insolvency & Bankruptcy
Service Tax
Central Excise
CST, VAT & Sales Tax
Indian Laws
Articles
News
Notifications
Circulars / Instructions / Orders
Highlights / Catch Notes
GST
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Detention of vehicle - Levy of tax with interest and penalty - mismatch between the registration number of the vehicle and the vehicle number mentioned in the e-way bill - Matter is remanded back to the file of respondent No.1, who shall hear both sides including the petitioner and thereafter, pass fresh order in accordance with law and in the light of the decision rendered by this Court in SAME DEUTZFHR INDIA P. LTD. - HC
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Applicability of CGST and SGST Tax Rate - composite supply of works contract - listed works executed for Andhra Pradesh Industrial Infrastructure Corporation (APIIC) - it is evident that all of them are meant for business purpose only. Moreover, the applicant did not provide any information or documentary proof clarifying that the constructions are for use other than for commerce, industry, or any other business or profession, to be eligible for concessional rate of 12% (6% CGST + 6% SGST) - applicable rate of tax is 18% - AAR
Income Tax
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Exemption u/s 10B - High Court has committed a grave error in observing and holding that the requirement of furnishing a declaration under Section 10B (8) is mandatory, but the time limit within which the declaration is to be filed is not mandatory but is directory. The same is erroneous and contrary to the unambiguous language contained in Section 10B (8) - We hold that for claiming the benefit u/s 10B (8) the twin conditions of furnishing a declaration before the assessing officer and that too before the due date of filing the original return of income under section 139(1) are to be satisfied and both are mandatorily to be complied with. - SC
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Application for Income tax settlement rejected u/s 245D - 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. - HC
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Addition towards depreciation on JCB Machine - JCB machine was used for manual loading and unloading of the finished goods, which otherwise would have required huge manpower. Since the JCB machine was used for loading and unloading of material and finished products, we see no reason to interfere in the impugned order overturning the assessment order on the ground that there was no use of JCB machines in the assessee’s business. - AT
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Addition u/s 41(1) - Principal amount waived off by the bank which was utilized for trading activity is capital amount - Since loans have been actually utilized for the above said purpose, which are on the capital front and when the same is written off during the year on a one time settlement, it is nothing but capital receipt and not a revenue receipt. - Not taxable - AT
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Addition u/s 68 of share application money - once the assessee is able to prove that the money received by it was returned in the account of the same party, then there remains no doubt to draw an inference that the advances received by the assessee were unexplained cash credit. Therefore in our considered view, the assessee has discharged its onus imposed under section 68 of the Act. - AT
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Penalty u/s 221 r.w.s. 140A - default of non-payment of taxes on due date - Provisions of Section 140A (3) can apply only when there is a self-assessment tax payable with respect to the return filed u/s 139 of the act. Further, if there is a failure u/s 140 A (3) then only assessee can be held to be “assessee in default”. As in the present case there is no return of income filed u/s 139 of the income tax act, therefore any penalty based on that return, does not survive. - AT
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Validity of reopening of assessment u/s 147 - by the time, assessment order for the assessment year 2004-05 was passed on 31.12.2010, six year period for reopening of assessment for the assessment years 2002-03 & 2003-04 was expired on 31.03.2009 & 31.03.2010 and thus, we are of the considered view that reopening of assessment in terms of section 150(1) of the Act, is clearly barred by limitation, because of exception provided u/s. 150(2) of the Income Tax Act, 1961, and thus, notice issued u/s. 148 and consequent assessment order passed u/s. 143(3) r.w.s. 147 for the assessment years 2002-03 & 2003-04 is barred by limitation. - AT
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Unsecured loan u/s 68 - Bogus cash credits - where there is a statutory rebuttable presumption against the assessee, as in case of cash credits etc., u/s 68 or unexplained investment u/s 69, the initial burden of proof is on the assessee to show that the cash credit is genuine or the investment is not unexplained. The AO should, therefore, always examine as to who has to discharge the burden of proof. - AT
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Addition on account of excess stock of jewellery found during survey - addition u/s 69A and not under Income from Business - On a careful reading of the specific reasons for surrendering the income wherein very clearly the assessee states that; "it is submitted that certain discrepancies were observed related to cash deposit/income etc. However, is, order to by peace of mind and to avoid any litigation and is order to settle the group cases of the persons covered " - The wordings are very clear and categoric. We have taken into consideration the PMGKY Scheme 2016 and have also taken into consideration two Circulars which clarify those i.e. Circular No. 2/2017 and 9/2017. - Additions deleted - AT
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Addition u/s 68 - bogus liability allegedly shown by the assessee - receipt of the shares on loan - It appears to us that the nature of transactions as well as the modus operandi involved in the same was not properly understood by the AO while doubting the genuineness of the same while CIT(A) not only understood the same properly but also appreciated the exact nature of transactions to hold that the said transactions were genuine which were entered into by the assessee in the normal course of its business as a dealer in shares. - AT
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Bad debts - the assessee has not satisfied the condition laid down in section 36(1)(vii) r.w.s. 36(2) - As per section 36(2) of the Act, deduction shall not be allowed unless such debt or part there of has been taken into account in computing the income of the assessee of the previous year in which the amount of such debt or part thereof is written off or of an earlier previous year, or represents money lent in the ordinary course of business or banking or money lending which is carried on by the assessee. Being so, in our opinion, the assessee cannot claim the written off investment in the field of capital as bad debt or business expenditure. - AT
Customs
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Recovery of customs duty - warehoused goods - priority to recover dues - attachment of property - charge created by the second respondent Bank / financial institution, being a secured creditor - the second respondent bank being a secured creditor and created right over the property in question prior to the alleged attachment raised by the appellant and hence, they have preferential right over the claim of the appellant. - HC
Direct Taxes
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Benami Property Transaction - cross examination of witnesses - As in the absence of any provision of law as well as the compelling circumstances warranting the respondent authorities to provide an opportunity of cross examination of witnesses, whose statements have been relied on by the respondent authorities to the appellant at the stage of section 24 proceedings, the plea raised by the appellant in this regard, cannot be countenanced. - order for continuing the provisional attachment order of the property as an interim measure sustained - HC
Indian Laws
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Dishonor of Cheque - the pre-condition of filing a complaint under Section 138 of the NI Act of sending a statutory notice has not been satisfied in the present case. Therefore, no cause of action arose in favour of the respondent/complainant to file the subject complaint. He, therefore, could not have instituted the complaint nor the trial court could have taken cognizance of the offence and issued process against the petitioner. - HC
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Contempt of Court - Considering the facts and circumstances on record and the facts that the Contemnor never showed any remorse nor tendered any apology for his conduct, we impose sentence of four months and fine in the sum of Rs.2,000/- upon the Contemnor. The fine shall be deposited in the Registry of this Court within four weeks and upon such deposit, the amount shall be made over to the Supreme Court Legal Services Committee. In case the amount of fine is not deposited within the time stipulated, the Contemnor shall undergo further sentence of two months. - SC
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Condonation of delay of about 9 years and 4 months in filing application - A litigant should not be penalised for the laches or misconduct on the part of his learned advocate. In the present case, though the petitioner should have been more diligent in pursuing his case before this Court, an opportunity should be granted to him to contest his appeal on merit. - Delay condoned with cost - HC
Service Tax
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Consulting Engineer Service - there is no logic and/or reason to exclude a” body corporate” from the definition of “consulting engineer” and to exclude the services of a “consulting engineer” rendered by a “body corporate” to exclude and/or exempt from the service tax net. Such an interpretation would lead to anomaly and absurdity. As observed hereinabove, it will create two different classes providing the same services which could not be the intention of the Parliament/Legislature. - SC
Central Excise
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Interest on demands made by the appellant during investigation - any deposits made if have not been confirmed as duty the time bar of Section 11B of Central Excise Act cannot be invoked. It stands clear that the amount in question was not the amount of duty after the Tribunal set aside the duty liability of the appellant. Hence, it is held that section 11 B is not applicable to such deposits. - AT
Case Laws:
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GST
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2022 (7) TMI 566
Seeking grant of Bail - availment and utilization of fraudulent input tax credit without any receipt of the goods - issuance of invoices from bogus firms without any supply of bills - HELD THAT:- There are merit in the submissions of the learned counsel for the applicant. The substantive allegations against the applicant and Co-accused Mayank Gautam are similar in nature and, therefore, the applicant is also entitled for being enlarged on bail pending conclusion of the trial. Let the applicant, Ashish Rajput be released on bail - application allowed.
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2022 (7) TMI 565
Levy of GST - Royalty - challenge to notifications whereby, royalty paid by them on mining activity is being subjected to GST and/or notices issued for alleged incriminating discrepancies in returns after scrutiny and analogous proceedings - HELD THAT:- Reserving the right of the respondents to move for vacation of ad interim stay, if so advised, it is hereby directed that in the proposed recovery of GST on royalty shall remain stayed qua all the writ petitioners. However, the respondents shall be at liberty to continue with the proceedings which have been initiated under the impugned notices. In fresh matters, notices shall be issued to the respondents. In such writ petitions wherein notices have been issued, the Registry shall check for service upon the respondents and where powers have been filed, names of the respective counsels shall be reflected. List on 16.08.2022.
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2022 (7) TMI 564
Detention of vehicle - Levy of tax with interest and penalty - mismatch between the registration number of the vehicle and the vehicle number mentioned in the e-way bill - HELD THAT:- Reliance placed in the case of M/S. SAME DEUTZFAHR INDIA P LTD VERSUS STATE OF TELANGANA [ 2020 (9) TMI 1057 - TELANGANA HIGH COURT] where it was held that Once it is clear that petitioner has additional place of business in the State of Telangana in Bongulur village, Ibrahimpatnam Mandal and the goods were being transported to that address from its Corporate office at Ranipet, Tamil Nadu State, it cannot be said that the petitioner was indulging in any illegal activity when the tax invoice shows that the supplier is the petitioner s Corporate office in Ranipet, Tamil Nadu State and that it was shipped to its Depot in Bongulur village in Ibrahimpatnam Mandal. Matter is remanded back to the file of respondent No.1, who shall hear both sides including the petitioner and thereafter, pass fresh order in accordance with law and in the light of the decision rendered by this Court in SAME DEUTZFHR INDIA P. LTD. V. STATE OF TELANGANA - Since the petitioner is before this Court, let it appear before respondent No.1 on 25.07.2022 at 10.30 a.m., whereafter, respondent No.1 shall proceed with the matter in accordance with law. Petition disposed off.
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2022 (7) TMI 563
Benefit of concessional rate of GST - Works Contract - services provided by the applicant to APIIC - appropriate rate and classification of GST - applicability of S.No.3(vi) of the Notification No.11/2017- Central Tax (Rate) dt: 28.06.2017 - whether APIIC which awarded construction work to the applicant would qualify for a Governmental Authority/entity or not? - HELD THAT:- Andhra Pradesh Industrial Infrastructure Corporation Ltd. (APIIC) was formed in 1973 by GO No: 831 dated: 10.09.1973 issued by Government of Andhra Pradesh. As seen from the share holding ratios of the 41 st Annual Report for the years 2013-2014 as made available by APIIC website https://www.apiic.in, the Government of Andhra Pradesh including its nominees have 100% of share holding and thus it is covered under the definition of 'Government Entity' under the above said provisions. Therefore, we conclude that M/s. APIIC is a Government Entity for the purpose of GST matters. Whether the construction work taken up by the applicant is meant for business or otherwise? - HELD THAT:- The applicant rather emphatically claimed that the work is meant for the use of Minister for Industries, which is essentially meant for promotion of Business and Industry. Moreover, the recipient of the services, AMC is basically engaged in business activities and even a dose observation of the modus operandi of the organisation prove the same. This would be sufficient enough to come to a conclusion that the said construction is for conducting promotional activities, which are essentially business oriented and hence not eligible for concessional rate of 12% available under Notification No.24/2017 - CT (Rate) dated 21.09.2017. Hence, the contract entered by the applicant is classifiable under SAC heading No. 9954 under construction services, with entry no (ii) of serial No.3 of notification no. 11/2017 Central Tax (Rate) dated 28.06.2017 i.e., Composite Supply of Works Contract as defined in clause 119 of Section 2 of Central Goods and Services Act, 2017 and the applicable rate of tax is 18%.
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2022 (7) TMI 562
Concessional rate of GST - Works Contract - Composite supply or not - services provided by the applicant to APIIC - Government entity or not - applicability of S.No.3 (vi) of the Notification No.11/2017- Central Tax (Rate) dt: 28.06.2017, as amended - appropriate rate and classification of GST to be charged by the applicant - whether M/s. APIIC is a Government Authority/Entity or otherwise? - HELD THAT:- Andhra Pradesh Industrial Infrastructure Corporation Ltd. (APIIC) was formed in 1973 by GO No: 831 dated: 10.09.1973 issued by Government of Andhra Pradesh. As seen from the share holding ratios of the 41 st Annual Report for the years 2013-2014 as made available by APIIC website https://www.apiic.in, the Government of Andhra Pradesh including its nominees have 100% of share holding and thus it is covered under the definition of 'Government Entity' under the above said provisions. Therefore, we conclude that M/s. APIIC is a Government Entity for the purpose of GST matters. Whether the construction work in which the applicant is engaged in is meant for any business or otherwise? - HELD THAT:- The applicant rather emphatically claimed that the work is meant for the use of Minister for Industries, which is essentially meant for promotion of Business and Industry. Moreover, the recipient of the services, APIIC is basically engaged in business activities and even a close observation of the modus operandi of the organisation prove the same. This would be sufficient enough to come to a conclusion that the said construction is for conducting promotional activities, which are essentially business oriented and hence not eligible for concessional rate of 12% (6% CGST 4- 6% SGST) available under Notification No.24/2017 CT (Rate) dated 21.09.2017 - the contract entered by the applicant is classifiable under SAC heading No. 9954 under construction services, with entry no (ii) of serial No.3 of notification no. 11/2017 Central Tax (Rate) dated 28.06.2017 i.e., Composite Supply of Works Contract as defined in clause 119 of Section 2 of Central Goods dose observation of the modus operandi of the organisation prove the same. This would be sufficient enough to come to a conclusion that the said construction is for conducting promotional activities, which are essentially business oriented and hence not eligible for concessional rate of 12% (6% CGST + 6% SGST) available under Notification No. 24/2017 - CT (Rate) dated 21.09.2017. The contract entered by the applicant is classifiable under SAC heading No. 9954 under construction services, with entry no (ii) of serial No.3 of notification no. 11/2017 Central Tax (Rate) dated 28.06.2017 i.e., Composite Supply of Works Contract as defined in clause 119 of Section 2 of Central Goods and Services Act, 2017 and the applicable rate of tax is 18% (9% under Central Tax and 9% State Tax).
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2022 (7) TMI 561
Applicability of CGST and SGST Tax Rate - composite supply of works contract - listed works executed for Andhra Pradesh Industrial Infrastructure Corporation (APIIC) - construction of 20MT cold storage building for Primary Processing Centre (PPC) under Mega park scheme at peddapuram, East Godavari district - HELD THAT:- The composite supply of works contract under Section 2 (119) of CGST Act, 2017 / APGST Act, 2017 is treated as supply of service in terms of Serial No.6 (a) of Schedule II of CGST Act, 2017 / APGST Act, 2017 - The Government of India, vide notification No. 11/2017 - Central Tax (Rate), dated - 28th June 2017 notified the rate of GST applicable on supply of services. Under this notification for heading 9954, the applicable rate of GST is 9%. Whether API1C, which awarded construction work to the applicant would qualify for a Governmental Authority/entity or not? - HELD THAT:- Looking to the genesis of Andhra Pradesh Industrial Infrastructure Corporation Ltd. (APIIC), it was formed in 1973 by GO No. 831 dated 10-SEP-1973 issued by the Government of Andhra Pradesh. As seen from the shareholding ratios of the 41st Annual Reports for the years 2013-14 as made available by APIIC website https://www.apiic.in, the Government of Andhra Pradesh including its nominees is having 100% of shareholding and thus it is covered under the definition of 'Government Entity' under the above said provisions. Therefore, we conclude that M/s APIIC is a Government Entity for the purpose of GST matters. Whether the construction works taken up by the applicant are meant for use other than for commerce, industry, or any other business or profession? - HELD THAT:- On looking into the listed construction projects sl.no from 1 to 6, prima facie, it is evident that all of them are meant for business purpose only. Moreover, the applicant did not provide any information or documentary proof clarifying that the constructions are for use other than for commerce, industry, or any other business or profession, to be eligible for concessional rate of 12% (6% CGST + 6% SGST) available under Notification No.24/2017 - CT (Rate) dated 21.09.2017 - In this case, the works executed by the applicant are classifiable under SAC Heading No. 9954 under construction services, entry no (ii) of serial No.3 of notification no. 11/2017 Central Tax (Rate) dated 28.06.2017 i.e., Composite Supply of Works Contract as defined in clause 119 of Section 2 of Central Goods and Services Act, 2017 and the applicable rate of tax is 18% Whether the construction project listed in sl.no 7 i.e., Construction of 20 MT Cold Storage Building for Primary Processing Centre can be classified under sl.no. 3 of constructions services clause V (e) of notification no 11/2017 Central Tax (Rate) dated 28lh June 2017, with the applicable rate of tax as 12% (CGST and SGST each) or not? - HELD THAT:- Classified under V (e) ofsl.no 3 under heading 9954 Construction Services of notification no 11/2017 Central Tax (Rate) dated 28th June 2017 with applicable rate of tax at 12%.
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Income Tax
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2022 (7) TMI 560
Exemption u/s 10B - whether, for claiming exemption u/s 10B (8) assessee is required to fulfil the twin conditions , namely, (i) furnishing a declaration to the assessing officer in writing that the provisions of Section 10B (8) may not be made applicable to him; and (ii) the said declaration to be furnished before the due date of filing the return of income under sub-section (1) of Section 139? - Claim of withdrawal of exemption u/s 10B in the Revised Return and claim of carry forward of loss HELD THAT:- None of the decisions which are relied upon on behalf of the assessee on interpretation of Chapter VIA shall be applicable while considering the claim under Section 10B (8) of the IT Act. Even the submission on behalf of the assessee that the assessee had a substantive statutory right under Section 10B (8) to opt out of Section 10B which cannot be nullified by construing the purely procedural time requirement regarding the filing of the declaration under Section 10B (8) as being mandatory also has no substance. As observed hereinabove, the exemption provisions are to be strictly and literally complied with and the same cannot be construed as procedural requirement. We are of the opinion that the High Court has committed a grave error in observing and holding that the requirement of furnishing a declaration under Section 10B (8) is mandatory, but the time limit within which the declaration is to be filed is not mandatory but is directory. The same is erroneous and contrary to the unambiguous language contained in Section 10B (8) - We hold that for claiming the benefit u/s 10B (8) the twin conditions of furnishing a declaration before the assessing officer and that too before the due date of filing the original return of income under section 139(1) are to be satisfied and both are mandatorily to be complied with. Accordingly, the question of law is answered in favour of the Revenue and against the assessee. The orders passed by the High Court as well as ITAT taking a contrary view are hereby set aside and it is held that the assessee shall not be entitled to the benefit under Section 10B (8) on non-compliance of the twin conditions as provided u/s 10B (8) as observed hereinabove. The present Appeal is accordingly Allowed. Claim of withdrawal of exemption u/s 10B in the Revised Return and claim of carry forward of loss - HELD THAT:- filing a revised return under section 139(5) of the IT Act claiming carrying forward of losses subsequently would not help the assessee. In the present case, the assessee filed its original return under section 139(1) and not under section 139(3). Therefore, the Revenue is right in submitting that the revised return filed by the assessee under section 139(5) can only substitute its original return under Section 139(1) and cannot transform it into a return under Section 139(3), in order to avail the benefit of carrying forward or set-off of any loss under Section 80 of the IT Act. The assessee can file a revised return in a case where there is an omission or a wrong statement. But a revised return of income, under Section 139(5) cannot be filed, to withdraw the claim and subsequently claiming the carried forward or setoff of any loss. Filing a revised return under Section 139(5) of the IT Act and taking a contrary stand and/or claiming the exemption, which was specifically not claimed earlier while filing the original return of income is not permissible. - Decided against the assessee.
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2022 (7) TMI 559
Reopening of assessment - validity of notice u/s 148A - Petitioner seeks a direction to the Respondent No. 2 to reopen the income tax portal of the Petitioner Company and allow it three working days to file a reply to the show cause notice and to restrain the Respondents from continuing any proceedings in pursuance - HELD THAT:- It is settled law that principle of natural justice is no unruly horse and no lurking land mine as held by Mr.Justice Krishna Iyer in Chairman, Board of Mining Examination and Chief Inspector of Mines Vs. Ramjee [ 1977 (2) TMI 126 - SUPREME COURT ] In fact, in M/s S.Tikara Vs. State of M.P. Ors. [ 1977 (3) TMI 178 - SUPREME COURT ] it has been held that the principles of natural justice cannot be petrified or fitted into rigid moulds. They are flexible and turn on the facts and circumstances of each case. Consequently, the questions that arise are whether there has been any unfair deal by the respondent? In the present instance, one of the alleged supplier of the petitioner, Mr.Baburam Samasi, has made a statement that he had not carried out the transactions with the petitioner which are appearing in his bank account with ICICI Bank Ltd. In view of the testimony of the supplier, this Court is of the opinion that the matter has to proceed further. Further, even if the documents now sought to be relied upon by the petitioner are taken into account, this Court is of the view that the notice under Section 148 of the Act was called for as a prima facie case of escapement of income was made out. Moreover, as it is the case of the Respondents that, in the first instance, clear and legible copies were supplied to the Petitioner, this Court is of the opinion that the said dispute cannot be adjudicated in the writ proceedings. Accordingly, the present writ petition along with pending application is dismissed.
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2022 (7) TMI 558
Application for Income tax settlement rejected u/s 245D - submission of the learned senior counsel that as stipulated under sub-section (4) of Section 245D of the Act, sufficient opportunity was not afforded to the appellant and therefore, he prayed for remanding the matter back to the first respondent for fresh consideration - HELD THAT:- The power of the High Court to interfere with the orders of the Settlement Commission is available when the commission has violated the procedures as prescribed under the Act which includes the grant of opportunity and the obligation to consider the materials before the Commission. Similarly, when there are no nexus between the findings and the decision by the Tribunal, the order can be interfered. These grounds are in addition to the grounds of violation of the principles of natural justice, jurisdictional errors, against the provision, bias, fraud and malice. It is also settled law that a writ of certiorari can be issued by the High Court under Article 226 of the Constitution of India, when an administrative or a quasi-judicial authority, in the decision making process considers irrelevant materials by ignoring the relevant materials to draw its conclusion, the order can be interfered with. In the case before us, the applications have been rejected by an order under 245D(4) for the reasons that the appellants have failed to truly and fully disclose the particulars and that they have not co-operated with the commission. There is no quarrel about the preposition that the failure to truly and fully disclose the particulars and the manner of derivation of the additional income is the primordial requisite for an application to be entertained. In the present case, the Learned Senior Counsel for the appellants has, referring to the applications, annexures and other particulars filed before the commission, contended that the appellants have truly and fully disclosed all the particulars within their knowledge and also the manner in which the additional income has been derived and that satisfies the requirements under Sections 245C and 245D of the Act. What constitutes true and full disclosure in the context of Chapter XIX-A is to be explored before we proceed further. An assessee is entitled to approach the settlement Commission only when there is an undisclosed income that escaped assessment or that has not been disclosed in the returns. The very purpose and the circumstances under which the provisions were introduced has been traced in paragraph 11. The commissioner also for the purpose of furnishing his report, cannot deviate from the scheme of Chapter XIX-A and do an assessment. Therefore, it is completely unnecessary and beyond the scope of the commission to find fault with the assessee for not disclosing the transaction earlier in the returns, while deciding an application under Section 245D. As the assessee is bound to disclose all the primary facts within his knowledge and produce the documents in support of the same. Chapter XIX-A contemplates an order by settlement unlike chapter XIV which contemplates regular assessment proceedings. The scope of enquiry under Chapter XIX-A is restricted to true and full disclosure, co-operation with the commission and the disclosure of the mode of income. The disclosure as contemplated under scheme is true and full when that is not tainted with fraud or misrepresentation. What is to be seen is whether the materials produced are enough to subjectively satisfy oneself to the limited scope of enquiry for settlement. It is sufficient that the assessee discloses all the primary facts. once, the primary facts relating to undisclosed income now disclosed before the commission, additional income and the manner in which the additional are derived disclosed with materials, it satisfies the requirement of full and true disclosure. The applicant cannot be burdened with the responsibility to satisfy all the inferences that are drawn by the commissioner or the commission. Considering the nature of the scheme, that also is not the intention of the legislature. In the present case, even if we go by the date on which the earlier order was set aside by this Court remanding back the application to be decided afresh, the time to pass orders would expire on 31.12.2017. The commission had sufficient time to grant a reasonable opportunity after the report was served on 23.11.2017. There are no provision in the rules by which any time is fixed for the assessee to submit his objections to the report under section 245D(3). When no time is prescribed a reasonable time must be granted to the assessee. To a report under Rule 9, the assessee is granted 15 days time under Rule 9A to submit his objections, which in the opinion of this court is a reasonable period. The period of 3 days granted by the commission is not a reasonable period, more particularly when the commissioner has been allowed to file a report after the statutory period - as per Section 245D (4), it is mandatory grant a personal hearing after receipt of the report under sub-section 3, which in the present case was not granted. Hence, the procedure contemplated under the Act is violated. The judgment relied upon by the Learned Senior Counsel for the appellants in Automotive tyre manufacturers Association v. Designated Authority and others, [ 2011 (1) TMI 7 - SUPREME COURT] is squarely applicable. When the provisions lay down that a particular procedure is to be followed, there cannot be any deviation from the same. It is needless to state that the date for personal hearing is to be fixed after the objections are filed by the assessee. We have no hesitation to hold that the order has been passed in violation of the principles of natural justice and against the procedures as prescribed under the Income Tax Act and hence, the order is liable to be set aside and the matter is remanded back for fresh consideration after giving opportunity to both the parties. Whether the Interim Board can now decide the matter? - In the case before us, the order of the Settlement Commission rejecting the applications has been passed on 06.12.2017, the challenge to the same was accepted by this Court. The writ petitions were 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 applications filed by the Appellants would have to be treated as pending applications and appropriate orders are to be passed after giving the appellants sufficient opportunity and by considering all the materials placed by them. The Interim Board shall dispose of the applications within a period of six weeks from the date of receipt of the order, on merits and in accordance with law, after giving sufficient opportunity to the appellants and the respondents. In view of the above, the orders impugned in the writ petitions as well as in the present writ appeals, are set aside
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2022 (7) TMI 557
Prosecution proceedings - Criminal Complaint u/s 276C(2) read with 278E - complaint was filed on the premises that for the Assessment Year 2014-2015, the accused had failed to disclose the income and the same came to the notice of the Department through search and seizure conducted - A short point raised in the quash petition is that, pending prosecution initiated based on the order passed by the Appellate Authority, the accused/ petitioner herein preferred an appeal before the Tribunal and Tribunal has set aside the order of the Appellate Authority - HELD THAT:- To ascertain whether the order of the Tribunal dated 31.03.2022 will tantamount to set aside the order of the Assessing Authority demand of Rs,50,21,160/- will also get set aside, the learned counsel for the Department answered in negative. So, it is very clear that in the order of the Tribunal, the petitioner herein could not be liable to pay the demand and the penalty made based on the order passed by the Appellate authority dated 20.11.2017 but status quo ante will be restored. In any event, in view of the subsequent development, the criminal prosecution laid based on the alleged failure to comply the demand notice issued on 22.03.2018 will not survive. Hence, for that reason, the criminal original petition is allowed with liberty to the Department to proceed against the assessee, if there is any violation of failure on her part to comply the demand which she is liable to pay for the Assessment Year 2014-2015 and thereafter. This observation is subject to the right reserved by the Department to prefer further appeal against the order of the Tribunal dated 31.03.2022. The connected miscellaneous petition is closed.
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2022 (7) TMI 556
Addition of capital gain - AO inferred the assessee to have sold his share of land - HELD THAT:- The property in question belonged to Adlers Bio Energy Ltd., which was purchased by it during the F.Y. 2007-08. A change in ownership of Adlers took place with the transfer of shares. On perusal of the Agreement, it can be seen that there was outstanding liability of Adlers amounting to Rs.1.67 crore to M/s. Terranuova Integrated Industries Pvt. Ltd. (TIPL). The buyer of Adlers undertook the liability due to TIPL. It was the obligation of Adlers worth Rs.1.67 crore, which was taken over by the buyer. Nowhere is there any reference to sale consideration of Rs.1.67 crore having been received by the assessee and another person, as has been inferred by the AO. The ld. DR could not controvert such factual position recorded by the ld. CIT(A) in the impugned order, which amply demonstrates that there was no transaction of sale of property worth of Rs.1.67 crore. In that view of the matter, there cannot be any question of capital gain becoming chargeable to tax in the hands of the assessee. We, therefore, affirm the impugned order on this score. This ground is not allowed. Bogus purchases - In absence of the assessee filing truck numbers, transportation and delivery challans with toll tax receipt etc., the AO held that the purchases were bogus - CIT(A) restricted the addition to 15% of the purchase price as profit element in the bogus purchases - HELD THAT:- Admittedly, no appeal has been preferred by the assessee before the Tribunal against the impugned order. When certain goods are recorded in the books of account as purchased, then these would either get consumed in the manufacturing process or appear in the closing stock. There cannot be a situation in which the purchase of raw material is recorded and the same does not get reflected either in the manufacturing or in the closing stock. As the assessee could not establish the genuineness of purchases recorded in the books of account, what follows, as a corollary, is that steel was actually purchased from some other parties at lower rates but recorded at higher purchase price in the books of account through bogus bills. In such circumstances, only the additional profit, which the assessee suppressed by recording bogus purchases at higher value instead of actual purchases at lower value, can be subjected to tax and not the whole amount of purchases as was done by the AO - we are satisfied that the ld. CIT(A) was justified in computing such extra profit embedded in bogus purchase value at 15% and sustaining the addition pro tanto . We, therefore, uphold the impugned order on this issue. This ground fails. Addition on account of steel consumption - Taking the actual quantity of steel shown to have been purchased and consumed by the assessee, the AO computed excess consumption of steel at 51500 kgs. and held the same as unrecorded - Applying the average rate of Rs.34.01 per kg., he made an addition - CIT(A) deleted the addition - HELD THAT:- As it is seen that the entire addition is based on the AO s premise that the assessee manufactured two varieties of 3 MT and 3.5 bullock carts with the consumption at 200 kgs. and 250 kgs. respectively. The assessee successfully demonstrated before the ld. CIT(A), with the help of sale invoices, that all the bullock carts sold by it were only of 3 MT and there was no bullock cart of 3.5 MT, as was inferred by the AO. Nothing has been placed on record to show that this finding of the ld. CIT(A) is erroneous. In that view of the matter, the entire edifice of the addition erected on such misunderstanding, falls flat. We, therefore, countenance the impugned order on this score and dismiss this ground of appeal. Disallowance of Labour payments - HELD THAT:- AO found difference in signatures of 6 persons only. Without quantifying the amount of wages pertaining to such 6 persons, an ad hoc disallowance was made - CIT(A) took note of the fact that there was 62 percent increase in the turnover of the assessee over the preceding year. By giving 80% increase in the labour cost, he restricted the disallowance to Rs.19.49 lakh. In our considered opinion, the verdict given by the ld. CIT(A), in the instant facts and circumstances of the case, is appropriate as against the ad hoc disallowance made by the AO. We, therefore, uphold the impugned order on this issue. This ground is not allowed. Addition on account of Vehicle expenses - On a specific requisition, the assessee could not produce log books of the cars etc - CIT(A) deleted the addition - HELD THAT:- We find it is an admitted position that the assessee did not maintain log book for the vehicles. In that view of the matter, personal use of vehicles cannot be ruled out. Considering the entirety of facts and circumstances of the case, we are satisfied that it would be just and fair if the disallowance on account of Vehicle expenses, vehicle insurance, interest over vehicle and depreciation is restricted for personal use to 10% of the expenses - Decided partly in favour of assessee. Addition of Travelling and Repair and maintenance expenses - Since the expenses were in cash and claimed on the basis of self-made vouchers, the AO disallowed 20% thereof - CIT(A) deleted the addition - HELD THAT:- We find that the assessee claimed deduction on the basis of self-made vouchers. Considering the entirety of the facts and circumstances of the case, we are of the considered opinion that it would be just and fair if the disallowance of 10% of total expenses, namely, Rs.22,105/- is sustained. We order accordingly. This ground is partly allowed. Addition on account of other items consumption - AO made all the above additions on the ground that the consumption of tyres, tubes, axel wheels and axel was shown on lower side - CIT(A) deleted the addition except sustaining addition in tyres due to actual excess 18 pieces of tyres - HELD THAT:- Quantity of tyres as worked out by the AO has been properly reconciled by the assessee before the ld. CIT(A) except 18 tyres, for which the addition has been restricted in the first appeal. The ld. DR could not point out any infirmity in the figures recorded in the impugned order on this score. Similar is the position regarding tubes, axle wheels and axles for which the assessee properly explained the difference as calculated by the AO with necessary evidence. In view of the above discussion, we are satisfied that no exception can be taken to the view canvassed by the ld. CIT(A). This ground is not allowed. Addition towards depreciation on JCB Machine - AO held that there was no use of JCB machine in the assessee s business and hence made disallowance, which came to be deleted in the first appeal - HELD THAT:- As it is evident that the reason for the AO to make the disallowance is that there was no use of JCB machine in the assessee s business. On the contrary, the assessee proved before the ld. CIT(A) that the JCB machine was utilized in the course of its business because each bullock cart with axle wheels, tyres, tubes and axle weighed around 400 kgs. JCB machine was used for manual loading and unloading of the finished goods, which otherwise would have required huge manpower. Since the JCB machine was used for loading and unloading of material and finished products, we see no reason to interfere in the impugned order overturning the assessment order on the ground that there was no use of JCB machines in the assessee s business. This ground is not allowed. Addition from agricultural income - CIT(A) held that expenses of crop of sugarcane be taken at 50% of yield and of other crops at 35% of the yield - HELD THAT:- As admitted position that the assessee furnished purchase receipts of some parties who had purchased agricultural crop from the assessee. AO disputed the correctness of only 4 parties out of total 44 in total. Even though letters were not served to three parties and the fourth party was paralysed, the fact remains that there was no denial by any party. At the same time, it is equally true there is some inconsistency in the Bill Numbers and Dates of M/s. Dayaram Ramadhan Bharadiya. It is also true that the assessee took agricultural loan of Rs.93.50 lakh from bank which shows that the agricultural activity was carried on by the assessee. Existence of the agricultural land is not disputed because the assessee furnished 7/12 extracts also. Considering the entirety of the facts and circumstances of the case, we are of the considered opinion that the ld. CIT(A) was justified in restricting the addition to the above level. Assessee appeal is partly allowed.
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2022 (7) TMI 555
Penalty u/s 271(1)(c) - appeal of the assessee allowed the set off of loss claimed by the assessee against the undisclosed income - HELD THAT:- Considering the order of Tribunal in the quantum assessment, wherein the entire additions on the basis of which the penalty was levied has already been deleted, therefore, the order of penalty will not survive. Hence, we direct the assessing officer to delete the entire penalty levied under section 271(1)(c) - Decided in favour of assessee.
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2022 (7) TMI 554
Addition u/s 41(1) - Principal amount waived off by the bank which was utilized for trading activity is capital amount - whether loan borrowed from HSBC and Yes Bank which was settled during the year as one time settlement, was actually utilized for purchase of computer software and advance to a subsidiary company for acquisition of shares? - HELD THAT:- As it is clear that loans borrowed from HSBC and Yes Bank are utilized on the capital front. The assessee has also furnished the details of payments made to subsidiary and how the subsidiary has utilized these payments for acquiring controlling interest in another company. Therefore, it is clear from the material placed on record that the loans which was borrowed from HSBC and Yes Bank is for the purpose of acquisition of shares and for purchase of computer software. Since loans have been actually utilized for the above said purpose, which are on the capital front and when the same is written off during the year on a one time settlement, it is nothing but capital receipt and not a revenue receipt. In this context, we rely on the judgment in the case of CIT v. Mahindra Mahindra [ 2018 (5) TMI 358 - SUPREME COURT] - Since the relevant extract of the Hon ble Apex Court judgment has been extracted in the impugned order of the CIT(A), the same is not reproduced. Therefore, we see no reason to interfere with the order of the CIT(A) and uphold the same as correct and in accordance with law - Decided against revenue.
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2022 (7) TMI 553
Addition u/s 68 - Unexplained Share premium and share application money - HELD THAT:- We find that in the case in hand, the investors throughout have confirmed the investment and no material has been led by the AO to even allege that such investment was made from the coffers of the assessee company as it is not the case of the Revenue that the assessee has purchased cheque by paying cash to the investor company. The investors are corporate entities duly assessed to tax and have made investment through banking channel from their own sources which fact has neither been denied nor rebutted in the assessment nor by the first appellate authority. Considering the facts of the case in totality, we are of the considered opinion that the assessee has discharged the primary onus cast upon it by provisions of section 68 - It is not the case of the Revenue that the assessee is a beneficiary of accommodation entry. The Assessment Year under consideration is Assessment Year 2012-13 and for this Assessment Year, the assessee is not required to establish source of source. In view of the evidences brought on record and referred to hereinabove, we direct the Assessing Officer to delete the addition - Appeal of assessee allowed.
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2022 (7) TMI 552
Addition u/s 68 - Addition of loan - addition has been made on the assumption that the loan taken from M/s Index Securities and Research Pvt Ltd. is not genuine - HELD THAT:- A perusal of the assessment order shows that nowhere the Assessing Officer nor the ld. CIT(A) have taken any adverse view in respect of documentary evidences furnished by the assessee. The entire addition has been made on the basis of statement of third parties on the basis of which the AO came to the conclusion that the assessee is a beneficiary of accommodation entries but nowhere any evidence has been brought on record to demonstrate that the assessee has, in fact, purchased cheques by paying cash to M/s Index Securities and Research Pvt Ltd. The assessment framed in the case of M/s Index Securities and Research Pvt Ltd. and as mentioned elsewhere, the quarrel before the Hon'ble High Court of Delhi conclusively proves that M/s Index Securities and Research Pvt Ltd. is an identified person having sufficient funds to lend the money to the assessee and since the transactions have been made through banking channel and as mentioned hereinabove, loan taken from M/s Index Securities and Research Pvt Ltd. have been repaid by the assessee. Interest payment was subject to tax deducted at source. Considering these plethora of evidences, we have no hesitation to conclude that the assessee has conclusively discharged the burden cast upon it by provisions of section 68 - We, accordingly, direct the Assessing Officer to delete the impugned additions from the respective Assessment Years. - Decided in favour of assessee.
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2022 (7) TMI 551
Disallowance of provision for Inventory obsolescence - assessee Company has also written off the obsolete inventory on actual basis to create the provision for inventory obsolescence - HELD THAT:- The accounting standard 2 on valuation of inventory issued by the ICAI which clarified that, inventories are required to be valued at lower cost or net realizable value. As per the statement showing details of inventory obsolescence for the assessment year under consideration, the goods have been already expired and is not marketable or saleable condition. The Hon'ble High Court in the case of CIT Vs. Woodward Governor India Pvt. Ltd. [ 2009 (4) TMI 4 - SUPREME COURT] held that the amount to provide and loss account debited to profit and loss account in accordance with applicable accounting standard issued by ICAI should be allowed for the purpose of the Act. Also in the case of HOTLINE TELE TUBE COMPONENTS LTD. [ 2008 (8) TMI 6 - HIGH COURT DELHI] held that the provisions for diminution in value of stock was allowable as deduction. The similar view has also been taken by the Jurisdictional High Court in CIT Vs. Huges Communication India Ltd. [ 2013 (3) TMI 352 - DELHI HIGH COURT] - Thus we are of the opinion that provision for inventory obsolescence for the year under consideration is allowable deduction. Accordingly, we allow the Grounds of Appeal No. 1, 4 5 of the assessee. Nature of receipt - treating the excise duty subsidy as capital receipt - HELD THAT:- The said unit due to their presence in the notified area have availed the benefit in the form of excises duty subsidy - Therefore, the Ld. A.O and the CIT (A) should have allowed the claim of the assessee by treating the excise duty, subsidy as capital receipt. The similar issue has been arose for consideration in the case of Modern Papers [ 2021 (6) TMI 620 - ITAT DELHI] wherein by relying on the decision of the Co-ordinate Bench in the case of Crystal Coal Protection Pvt. Ltd. [ 2019 (12) TMI 980 - ITAT DELHI] allowed the claim of the assessee therein by treating the excise duties subsidy as capital receipt. Appeal of assessee allowed.
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2022 (7) TMI 550
Revision u/s 263 by CIT - Direction given by the CIT for making the addition on account of difference in the quantity of stock found as on 1 April 2009 viz a viz 31 March 2009 - HELD THAT:- There is no ambiguity to the fact that as a result of survey operation at the premises of the assessee, the difference in the stock was found. Before we touch upon the issue involved on hand, it is pertinent to make a note of the fact that as a result of survey operation, there was found difference in the physical stock viz a viz the stock shown in terms of quantity in the books of accounts. Such difference in the stock was offered by the assessee as income in the income tax return.As far as the difference in the physically stock viz a viz books stock is concerned, the same has been duly adjusted and the same is not in dispute. Likewise, there was no whisper in the order of the ld. CIT to the effect that such stock was sold in the open market without recording the same in the books of accounts. Accordingly, we hold that such difference, in the stock in the case on hand, based on papers cannot be subject to further addition in the hands of the assessee in the absence of tangible materials - addition as made by the CIT is not warranted in the given facts and circumstances until and unless it is supported by the some corroborative evidences. As such the income does not depend on the piece of paper, rather it should be based on the tangible materials in the given facts and circumstances. The assessee in the given facts and circumstances has tried to explain the difference in the quantity of stock as discussed above by producing the agreements in support of his contention that he has borrowed gold loan from the relatives which was recorded in the stock register for the purpose of the quantity and without recording the same in the financial statements. CIT before rejecting the contention of the assessee, he should have called for the parties for the cross verification. But he has not done so. To our understanding, to meet the principles of natural justice, it is necessary upon the authorities before rejecting the claim of the assessee to carry out the necessary verification and due diligence. But in the given facts and circumstances, we find that no confirmation was received from the respective parties from whom the assessee has claimed to have borrowed the gold loan. Maybe, the argument/ the contention of the assessee is not based on the corroborative material and suffers from several infirmities, but to our understanding to meet the end of justice, it becomes qua sine none that the revenue authorities have to carry out the necessary inspection/ verification as deemed necessary before rejecting the claim of the assessee. In the case on hand, CIT has directed to make the addition but we are not inclined to confirm the same in the absence of necessary verification. Thus, in the interest of justice and fair play, we modify the direction of the learned CIT passed under section 263 of the Act. As such we are set aside the issue involved in the appeal before us to the AO for fresh/ de-novo examination of necessary verification without getting influenced by the finding of the learned CIT as well as our observation discussed above. Unaccounted stock found during the survey has been valued without incorporating the making charges/ labour expenses which the assessee must have incurred with respect to the unaccounted gold ornaments/jewelleries - As it seems to us that any addition in the unaccounted stock has tax neutral effect. It is for the reason that the unaccounted stock once has been brought in the books of accounts at a lesser value but corresponding sales would certainly be at a higher value which would offset the labour charges added by the learned CIT in the unaccounted stock. Out of 100 grams of gold, if the assessee makes of sale of 20 grams of gold in the year under consideration, then the assessee will naturally claim lesser expenses against the sale of 20 grams of gold which would result higher income to the assessee. Likewise, the remaining 80 gram of gold will be shown in the books of accounts which will certainly be at the lesser value as it was not inclusive of labour charges. But such closing stock will become the opening stock of the next year, which will reflect greater profit if such stock is sold. However, these facts have not been verified by the learned CIT while directing the AO to make the addition for Rs. 23,59,988.00 representing the labour charges/making charges attributable to such unaccounted stock. We also note that there is no direction given by the learned CIT to give effect of the amount enhanced by adding labour charges /making expenses in the unaccounted stock found during the course of survey while recording the same in the books of accounts. To our understanding, the claim of the assessee cannot be denied without carrying out the necessary independent verification/ examination of the facts and the records. In the case on hand, the learned CIT has directed to make the addition but we are not inclined to confirm the same in the absence of necessary verification. Thus, in the interest of justice and fair play, we modify the direction of the learned CIT passed under section 263 of the Act. As such we are set aside the issue involved in the appeal before us to the AO for fresh/ de-novo examination of necessary verification without getting influenced by the finding of the learned CIT. Addition on account of wrist watches - At the time of survey, the physical stock of the wristwatches were found which was not accounted in the books of accounts. Even the assessee has not recorded the same in the financial statement prepared as on 31.3.2010. As such, the assessee has neither shown the watches in the inventory nor in the schedule of fixed assets. Thus it was noted by CIT that the assessee has been sold in the open market. The assessee has not explained the source of investment in such watches. Therefore, the addition was sustained along with the profit in the hands of the assessee. The finding of the learned CIT has not been controverted by the learned AR for the assessee based on the documentary evidence. There is no force in the argument of the assessee that it does not deal into the business of the wristwatches. Assuming, the contention of the learned AR is to be true, then also the assessee is under the obligation to explain source of investment or prove that the same does not belong to him. But the assessee has failed to do so. No infirmity in the order of the learned CIT passed under section 263 of the Act with respect to the difference found in the physical quantity of stock for the wristwatches. Addition on conversion of capital asset as stock in trade - There remains no ambiguity that the conversion of capital asset into stock in trade is a transfer within the provisions of section 45 of the Act and therefore the same is subject to tax under the head capital gain. But the liability for the tax rises in the year in which such converted stock in trade is sold out. There is no finding of the CIT about the fact whether converted stock in trade was sold. In the absence of such information, the finding of CIT is not sustainable by making the addition in the hands of the assessee. Accordingly, we modify the direction of the learned CIT to the extent that the question of capital gain will arise in the year in which such quantity of converted stock is sold out. Thus, we set aside the finding of the learned CIT and direct the AO to compute the capital gain on the conversion of capital asset into stock in trade in the year in which such stock in trade is sold out to the customers as per the provisions of law. Addition allocating the expenses to the Windmill business - We find that the assessee is claiming that he is maintain the separate books accounts whereas the learned CIT held that the assessee is not maintaining the books of accounts. Thus we find contradiction in the submission of the assessee and the finding of the learned CIT. It is also important note that the assessee has declared the profit respect of windmill business amounting to Rs. 40,10,342.00 which is not possible to workout without maintaining the books of accounts. However, in the interest of justice and fair play we are inclined to set aside the issue to the AO for fresh adjudication as per the provisions of law. Appeal filed by the assessee is partly allowed for statistical purposes.
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2022 (7) TMI 549
Rejection of books of accounts - Estimation of income @ 20% of the stock put to sale - HELD THAT:- Admitted facts are that the assessee failed to produce any evidence in support of sales made and hence the AO rejected the books of account and estimated the income @ 20% of the stock put to sale. The reliance placed by the Ld. AR in the decision of the Coordinate Bench of the Tribunal in the case of Majji Naga ( 2016 (6) TMI 1449 - ITAT VISAKHAPATNAM] and Tangadu Jogisetty [ 2016 (6) TMI 1449 - ITAT VISAKHAPATNAM] deserves consideration. Respectfully following the decisions of the Coordinate Bench of the Tribunal we hereby direct the AO to estimate the net profit @ 5% of the purchase price of the stock which was put to sale which is net of deductions. Accordingly, ground no.3 raised by the assessee is partly allowed. Payment of license fee - AO has disallowed 1/3rd of the license fee based on the facts that no receipt was provided by the assessee - HELD THAT:- The assessee also did not file any objections for the remand report by the AO. We note here that for running an IMFL shop any person needs to pay license fee to the Government on annual basis - AO has not disputed the fact that the assessee is in the business of running a wine shop and whereby the License fee is required to be paid in accordance with the guidelines of the respective State Government. Merely on the basis of absence of evidence in respect of the payment of license fee it cannot be said that the assessee has not paid any license fee for running the business. Therefore we are of the considered view that the Revenue Authorities erred in disallowing the same. Accordingly, the relevant ground raised by the assessee is allowed.
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2022 (7) TMI 548
Provision for liabilities for performance guarantees /warrantees - Disallowing considering it as contingent liability - HELD THAT:- Admittedly the guarantee/warranty is provided to the customer as per the scheme designed by the company. Accordingly, the guarantee/warranty is subject to various terms and conditions provided in the scheme. Such scheme is always made available to the buyers. If there arises any defect any product supplied to the customer, it (the customer) can always approach the company either for the replacement of the product or repair of the product, as the case may be. Indeed, the sales made by the assessee is the income in the hands of the assessee but the same is subject to liability which may arise to it by virtue of the guarantee/warranty provided by it to the customers. Thus when the assessee is making sales of its product with the guarantee/warranty, the question arises whether the assessee is required make the provision for the guarantee /warranty against the sales made by it. The answer stands in positive. It is for the reason that there is correlation between the sales and the guarantee/warranty extended by the assessee. Once a revenue has been recognized in the books of accounts on account of sales, the corresponding liability which may arise to the assessee on account of guarantee/warranty against such sale should also be recognized in the books of accounts. As per M/S. ROTORK CONTROLS INDIA (P) LTD. case [ 2009 (5) TMI 16 - SUPREME COURT] , there remains no ambiguity to the fact that the assessee has to provide the provision for the guarantee and warranty as the case may be in the books of accounts corresponding to the sales made by it. Basis of calculating the provision to be provided against the sales made with warranty /guarantee - We note that the revenue has not allowed the provision made by the assessee in the year under consideration on the reasoning that the provisions made by the assessee in the earlier years was not adjusted against any expenses. Accordingly, it was doubted that the provision for the warranty is not required. However, we are not in agreement with the view taken by the authorities below. It is for the reason that the liability arising upon the assessee against the sales made by it cannot be taken at nil value merely it has not been crystallized in the earlier years. As per the purchase agreement, the assessee was exposed to such liabilities on account of warranty/guarantee provided by it. As the provisions made in one year was reversed in the next year by offering the same as income. Therefore, it is not the case of the assessee that it has been claiming deduction on account of the provisions made against the sales of each year consistently without giving effect of the opening balance of the provision for the guarantee/warranty. In view of the above and after considering the facts in totality, we do not find any infirmity in the claim made by the assessee in its books of accounts for the provisions against the sales made in the year under consideration. Thus we reverse the order of the authorities below and direct the AO to delete the addition made by him. Hence the ground of appeal of the assessee is allowed. Addition u/s 68 of share application money and the loans as well as commission expenses - HELD THAT:- The provision of section 68 of the Act fastens the liability on the assessee to provide the identity of the lenders, establish the genuineness of the transactions and creditworthiness of the parties. These liabilities on the assessee were imposed to justify the cash credit entries under section 68 in PRECISION FINANCE PVT. LIMITED [ 1993 (6) TMI 17 - CALCUTTA HIGH COURT] There remains no doubt that the transaction of the advance received by the assessee from the party was not genuine. In our considered view, once the assessee is able to prove that the money received by it was returned in the account of the same party, then there remains no doubt to draw an inference that the advances received by the assessee were unexplained cash credit. Therefore in our considered view, the assessee has discharged its onus imposed under section 68 of the Act. In view of the above, we do not find any infirmity in the order of Ld. CIT (A). Once the addition made by the AO has been treated by us, holding the loan transaction and share application transaction between the assessee and M/s RNG Finlease Pvt. Ltd, as genuine, the corresponding addition made by the AO for ₹ 9,05,000.00 on account of bogus transactions is not sustainable. Accordingly, we direct the AO to delete the same. It is not out of the place to mention that learned CIT-A has deleted the addition made by the AO after elaborate discussion which has been reproduced somewhere in the preceding paragraph. The learned DR at the time of hearing has not brought anything on record contrary to the finding of the learned CIT-A. Hence, the ground of appeal of the Revenue is hereby dismissed. Disallowance of the proportionate interest expenses - HELD THAT:- Admittedly, the own fund of the assessee exceeds the amount of loan and advance given to the parties and therefore it is presumed that the interest free loans and advances were provided out of the share capital and reserve and surplus fund of the assessee. Thus, no disallowance of interest expense is warranted. Accordingly, we do not find any infirmity in the order of the Ld. CIT(A). Hence, the ground of appeal of the Revenue is hereby dismissed. LTCG - capital gain tax on the transfer of Agricultural land - AO not satisfied with the reasons given by the assessee on the ground that the assessee has realized its 6 years later for correcting the registration document. As per the Assessing Officer the assessee is doing so in order to avoid the capital gain tax on the transfer of land - HELD THAT:- Capital gain was calculated in the hands of the assessee considering that the assessee has adopted colorable device to avoid the payment of tax by virtue of provision of section 50C - Directors in their individual hands have paid more Long Term Capital Gain tax than the capital gain computed in the hands of the assessee. This fact has already been reproduced in the order of the Ld. CIT(A) and the same was not controverted by the Ld. DR appearing on behalf of the Revenue. Accordingly, we can conclude that the allegation made by the Assessing Officer that the assessee has adopted colorable device to avoid the tax under the head Capital Gain is devoid of any merit. Furthermore, the assessee and the Directors are closely connected people and therefore there is no loss to the revenue merely on the reasoning that the income has been offered in the hands of the Director in place of the company. Thus, we don t find any infirmity in the order of the Ld. CIT(A). Hence, the ground of appeal of the Revenue is hereby dismissed. Disallowance u/s 14A r.w.r. 8D - HELD THAT:- Admittedly, there was no exempt income received by the assessee and therefore the question of making the disallowance of interest expenses does not arise. See CORRTECH ENERGY PVT. LTD. [ 2014 (3) TMI 856 - GUJARAT HIGH COURT] Revision u/s 263 - As per the Ld. PCIT the assessee has made investment in the shares amounting to Rs. 14,17,95,000/- which was capable of generating tax free income, thus, the disallowance was made under the provision of section 14A r.w.Rule 8D(ii) of Income Tax Rules being 1% of the average investment - HELD THAT:- Admittedly, the assessee has preferred an appeal before the Ld. CIT(A) against the disallowance made by the Assessing Officer under the provision of section 14A r.w. Rule 8D of Income tax Rules. This fact can be verified from the grounds raised by the assessee before the Ld.CIT(A) - Thus we hold that the proceedings initiated by the Ld. PCIT u/s 263 of the Act are not sustainable, as the issue is pending before the ld. CIT-A. In holding so we rely on the judgment of Hon ble Allahabad High Court in the case of CIT vs. Vam Resorts Hotel Pvt. Ltd [ 2019 (8) TMI 1418 - ALLAHABAD HIGH COURT] - we hold that the order passed by the ld. CIT under section 263 of the Act is not sustainable. Appeal filled by assessee allowed.
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2022 (7) TMI 547
Reopening of assessment u/s 147 - Eligibility of reasons to believe - review v/s reopening - unexplained investment u/s 69 - HELD THAT:- Under the Explanation in section 147 of the Act, the AO was empowered to assess or reassess income in respect of any issue which comes to his notice subsequently in the course of proceedings under this section, notwithstanding that the reason for such issue has not been included in the reasons recorded under subsection (2) of section 148 of the Act. Thus, Explanation 3 makes it clear that AO may assess or reassess the income in respect of issues which have escaped assessment, if such issues come to his notice in the course of proceedings under this Section even though the said issues did not find mention in the reasons recorded and the notice issued u/s 148. In the present case on perusal of the reasons, we note that the proceedings were initiated on account of escapement of income from the business of shipping agency carried on by the assessee under the name and style of M/s Prime Corporation. However, the AO during the assessment proceedings has also made the addition on account of unexplained investment under the provisions of section 69 - The reason of making the addition was based on the proceedings before the ADIT (Inv) as mentioned in the assessment order. A perusal of the above proceedings before the ADIT investigation reveals that addition of unexplained investment relates to the share trading activities carried out by the assessee through its bank i.e. Axis Bank and Religare Financial Services. It is undisputed fact that there was no mentioned about the share trading activity in the reasons recorded by the AO under the provisions of section 147 which is evident from the preceding paragraph. But the law provides the authority to the AO to make the addition of any other income which comes to his knowledge subsequently in the course of assessment proceedings. Whether the loss claimed by the assessee with respect to share trading business can be allowed as deduction against the escaped income as discussed above? - We find that the assessee is entitled to claim the deduction of the expenditures in respect of which the escaped income has sought to be assessed. The loss from the share trading activity has direct nexuses with respect to the unexplained investments which has been added by the AO under the provisions of section 69 - Accordingly we hold that the assessee is entitled for the deduction with respect to the loss claimed by the assessee from the share trading activities. We also note that there was single bank account which was used for the purpose of the share trading activities as well as for shipping business activities. As such the income generated by the assessee from the share trading activities was diverted to the business of shipping. The common fund was used for generating both the incomes out of the single bank account. Therefore we find difficult to hold that the activities being share trading and shipping business are distinct and not interconnected in the given facts and circumstances. There is also no dispute to the fact that the assessee in the original return of income filed under section 139 of the Act has only disclosed income from the salary. Thus, it is not the case of the assessee that the impugned share trading loss relates to the original return of income of the assessee. As such, the share trading loss was never subject matter of dispute or discussion in the original return of income. Accordingly, the principles laid down in the case of M/s Sun engineering [ 1992 (9) TMI 1 - SUPREME COURT] , in our humble understanding, are not applicable in the given facts and circumstances for the reasons elaborated hereinabove. Quantification of the loss from the share trading activities - It has been alleged by the revenue that the loss from the share trading activity has been computed under the provisions of section 44AF of the Act. Admittedly, there s no possibility of showing any loss from the share trading activities under the provisions of section 44 AF of the Act. However, we note that the assessee has not claimed any loss under section 44AF of the Act. As such there is a separate trading and profit loss account placed on page 29 of the paper book. Thus we disagree with the finding of the authorities below that impugned loss was computed under the provision of section 44AF of the Act. Hence, the ground of appeal of the assessee is allowed. Undisclosed investment - The addition was made by the AO on account of the undisclosed investments based on wrong assumption of facts. According to the learned AR there was the sale proceeds of Rs. 4,85,95,023.00 out of which a sum of ₹ 1,03,50,000.00 was disclosed but no inference can be drawn that the cash available with the assessee was only of Rs. 1,03,50,000.00 only. The contention of the learned AR was not disproved by the DR appearing on behalf of the revenue. Thus, we hold that investment was made by the assessee out of the gross receipts shown by him from the activity of share trading. Accordingly, we are of the view that no addition in the given facts and circumstances is warranted. Hence, we set aside the finding of the learned CIT-A and direct the AO to delete the addition made by him. Thus the ground of appeal of the assessee is allowed. Addition on account of difference in opening balance and closing balance of the share - As per the accounting practice, the closing stock of the shares as on the last day of the previous year is carried forward to the year under consideration which is shown as opening balance. Against such opening balance, the assessee makes the sale of the shares and the net effect is accounted as income/ loss in the books of accounts which is accepted accounting practice. If such practice is not followed to carry forward opening balance, then the amount of sales of the items appearing in the opening stock will result as gross income in the hands of the assessee which would not reflect the true income of the assessee. The income is determined after reducing the cost of acquisition from the sales price. As such the opening stock reflects the cost of acquisition which is adjusted against the price of the sales. If it is not done, the income chargeable to tax under the provisions of law cannot be determined. Thus we hold that assessee has not claimed any expense of ₹ 21 lakhs which is reflecting the difference in the opening and closing stock as alleged by the authorities below. Accordingly, we set aside the finding of the learned CIT-A and direct the AO to delete the addition made by him. Hence the ground of appeal of the assessee is allowed.
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2022 (7) TMI 546
Rectification u/s 154 - excess claim of deduction u/s. 80IB and 80IC needs to be disallowed - allocation of corporate overhead to tax holiday units - HELD THAT:- AO passed the order on 04.01.2016 u/s.154 and he disallowed the excess claim of deduction in respect of Yanam unit and Baddi Unit. The assessee is running four units, which are eligible for deduction/exemptions as per u/s.10B, 80IB and 80IC. Assessee has vehemently submitted that there was a debatable issue to which the rectification cannot be made u/s 154 is not acceptable because, the corporate expenditures are not related only for the corporate office, the expenditure are relating to the controlling and managing of the entire business of the assessee, whether it is a exempted unit or non exempted unit. Therefore, the expenditures should be apportioned among the all business units of the assessee for true computation of the taxable profit. The assessee has not apportioned but the revenue authorities consistently apportioned the corporate expenditures. The assessee have four units out of which in two units, the assessee has not allocated the corporate expenditures. Considering the entire set of facts, we observed that there was no debatable issue involving in this case. Accordingly, the order passed by the AO is correct as per section 154 - Respectfully following the above judgment of the Coordinate Bench [ 2017 (1) TMI 1390 - ITAT HYDERABAD ] in assessee's own case, the alternate plea of the assessee is accepted. Accordingly, we direct to the AO for disallowances of excess claim of deduction of exempted units has to be calculated as per para No.64 cited (supra). Accordingly, the appeal of the assessee is partly allowed.
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2022 (7) TMI 545
Exemption u/s 11 - AO as well as the ld. CIT(A) denied benefit of sections 11 and 12 of the Act to the assessee on the sole ground that the assessee was not having registration u/s 12A of the act for AY 2016-17 - assessee was not having registration u/s 12A of the Act till pronouncement of first appellate order and, thereafter, the aggrieved assessee chose to file appeal before the Tribunal challenging the orders of the authorities below - HELD THAT:- It is not been disputed by the ld. Sr. DR that the assessee was granted registration u/s 12AA of the Act vide order dated 15.09.2020 by CIT (Exemptions), Chandigarh. In view of order of ITAT Pune Bench in the case of Marathwada Auto Cluster [ 2018 (6) TMI 1809 - ITAT PUNE] and order of SNDP Yogam [ 2016 (3) TMI 1110 - ITAT COCHIN ] in a case where appeal is pending before the Tribunal, then, after grant of registration u/s 12AA of the Act w.e.f. 15.09.2020 as per retrospective operation of first proviso to sub-section (2) of section 12A of the Act. Further, as per order of ITAT Ahmedabad Bench in the case of Shree Bhanushali Mitra Mandal Trust [ 2016 (4) TMI 578 - ITAT AHMEDABAD ] and ITAT Kochin Bench in SNDP Yogam [ 2016 (3) TMI 1110 - ITAT COCHIN ] as per the said proviso to sub-section (2) to section 12A of the Act, the provisions of sections 11 and 12 of the Act shall apply in respect of any income derived by the trust of any assessment year preceding to the year in which registration u/s 12A of the Act was granted for the assessment year for which proceedings are pending before the AO as on the date of such registration and the retrospective benefit of the said first proviso to sub-section (2) to section 12A of the Act is also available in the cases where appeal is pending before the appellate authorities including CIT(A) and Tribunal (ITAT). Therefore, respectfully following the order of the ITAT Pune Bench in the case of Marathwada Auto Cluster (supra), the sole grievance of the assessee in the present appeal is allowed and the AO is directed to allow benefit of section 11 and 12 of the Act to the assessee in terms of first proviso to sub-section (2) of section 12A of the Act. Appeal of assessee allowed.
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2022 (7) TMI 544
Penalty u/s 221 r.w.s. 140A - default of non-payment of taxes on due date - assessee submitted that there is no default as the self-assessment tax as determined in the return of income u/s 139(4) has been paid - HELD THAT:- We first find that assertion of the learned assessing officer that the return was revised on 19/1/2018 is a revised return is devoid of any merit. This is so because in the acknowledgement of return filed in 19/1/2018 assessee says it is still an original return. Based on that return i.e. filed on 17/10/2016, he proposes to levy the penalty u/s 221 holding assessee to be an assessee in default . We find that when the return filed on 17/10/2016 was held to be an invalid return, thus, deemed never to have been filed by the assessee or as if the assessee has failed to furnish the return, we failed to understand that how the penalty can be initiated stating that assessee has failed to pay tax according to the invalid return filed by the assessee. When a return of income is held to be invalid, it cannot be considered that such return has ever been filed u/s 139. Provisions of Section 140A (3) can apply only when there is a self-assessment tax payable with respect to the return filed u/s 139 of the act. Further, if there is a failure u/s 140 A (3) then only assessee can be held to be assessee in default . As in the present case there is no return of income filed u/s 139 of the income tax act, therefore any penalty based on that return, does not survive. There is one more aspect to the issue, on one hand Act treats defective return as Failure to furnish the return of income and on the other hand, AO initiates penalty based on that defective return for non payment of taxes. Thus , there is an apparent dichotomy in the action of the AO. Accordingly we find that the penalty levied by the learned assessing officer as per order dated 14/05/2018 u/s 221 (1) of the income tax act is not sustainable. Hence, orders of lower authorities are reversed. Ground no 1 to 4 are allowed.
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2022 (7) TMI 543
Validity of Reopening of assessment u/s 147 - Bogus purchases - HELD THAT:- Assessee has not brought any material to our notice as to why the re-opening is bad in law and he simply argued that Daksh Diamonds is not managed by Bhanwarlal Jain and that the reopening is not valid. We find that the Hon'ble jurisdictional High Court in the case of Pass Industrial Engineers Pvt. Ltd. [ 2016 (8) TMI 280 - GUJARAT HIGH COURT] on similar set of facts held that when after scrutiny assessment the Assessing Officer received information from Investigation Wing that well known entry operators of Country provided bogus entries to various beneficiaries, and assessee was one of such beneficiary, the Assessing Officer was justified in re-opening assessment. No merit in the submission raised by assessee. Thus, Ground No.1 raised by assessee is dismissed. Addition of 25% on account of disputed / bogus purchases shown by assessee from Daksh Diamonds - We find that neither the books of account of assessee were rejected nor sale of assessee was doubted by Assessing Officer. And the assessing officer made the disallowance @ 25% of purchase shown from Daksh Diamonds on the basis of information of investigation wing. CIT(A) confirmed the action of AO, without giving any specific finding. We find that the assessee is in the business of cut and polish diamonds and the disallowances confirmed by the lower authorities are on excessive side in the business of assessee. We are of the view that when there is allegation of bogus purchases against the assessee and the assessee claimed that the transaction is genuine and payments are made through bank, only the component of profit element embedded in such transaction may be disallowed to avoid the possibility of revenue leakage. This combination in a number of cases of similar type of purchase, wherein purchase are shown either from Bhanwarlal Jain or Gautam Jain Group or Pankaj K Chaudhary have restricted the similar disallowance @ 6% of purchase. Therefore, following the consistency the Assessing Officer is directed to restrict the disallowance @ 6% of the purchase shown by assessee from Daksh Diamonds. In the result, ground No.2 raised by assessee is partly allowed.
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2022 (7) TMI 542
Validity of the orders passed by the first appellant u/s 92CA (3) on the ground of limitation as contemplated u/s 153 of the Act - Period of limitation applicable to TPO u/s 92CA(3A) and incidentally u/s 153 - how the period of 60 days prior to the date of transfer pricing order i.e. 01.11.2019 is to be computed? - HELD THAT:- Undisputedly, sub-section (3A) to section 92CA has been inserted w.e.f. 01.06.2007 providing time limit for the Transfer Pricing Officer to pass the order i.e. within a period of 60 days prior to the date of completion of assessment as per section 153 of the Act. So, under section 92CA (3A) read with section 153, Ld. TPO was required to pass the order within the period of 60 days prior to the date on which the period of limitation referred to in section 153 expires i.e. 21 months. Undisputedly, the TP order was passed by the Ld. TPO on 01.11.2018 whereas the Ld. TPO was required to pass the order within 60 days prior to the date on which the period of limitation referred to in section 153 of the Act expires i.e. 31.10.2018. Hon'ble Madras High Court in case of M/s. Pfizer Healthcare India Pvt. Ltd. [ 2022 (4) TMI 808 - MADRAS HIGH COURT] while dealing with the issue held that for computing the period of 60 days, the last date as per section 153 should be excluded. Identical issue has been decided by the co-ordinate Bench of the Tribunal in case of ECL Finance Ltd. [ 2021 (9) TMI 1399 - ITAT MUMBAI] in favour of the assessee by following M/s. Pfizer Healthcare India Pvt. Ltd. (supra) Thus we are of the considered view that as per limitation prescribed under section 153 of the Act that assessment order was required to be passed within a period of 21 months from the end of assessment year i.e. A.Y. 2015-16 i.e. 31.03.2016, meaning thereby the assessment order under section 153(1) was to be completed within 21 months from the end of assessment year i.e. on 31.12.2017 with further extension of 12 months in case of transfer pricing reference as per section 153(4) of the Act was made which expires on 31.12.2018. So the limitation for passing the order under section 92CA(3) is 60 days prior to the date prescribed under section 153 of the Act. In the instant case due date for passing the order under section 92CA(3) of the Act is 31.10.2018 whereas the TP order in this case is passed on 01.11.2018 which is beyond the period of limitation because the same was required to be passed 60 days before the date of which limitation expires under section 153 of the Act i.e. o. 31.10.2018, hence barred by limitation. Disallowance on account of late deposit of employees contribution on account of PF ESIC on the ground that the same were not deposited within the due date prescribed under the Act - Scope of amendment - HELD THAT:- As we are of the considered view that since the amended provisions contained under section 43B read with section 36(1)(va) of the Act are not applicable for the year under consideration i.e. A.Y. 2015-16 as the amendment will be effective from A.Y. 2021-22 and the AO/ Ld. CIT(A) have erred in disallowing the same. Consequently, impugned order passed by the Ld. CIT(A) is set aside and as such ground determined in favour of the assessee.
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2022 (7) TMI 541
Levying Late fees u/s 234E - belated filing of TDS returns - scope of amendment - demand for the period before 01.06.2015 - HELD THAT:- The assessee has filed TDS statements for second and fourth quarters of AY 2013-14 and for the first quarter of AY 2014-15 belatedly. AO cannot make any adjustment other than one prescribed in section 200A. Prior to 01.06.2015, there was no enabling provision in section 200A of the Act for making adjustment in respect of statement filed by the assessee with regard to tax deducted at source by levying fees u/s 234E of the Act. The Parliament for the first time enabled the Assessing Officer to make adjustment by levying fees u/s 234E of the Act with effect from 01.06.2015. In the case of Olari Little Flower Kuries (P.) Ltd. [ 2022 (2) TMI 1061 - KERALAHIGH COURT] has held that since provision of section 200A of the Act was amended to enable computation of fee payable u/s 234E of the Act at the time of processing of return and said amendment came into effect from 01.06.2015 (in view of CBDT Circular No.19 of 2015 dated 17.11.2015) intimations issued u/s 200A of the Act dealing with fee for belated filing of TDS returns for the period prior to 01.06.2015 were invalid and were to be set aside. Therefore, the levy of late fee for financial years 2012-13 and 2013-2014 cannot be sustained in order passed u/s 200A of the Act, prior to 01.06.2015. Assessee appeal allowed.
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2022 (7) TMI 540
Additions towards value of closing stock of shares - HELD THAT:- As per the assessee, the total of two stocks comes to Rs.3,82,933/- whereas, the AO has made addition - We find that sum of two accounts i.e. M/s.SSKAI for Rs.2,58,348/- and M/s.Motilal Oswal Securities, for Rs.1,24,585/- comes to Rs.3,82,933/- whereas the AO has made addition of Rs.5,62,487/-. We have verified the difference between the additions made by the AO and additions he ought to have been made and find that the AO had included a sum of Rs.1,79,554/- being closing balance of various bank accounts as on 31.03.2014, even though, the AO observed in his assessment order that after considering submissions of the assessee, no addition is made on account of closing balance. Therefore, we are of the considered view that there is a mistake in as much as to make additions towards closing balance of Rs.1,79,554/-. Therefore, we direct the AO to exclude a sum of Rs.1,79,554/- and confirm additions towards value of closing stock of shares for Rs.3,82,933/-. Appeal filed by the assessee is partly allowed.
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2022 (7) TMI 539
Validity of reopening of assessment u/s 147 - Period of limitation - six year period for reopening of assessment - HELD THAT:- Assessment for the impugned assessment years have been reopened, in consequential or to give effect to findings of the Tribunal in their order for the assessment year 2004-05 dated 11.10.2012 and such assessment order has been passed on 31.12.2010. Further, by the time, assessment order for the assessment year 2004-05 was passed on 31.12.2010, six year period for reopening of assessment for the assessment years 2002-03 2003-04 was expired on 31.03.2009 31.03.2010 and thus, we are of the considered view that reopening of assessment in terms of section 150(1) of the Act, is clearly barred by limitation, because of exception provided u/s. 150(2) of the Income Tax Act, 1961, and thus, notice issued u/s. 148 and consequent assessment order passed u/s. 143(3) r.w.s. 147 for the assessment years 2002-03 2003-04 is barred by limitation. Hence, we quash reassessment order passed by the Assessing Officer for both the assessment years. - Decided in favour of assessee.
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2022 (7) TMI 538
Revision u/s 263 - case of the Assessee was selected for scrutiny on the reason large cash deposit in saving bank account(s), whether cash deposits have been made from disclosed sources - Assessee before us contended that detailed and proper enquiry was done by the AO in this case and therefore the impugned order is liable to be set aside - HELD THAT:- We have given thoughtful considerations to the contention of the Assessee and realize that the AO has failed to verify the basic foundation i.e. Licence for doing the business of money lending by the Assessee, on the basis of which the Assessee claimed to have deposited the amount under consideration. Hence the contention of the Assessee is untenable. All the facts enumerated goes to show that foundation of enquiry qua claim of the Assessee is missing and the AO made the assessment order in cursory manner by conducting farce enquiry, which infact can not be termed as enquiry, hence we are of the considered view that in the instant case no enquiry qua issue involved, was done by the AO and therefore the Ld. PCIT was fully justified to reopen the case of the Assessee u/s. 263 of the ACT by holding the assessment order for A.Y. 2016-17 as erroneous and bad in law in so far as prejudicial to the interest of Revenue. Considering the conclusion drawn by Ld. PCIT and peculiar facts and circumstances of the case narrated above, we do not find any substantive reason and justification to interfere in the impugned order as the same do not suffer from any perversity or impropriety or illegality, consequently no interference is warranted. Appeal filed by the Assessee is dismissed.
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2022 (7) TMI 537
Unsecured loan u/s 68 - Bogus cash credits - As per assessee primary onus cast by law to establish identity, genuiness of transaction creditworthiness is discharged by the assessee filling confirmation, PAN, copy of Return of Income, bank statements along with audited report of depositor companies - HELD THAT:- Assessee - Company has miserable failed to prove identity, as explained by ld DR that assessing officer vide letter dated 27.02.2015 directed the assessee to produce the Principal Officers of the 12 lender companies but no compliance was made by the assessee, therefore identity of these Lender Companies has not been proved. We note that out of twelve lender companies, none appeared before assessing officer. We also find merit in the submission of ld DR to the effect that the fact that loan has been repaid in subsequent years, has not been examined by the assessing officer That is, ld DR argued before us that the said issue may be remitted back to the file of the assessing officer to examine whether loan has been repaid out of own sources or by taking further accommodation entry. The expression 'burden of proof really means two different things. It means sometimes that a party is required to prove an allegation before judgment can be given in his favour. It also means that on a contested issue, one of the two contending parties has to introduce evidence. In the first sense, if the burden is not discharged, the party must eventually fail. In the second case, where the parties have joined issue and have led evidence and the conflicting evidence can be weighed to determine which way to issue can be decided, the question of burden of proof becomes an abstract question and is therefore academic. The section 101 to 114 of Indian Evidence Act, 1872 deals with burden of proof. The section 102 of the Evidence Act provides that the burden of proof lies on that party who would fail if no evidence at all were given on either side. Thus, if an assessee claims that money or bullion found in his possession at the time of the search or survey does not belong to him but someone else, the onus is on him to establish it because the ordinary presumption is that he is the owner as the money etc. was found in his possession. Similarly, in all cases where a particular receipt is sought to be taxed as income, the initial onus is on the Assessing Officer to prove that it is taxable. Where, however, the assessee claims exemption, the burden is on the assessee to prove it to be exempt. Same is the position in case of allowances, deductions, or claims of loss, etc. Similarly, where there is a statutory rebuttable presumption against the assessee, as in case of cash credits etc., u/s 68 or unexplained investment u/s 69, the initial burden of proof is on the assessee to show that the cash credit is genuine or the investment is not unexplained. The AO should, therefore, always examine as to who has to discharge the burden of proof. Therefore, based on these facts and circumstances, we remit the lis back to the file of the assessing officer for fresh adjudication in accordance with law. Assessee Appeal is allowed for statistical purposes.
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2022 (7) TMI 536
Addition on account of excess stock of jewellery found during survey - addition u/s 69A and not under Income from Business - HELD THAT:- On a consideration of the same on going through the PMGKY Scheme alongwith the Circular No. 2 and 9 of 2017 which clarify the Scheme considering the facts of the peculiar case, we find that in the facts of the present case, the AO incorrectly invoked Section 69A of the Act and the ld. CIT(A) on facts was not justified to sustain the addition so made. In the facts of the present case, accordingly, we are of the view that the order cannot be sustained. We have duly taken into consideration the facts as available in the respective orders of the ITAT. It is seen that the assessee is dealing in gold and silver jewellery etc. and the discrepancies in the silver jewellery cannot be arbitrarily said to be from an unexplained source as no such fact or allegation has either been made in the Survey or referred to by the AO. The discrepancy in the silver stock was in the regular course of the business of the assessee. We have taken into consideration the Surrender Letter dated 22.03.2017 filed by the assessee. It is a matter of fact that the surrender has been honoured and has not been retracted by the assessee. On a careful reading of the specific reasons for surrendering the income wherein very clearly the assessee states that; it is submitted that certain discrepancies were observed related to cash deposit/income etc. However, is, order to by peace of mind and to avoid any litigation and is order to settle the group cases of the persons covered - The wordings are very clear and categoric. We have taken into consideration the PMGKY Scheme 2016 and have also taken into consideration two Circulars which clarify those i.e. Circular No. 2/2017 and 9/2017. We have also taken into consideration the specific questions put to Shri Sachin Aggarwal, Partner. We have taken into consideration the Circular No. 2/2017 and 9/2017 and Paper Book page 59. On a careful consideration of the facts and evidences on record, we find that the addition cannot be sustained. Accordingly, on a consideration of facts on record, the specific Scheme, Surrender letter and case law relied upon, we are of the view that the addition cannot be sustained. Allowing the appeal of the assessee, the addition is directed to be deleted. Appeal of assessee allowed.
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2022 (7) TMI 535
Revision u/s 263 - deduction u/s 54F - Whether investment and income relating to properties are duly disclosed? - Revenue has failed to demonstrate that the assessee's share in the newly purchased property for which deduction u/s 54F had been claimed was to the tune of 33% - HELD THAT:- The mere fact that his wife's name is also appended to therein alongwith his name and that of his son who as per record has obtained a housing loan for the stated property, we find that these facts do not erode the claim of exemption of the assessee u/s 54. The fact that this entire amount has been invested in the property is not disputed by the Revenue. We have also seen that it has not been upset by the ld. PCIT in the order. All relevant documents are available on record. What enquiry/investigation the AO should have done in the first round, we find has been left unaddressed. In the face of the consistent stand of the assessee that the entire Long Term Capital Gain from the sale of the property has been applied to the new property. Documents substantiating this claim are available on record and have not been upset. The revisionary power u/s 263 of the Act cannot be allowed to be exercised in a casual arbitrary manner. It is incumbent upon the ld. PCIT to point out the error in the order and that too such an error which can be said to be prejudicial to the interests of the Revenue. Revenue has dismally failed on this count. Accordingly, in the said factual background where we find no evidence for supporting the conclusion that only 1/3rd share belonged to the assessee. The exercise of power by the PCIT in these peculiar facts cannot be upheld. The case laws relied upon by the ld. PCIT in the order and the ld. CIT-DR including the one cited by the AR, accordingly, we hold do not warrant any discussion. At the very threshold itself, we have seen that the issue being purely factual, presumptions cannot be allowed to prevail and taint the facts on record. Since much reliance for the Revenue has been placed upon the decision in the case of Kamal Kant Kamboj [ 2017 (8) TMI 285 - PUNJAB AND HARYANA HIGH COURT] we find on a careful reading of the same and hold that it does not have any applicability to the facts of the present case. In the facts of the said decision which was rendered by the jurisdictional High Court, the admitted fact available on record was that the assessee had invested in the property exclusively in the name of his wife. As a result thereof, the exemption for Long Term Capital Gain u/s 54B was held to be not allowable as the investment had not been made in the name of the assessee. In the facts of the present case, the new purchase has been made in the name of the assessee but funds largely have flown from the assessee and the said fact is not upset. The mere fact that names of the wife and son also is included, we hold has no relevance for determining in the peculiar facts the issue at hand. In the facts of the present case, the suspicions entertained by the PCIT have not been translated into facts despite the fact that the entire documents were available. Accordingly, on a consideration of facts and circumstances and position of law, we find that the order deserves to be quashed. - Decided in favour of assessee.
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2022 (7) TMI 534
Penalty u/s 271C - payment towards EDC charges to DGTCP Haryana through HUDA without deduction of TDS - Default for non deduction of tax at source as per provisions of Chapter XVII-B towards amount paid as External Development Charges (EDC) to Directorate of Town and Country Planning, Haryana (Haryana Government) (DGTCP) through banking channel favouring Haryana Urban Development Authority (HUDA) - HELD THAT:- The issue is no longer res integra. The identical issue has come up for adjudication before the Co-ordinate Bench of Tribunal in the case of Spaze Tower Pvt. Ltd. [ 2022 (5) TMI 1344 - ITAT DELHI] wherein found that the provisions of Section 194C are not applicable on payments to agencies like HUDA on behalf of the State Government. The imposition of penalty under Section 271C was consequently found to be unsustainable in the absence of default of Section 194C. The facts and issue being identical, in the light of the clarification noted above coupled with view taken by the Coordinate Bench in the identical facts situation, we see no reason to depart therefrom. Consequently, we find merit in the plea raised on behalf of the assessee for cancellation of penalty imposed under Section 271C of the Act. - Assessee appeal allowed.
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2022 (7) TMI 533
Addition u/s 68 - bogus liability allegedly shown by the assessee - HELD THAT:- Although the assessee-firm did not make any entry in its books of accounts on receipt of the shares on loan as the same was not required, the proper accounting entries on sale of shares were duly passed in the books of accounts of the assessee showing the value of sale proceeds as the liability of the assessee-firm to the concerned creditors. Although the assessee, as submitted before the authorities below as well as before us, was required to repay the said liability in the form of shares and not the value, we find that assigning the value of sale proceeds of the shares actually realized to the concerned creditors was fair and proper in the facts and circumstances of the case including especially the fact that the difference on the date of purchase of shares for returning back to the concerned creditors was liable to be declared by the assessee as profit or loss as the case may be as agreed even by the assessee. The shares owned by the concerned creditors were given on loan by them to the assessee to discharge its liability of margin payment through demat account and on sale of the same by the main broker M/s. Khandwala Integrated Financial Services Pvt. Ltd., the liability was duly recognized by the assessee towards the concerned creditors in its books of accounts at the value of sale proceeds actually realized. All these transactions were duly supported by the documentary evidence produced by the assessee; and, the AO in our opinion, was not justified to doubt the genuineness of the said transactions on the basis of some frivolous objections which have been duly clarified and met by the assessee. It appears to us that the nature of transactions as well as the modus operandi involved in the same was not properly understood by the AO while doubting the genuineness of the same while CIT(A) not only understood the same properly but also appreciated the exact nature of transactions to hold that the said transactions were genuine which were entered into by the assessee in the normal course of its business as a dealer in shares. Moreover, the identity and capacity of the concerned creditors as well as genuineness of the relevant transactions involving shares taken by the assessee on loan was duly established by the assessee on evidence and the learned CIT(A), in our opinion, was fully justified in deleting the addition made by the Assessing Officer by treating the said transactions as unexplained cash credit under Section 68 - Decided against revenue.
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2022 (7) TMI 532
Loss sustained in respect of the amounts advanced by the appellant to 2 companies - Loss written back by the said companies and offered as income as amounts no longer payable to the appellant and the same constituted a legitimate loss incidental to business carried on by the appellant under - assessee is in his profit loss account claimed expenses in the nature of investment in companies written off - HELD THAT:- The write off cannot be added in the hands of assessee. This argument of assessee is totally misconceived. We have to see how the investment has been treated in the hands of assessee not in the hands of recipient of the advances. In the hands of assessee, this advance amount has been treated as a capital investment and it is not in trading asset in nature, so as to claim the written off as business expenditure. In the hands of the present assessee, it is an investment, if the same has to be considered as a capital loss not as a trading loss or business loss so as to claim the same as business expenditure. In our opinion, the assessee has not satisfied the condition laid down in section 36(1)(vii) r.w.s. 36(2) - As per section 36(2) of the Act, deduction shall not be allowed unless such debt or part there of has been taken into account in computing the income of the assessee of the previous year in which the amount of such debt or part thereof is written off or of an earlier previous year, or represents money lent in the ordinary course of business or banking or money lending which is carried on by the assessee. Being so, in our opinion, the assessee cannot claim the written off investment in the field of capital as bad debt or business expenditure. Accordingly, we find no merit in this argument of the assessee s counsel and the same is rejected and this ground of appeal of assessee is dismissed. Disallowance being the interest paid on borrowing, which were used to make the investment on which income was offered - HELD THAT:- In the present case, the assessee earned interest income - The claim of assessee is that the assessee has incurred an expenditure in the form of interest paid - AO allowed the interest expenditure to the extent of interest income earned by the assessee - The contention of the assessee is that assessee has actually incurred an interest expenditure for which the assessee not given any details, so as to enable the lower authorities to examine the claim of the assessee even the allowability of interest expenditure to earn the same amount of income is very exorbitant. Since the department is not in appeal before us on this issue, we are not commenting anything on this. However, in our opinion, the AO is very liberal in allowing the interest expenditure to earn interest income - Hence, we do not find any merit in the claim of the assessee on this issue and the same is rejected. This ground of the assessee is dismissed.
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2022 (7) TMI 531
Disallowance u/s 40(a)(ia) - TDS u/s 194C AND 194I - AR contended that the effect of second proviso to section 40(a)(ia) that even if payer fails to deduct tax at source of any sum paid to the payee if the payee are admitted the income in the return filed and had paid tax thereon, then it is admitted that the payer has deducted and paid the tax on such sum on the date of furnishing the return by the resident payee - AR vehemently argued in such eventuality the provisions u/s 40(a)(ia) would not be invoked in view of the amendment by way of insertion of second proviso to section 40(a) - HELD THAT:- We note that in the first round of litigation the Tribunal restored the order of AO in respect of addition made u/s. 40(a)(ia) for violation of section 194I of the Act. Admittedly, the assessee did not challenge the said addition before the higher forum. Before us, now, by way of legal ground, the ld. AR contends that the applicability of section proviso inserted to section 40(A)(ia) of the Act, in our opinion, when the said addition was confirmed by the ITAT, there is no scope again sending the issue to the file of AO will arise. The CIT(A) also discussed the same and clearly held the said issue was not open to the AO for fresh adjudication in view of the issue attained finality by the order of ITAT. Therefore, we find no infirmity in the order of CIT(A) in this regard and the grounds raised by the assessee are dismissed.
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2022 (7) TMI 511
Addition u/s 68 - Unsecured loans - loans made by the Assessing Officer qua loans advanced - non-compliance of notices u/s 133(6) - HELD THAT:- A perusal of the paperbook reveals that CIT(A) and ITAT after examining the copies of audited financial statement, acknowledgement of return of income, confirmation from lender, bank statement of lender have held that the lenders are entities duly assessed to tax and have made unsecured loans through banking channels, which fact has not been denied nor rebutted in the assessment order. CIT(A) and ITAT have also categorically held that the Assessee had furnished complete details and evidences to discharge the burden in respect of unsecured loans reflecting in the financial statement of the assessee-company. It is settled law that non-compliance of notices under Section 133(6) of the Act to all entities giving unsecured loans cannot be the sole basis to make additions under Section 68 of the Act. Consequently, this Court is of the view that it would not be justified in reversing in second appeal the concurrent finding of facts recorded by two authorities below, especially when the said findings suffer from no perversity. [See: Ram Kumar Aggarwal Anr. Vs. Thawar Das (through LRs), [ 1999 (8) TMI 1008 - SUPREME COURT] and State of Haryana Ors. Vs. Khalsa Motor Limited Ors [ 1990 (8) TMI 416 - SUPREME COURT ].]
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Benami Property
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2022 (7) TMI 530
Benami transaction - 5th respondent exercising powers under Section 18(2) of the Benami Property Act has provisionally attached the properties - HELD THAT:- Adjudicating Authority is empowered to make or cause to be made inquiries and to call for reports or evidence as it deems fit. It has also the authority to take into account all relevant materials besides reply of the noticee and thereafter to take a decision one way or the other holding the property not to be a benami property and revoking the attachment order or holding the property to be a benami property and confirming the attachment order. Considering the fact that petitioners before us are widows and facing stringent provisions of the Benami Property Act, it would meet the ends of justice if the Adjudicating Authority on receipt of application of the petitioners call for the relevant documents/evidence from authorised authorities including the Special Investigation Team and thereafter hand over copies of the same to the petitioners so as to enable them to make effective defence. Accordingly following directions are issued: (i) Petitioners shall submit application(s) before the Adjudicating Authority within two (02) weeks from today mentioning therein the documents required for their defence and in whose custody the documents are being kept. (ii) On receipt of such application(s), the Adjudicating Authority shall requisition the relevant documents/evidence from the concerned authorities. (iii) On receipt of the documents/evidence by the Adjudicating Authority, petitioners or their authorised representative shall be permitted to go through the same and on their request, photo copies of such documents may be made available to the petitioners or their authorised representative. (iv) Thereafter, petitioners shall file their reply to the notice issued by the Adjudicating Authority (v) Adjudicating Authority shall consider their reply and all other materials on record and thereafter pass an order in terms of Sub- Section (3) of Section 26 of the Benami Property Act.
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2022 (7) TMI 529
Benami Property Transaction - validity of continuing the provisional attachment - prime contention of the learned counsel for the appellant is that the appellant was not at all involved in the alleged transaction, which the first respondent is treating as benami transaction - grievance of the appellant is that the first respondent did not furnish the entire documents relied on by them, nor provide any opportunity to the appellant to cross examine the persons whose statements have been referred to in the impugned proceedings and as such, the order passed under section 24(4) of the Act, which was impugned in the writ petition, is arbitrary, illegal and violative of the principles of natural justice. HELD THAT:- Applicability of the principles of natural justice and fair play, depends on the facts and circumstances of each case and is subjected to statutory provisions; and that, the proceedings under section 24 only require a recording of prima facie opinion as to the benami nature of the transaction. It is an admitted case that the appellant failed to submit his reply to the notice issued under section 24(1). As such, the first respondent, after making enquiry and calling for reports or evidence and taking into account all the relevant materials, has, with the prior approval of the Approving Authority, passed the order under section 24(4), continuing the provisional attachment of the property till the passing of the order by the Adjudicating Authority under section 26(3), which is purely provisional in nature. That apart, the provisions of law mandate the respondent authorities to furnish such documents, particulars or evidence and provide an opportunity of being heard to the appellant only at the stage of adjudication proceedings; and there is no provision under the Act to provide an opportunity to the appellant to cross examine the witnesses at the preliminary stage. As in the absence of any provision of law as well as the compelling circumstances warranting the respondent authorities to provide an opportunity of cross examination of witnesses, whose statements have been relied on by the respondent authorities to the appellant at the stage of section 24 proceedings, the plea raised by the appellant in this regard, cannot be countenanced. Therefore, we do not find any error in the order passed by the first respondent, as an interim measure, continuing the provisional attachment order of the property till the passing of the order under section 26(3) by the adjudicating authority. The learned Judge has also rightly affirmed the same and directed the respondent authorities to proceed further in accordance with law. Thus, the appellant has not made out any case to interfere with the order impugned herein as well as the order impunged in the writ petition at this stage. Writ appeal stands dismissed.
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2022 (7) TMI 528
Benami Property Transactions - provisional attachment of the property - applicability of the principles of natural justice - grievance of the appellants is that the first respondent did not furnish the entire documents relied on by them, nor provided any opportunity to the appellants to cross examine the persons whose statements have been referred to in the impugned proceedings and as such, the orders passed under section 24(4) which were impugned in the writ petitions, are arbitrary, illegal and violative of the principles of natural justice - HELD THAT:- It is an admitted case that the appellants failed to furnish the necessary documents to substantiate their stand that the alleged transactions are not benami transactions. As such, the first respondent, after making enquiry and calling for reports or evidence and taking into account all the relevant materials, has, with the prior approval of the Approving Authority, passed the separate orders under section 24(4), continuing the provisional attachment of the property till the passing of the order by the Adjudicating Authority under section 26(3), which are purely provisional in nature. That apart, the provisions of law mandate the respondent authorities to furnish such documents, particulars or evidence and provide an opportunity of being heard to the appellants only at the stage of adjudication proceedings; and there is no provision under the Act to provide an opportuity to the appellants to cross examine the witnesses at the preliminary stage We are of the opinion that in the absence of any provision of law as well as the compelling circumstances warranting the respondent authorities to provide an opportunity of cross examination of witnesses, whose statements have been relied on by the respondent authorities, to the appellants at the stage of section 24 proceedings, the plea raised by the appellants in this regard, cannot be countenanced. Therefore, we do not find any error in the orders passed by the first respondent, as an interim measure, continuing the provisional attachment order of the property till the passing of the order under section 26(3) by the adjudicating authority. The learned Judge has also rightly affirmed the same and directed the respondent authorities to proceed further in accordance with law. Thus, the appellants have not made out any case to interfere with the order impugned herein as well as the orders impunged in the writ petition at this stage
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Customs
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2022 (7) TMI 527
Recovery of customs duty - warehoused goods - priority to recover dues - attachment of property - charge created by the second respondent Bank / financial institution, being a secured creditor - overriding effect of SARFAESI Act, 2002 on the provisions of the Central Excise Act of 1944 or not - HELD THAT:- It could be seen that at the time of executing the mortgage deed in the year 2006, there was no charge or attachment over the property in question by any one, and the second respondent bank was the first charge holder of the same. The appellant issued notices under section 142(1)(a) (b) of the Customs Act, 1962, against the two companies for recovery of the alleged dues payable by them, in connection with the goods imported during 2007-2009, on 09.12.2010. Thus, the cause of action arises for the appellant to create charge over the property in question only on 09.12.2010. Pertinently, it is to be mentioned here that though the sale certificate dated 23.01.2012 proceeds to state that notice of attachment by Customs Authorities on the mortgaged property was filed in the office of SRO, Redhills, the second respondent has categorically stated in the sale certificate itself that 'the mortgage created in favour of the bank is prior in point of time and the bank being the secured creditor, the mortgage created in favour of the bank has priority over the charge of the customs and as such, the charge created in favour of Customs Authorities is subordinate to the charge in favour of the bank' - An explanation has also been forth coming on the side of the second respondent bank during the course of hearing that any ambiguity in the language employed in the sale certificate is only a genuine mistake and the appellant cannot take advantage over the same. Hon'ble Supreme Court, in Punjab National Bank v. Union of India and others [ 2022 (2) TMI 1171 - SUPREME COURT ] wherein, it was categorically held that the dues of the secured creditor will have priority over the dues of the Central Excise Department, as even after insertion of section 11E in the Central Excise Act, 1944 with effect from 08.04.2011 and the provisions contained in the SARFAESI Act, 2002 will have an overriding effect on the provisions of the Central Excise Act of 1944 . - Applying the ratio laid down in the aforesaid decision of the Hon'ble Supreme Court to the facts of the present case, this court is of the opinion that the second respondent bank being a secured creditor and created right over the property in question prior to the alleged attachment raised by the appellant and hence, they have preferential right over the claim of the appellant. In such view of the matter, the order of the learned Judge cannot be interfered with. The appellant is directed to lift the attachment over the property in question, within a period of two weeks from the date of receipt of a copy of this judgment - Appeal dismissed.
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2022 (7) TMI 526
Requirement of notice to person who are posted within the jurisdiction of this Court - HELD THAT:- There are so many matters in which Customs department, either Sea Customs or Air Customs, is involved and nobody appears for them. Therefore, this Court is not able to proceed further in the matter, particularly old matters. There are matters where substantial revenue is involved and the Government will be the loser. All Principal Chief Commissioners, who are posted within the jurisdiction of this Court are put to notice that whenever any matter is listed pertaining to their Commissionerate, either they shall personally remain present in Court and go on with the matter or ensure that a duly authorised advocate is instructed to appear in the matter. If due to absence of any representative the matter is adjourned, it is made clear that this Court will impose costs to be recovered from the Principal Chief Commissioner from his salary under whose jurisdiction the subject matter is covered. At the request of this Court, Mr. Mishra states that he will forward a copy of this order to all the Principal Chief Commissioners who are posted under the jurisdiction of this Court - Stand over to 30th June 2022.
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Insolvency & Bankruptcy
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2022 (7) TMI 525
CIRP process - time limitation - acknowledgement of debt - Applicant has initiated proceedings before District Magistrate and The Debts Recovery Tribunal within the period of limitation or not - HELD THAT:- It is seen from the record that the date of default has been mentioned as 13.09.2013, which stood revived with the OTS proposal dated 01.08.2016 filed vide I.A. 1155/2016 before the DRT Pune, well within the three year period. Subsequently, another settlement proposal dated 07.03.2018 was accepted by the Bank on 27.03.2018, wherein a timeline was provided for the payment of the balance amount - the OTS proposal dated 01.08.2016 filed vide I.A. 1155/2016 falls within the ambit of acknowledgement of debt as defined under Section 18 of the Limitation Act, 1963, which is further fructified by the admitted OTS dated 27.03.2018 again within three years of the previous proposal where the debt is acknowledged to be due and payable . The ratio of the Hon ble Supreme Court in DENA BANK (NOW BANK OF BARODA) VERSUS C. SHIVAKUMAR REDDY AND ANR. [ 2021 (8) TMI 315 - SUPREME COURT ] is squarely applicable to the facts of this case as there is a jural relationship between the Corporate Debtor and the Respondent Bank and there is an acknowledgement of debt vide the OTS dated 27.03.2018, which falls within the ambit of Section 18 of the Limitation Act, 1963. This Tribunal is of the considered view that the OTS proposal dated 01.08.2016 and the subsequent one on 27.03.2018 falls within the definition of the ambit of acknowledgement of debt as envisaged under Section 18 of the Limitation Act, 1963 - Appeal dismissed.
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Service Tax
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2022 (7) TMI 524
Non-payment of Service Tax - Consulting Engineer Service - neither the respondent was registered under the Service Tax Act nor it paid the service tax on receipt of payments for such services - scope of definition of consulting engineer under Section 65(31) of the Finance Act, 1994, specifically as to whether a body corporate is covered within its sweep prior to the amendment in 2005 - Demand of tax, interest and penalty - HELD THAT:- Under the Finance Act, 1994, the definition of consulting engineer in Section 65(31) covers services provided to a client by a professionally qualified engineer or an engineering firm consisting of professionally qualified engineers. The taxable attribute is that the services must be rendered in a professional capacity - From the relevant provisions under the Finance Act, 1994, referred to hereinabove, taxable service means any service provided or to be provided. Under the relevant provisions of Finance Act, 1994, at many places, the word used is person . For example, as per Section 68, every person providing taxable service to any person shall pay service tax. Section 69 provides that every person liable to pay the service tax may make an application for registration. In Section 70 also, the words used are every person liable to pay the service tax. In many places under the Finance Act, 1994, the Parliament/Legislature has used the word person (Sections 68, 69 and 70). At this stage, Section 3(42) of the General Clauses Act, 1897 is also required to be referred to, considered and applied. The word person includes any company or association or body of individuals, whether incorporated or not. Therefore, there is no logic and/or reason to exclude a body corporate from the definition of consulting engineer and to exclude the services of a consulting engineer rendered by a body corporate to exclude and/or exempt from the service tax net. Such an interpretation would lead to anomaly and absurdity. As observed hereinabove, it will create two different classes providing the same services which could not be the intention of the Parliament/Legislature. The view taken by the High Court of Karnataka in the case of TCS [ 2004 (7) TMI 664 - KARNATAKA HIGH COURT ] and the Calcutta High Court in the case of M.N. Dastur [ 2005 (2) TMI 11 - HIGH COURT (CALCUTTA) ], taking the view that a firm and a company can be said to be a consulting engineer as defined under the Finance Act, 1994 and liable to pay the service tax as a service provider, is agreed upon - thus, under the Finance Act, 1994, in the definition of consulting engineer , a body corporate is included and/or to be read into so as to bring a body corporate being a service provider providing the consultancy engineering services within the service tax net, as such, it is not necessary to consider whether the subsequent amendment amending the definition of consulting engineer by way of 2005 amendment adding a body corporate within the definition of consulting engineer would be retrospective and/or whether it can be said to be a clarificatory in nature or not and the said issue would become academic now. It is held that the respondent, being a service provider providing consultancy engineering services, was/is liable to pay the service tax for such services being consulting engineer within the definition of Section 65(31) of the Finance Act, 1994 and therefore and thereby liable to pay the service tax under Section 66 r/w Section 68 of the Finance Act, 1994 - the matter is remanded to the CESTAT to examine and decide the appeal on other grounds, if any, raised in the Appeal Memo before it afresh in accordance with law and on its own merits and in light of the observations made hereinabove and the law laid down by this Court in the present judgment and order. Appeal disposed off.
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2022 (7) TMI 523
Benefits of Sabka Vishwas (Legacy Dispute Resolution) Scheme, 2019 - Seeking declaration filed by the petitioner as per law and following the principles of natural justice - power of Designated Committee Constituted under Sabka Vishwas (Legacy Dispute Resolution) Scheme, 2019 to adjudicate upon the admissibility of declaration beyond Section 122 and Section 125 of the Finance Act - seeking declaration of interest for delayed payment of Service Tax merits waiver, under Sabka Vishwas (Legacy Dispute Resolution) Scheme, 2019, even if entire Service Tax was paid prior to 30th June, 2019. HELD THAT:- Mr Gupta is right, to the extent that there is nothing stated in the e-mail dated 05.03.2020, as to whether or not the impact of the circulars dated 25.09.2019 and 29.10.2019 was taken into account, before respondent no.3/Designated Committee concluded that the declaration made by the petitioner deserved to be rejected - the matter needs a fresh examination by respondent no.3/Designated Committee. Respondent no.3/Designated Committee is, thus, directed to reexamine the matter. Respondent no.3/Designated Committee will afford an opportunity of hearing to the petitioner before reaching a conclusion in the matter, one way or the other - petition disposed off.
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2022 (7) TMI 522
Service of SCN - Ex-parte order - ex parte order-in-original is silent as regards the manner in which the show cause notice was served - violation of principles of natural justice - HELD THAT:- The appellant had raised the issue of non-service of show cause notice before the Commissioner (Appeals). The appellant had also raised the ground with regard to limitation, as the demand was raised for the period July, 2012 to March, 2013, vide show cause notice issued in April, 2018. It has also been contended before the Commissioner (Appeals) that the appellant had deposited the admitted tax of Rs.6,66,286/- vide 18 challans in March, 2015. From the impugned order, it appears that the Commissioner (Appeals) has dismissed the appeal for want of pre-deposit without making any inquiry with regard to the claim of the appellant that they have already deposited the tax amount of Rs.6,66,286/-. Further, that the Commissioner (Appeals) has not recorded any finding with regard to the ground of non-service of the show cause notice, which goes to the root of the matter. No valid adjudication order can be passed, without proper service of show cause notice. This appeal by way of remand to the Commissioner (Appeals) with the directions to ascertain the claim of the appellant that they have deposited an amount of Rs.6,66,286/-. If the same is correct, then the appellant has satisfied the requirement of Section 35 F. Further, before proceeding on merits, the Commissioner (Appeals) shall inquire from the Adjudicating Authority as to the manner of the service of the show cause notice and shall obtain a copy of the evidence thereof. If no show cause notice has been served, in that case, the order-in-original is ab initio void. Only upon satisfaction with regard to the service of the show cause notice, the Commissioner (Appeals) shall proceed to decide the case on merits.
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Central Excise
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2022 (7) TMI 521
CENVAT Credit - capital goods - dutiable finished goods - applicability of Rule 6(4) of CCR or not - HELD THAT:- The appellant is entitled to take Cenvat credit on the capital goods, as their finished goods falling under CTH 68109990 are dutiable under the Central Excise Tariff Act. Thus Rule 6(4) of CCR is not attracted. Thus, the show cause notice is mis-conceived. Further, it is rightly held that the appellant have rightly taken Cenvat credit on the capital goods. Credit allowed - appeal allowed - decided in favor of appellant.
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2022 (7) TMI 520
Interest on demands made by the appellant during investigation and pursuant to the initial order of Departmental Adjudicating Authority, confirming the demand proposed in the impugned show cause notices - Section 11B of CEA 1944 - HELD THAT:- It is observed that the Adjudicating Authority below has though sanctioned the refund of the said deposited amount, however, while relying upon the section 11B of the Central Excise Act, 1944 has denied the entitlement for interest on the said deposit. It is observed that the issue has been dealt in detail by this Tribunal in the case of M/S. PARLE AGRO PVT. LTD. VERSUS COMMISSIONER, CENTRAL GOODS SERVICE TAX, NOIDA (VICE-VERSA) [ 2021 (5) TMI 870 - CESTAT ALLAHABAD] . Even the Hon ble Supreme Court in the case of SANDVIK ASIA LIMITED VERSUS COMMISSIONER OF INCOME-TAX AND OTHERS [ 2006 (1) TMI 55 - SUPREME COURT] has dealt with the issue deciding the same in favour of the assessee holding the assessee entitled for the interest @12 % for the refund of the amount which were deposited not as the amount of duty. The issue is no more res integra that any deposits made if have not been confirmed as duty the time bar of Section 11B of Central Excise Act cannot be invoked. It stands clear that the amount in question was not the amount of duty after the Tribunal set aside the duty liability of the appellant. Hence, it is held that section 11 B is not applicable to such deposits. Commissioner (Appeals) is held to have wrongly invoked the said provisions. In terms of section 35 of Central Excise Act, the amount of refund being in the nature of deposit only appellant is held entitled for the interest on the said amount that too @ 12 % from the date of deposit till the date of realisation thereof. Appeal allowed.
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CST, VAT & Sales Tax
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2022 (7) TMI 519
Classification of goods - KADIPROL - can be categorized as Poultry Feed falling under Entry 25 of Schedule I of the Gujarat Sales Tax Act or as a Drug and Medicine under Entry 26(1) of Schedule II Part A of the GST Act? - product in question was sold in a sachet/packet of 100 gm - HELD THAT:- It was not meant to be given as a food to the poultry. It was required to be mixed with the feed given to the poultry/birds. It cannot be directly fed and/or given to the birds. Therefore, there is some merit in the contention of the Revenue that the impugned judgment and order does not deal with the reasoning given by the Tribunal. It merely quotes and relies upon the two decisions in the case of Glaxo Laboratories (India) Ltd. [ 1978 (12) TMI 164 - GUJARAT HIGH COURT] and M/s. Pfizer (India) Ltd. [ 1991 (3) TMI 343 - GUJARAT HIGH COURT ] without a detailed and an indepth examination of the facts as found. Therefore, usually in the aforesaid background, the matter should be remitted to the High Court for a fresh decision. In view of the facts and as the issue in question is in the academic interest and as there is no revenue implication as there are no tax dues and therefore there is zero tax effect, the present proceedings is closed keeping the larger question on the Common Parlance Test open, to be considered in an appropriate case in a like matter. Appeal disposed off.
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2022 (7) TMI 518
Maintainability of revision petition - time limitation - appellant did not appear before the revisional authority inspite of the matter being adjourned on several occasions - HELD THAT:- The appellant did not diligently prosecute with the matter and did not cooperate with the revisional authority to dispose of the matter though the revision petition was filed in the year 2018. Furthermore, the revisional authority in its order states that the revision is barred by limitation and as there is delay of about 45 days in filing the revision petition. When the appellant went before the learned writ court, conduct of the appellant was taken note of and the court found that the appellant was not vigilant especially when they are big company having transactions of almost 20 crores in a year. Appellant being advised by a team of professionals cannot be granted any indulgence and, accordingly, the writ petition was dismissed. Such conduct of the appellant needs to be deprecated in the sense that the appellant though filed the revision petition, did not contest the matter and did not diligently prosecute with the matter. The correct amount of tax is to be determined and the appellant should be entitled to pursue the statutory remedies available under the Act. Yet we note the conduct of the appellant in not diligently prosecuting with the matter which was led to the order passed by the revisional authority which was impugned in the writ petition - a delicate balance needs to be made between the parties bearing in mind the interest of revenue as well as interest of the assessee. The writ petition stands disposed of by setting aside the order passed by the revisional authority subject to the condition that the appellant pays 50 percent of the net tax payable under the C.S.T. Act i.e. 50% of Rs. 2251158.00. However, the appellant is granted 15 days time from the date of receipt of the server copy of this order to effect such payment which shall be treated as a deposit upon production of the receipt of the same - Appeal allowed.
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Indian Laws
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2022 (7) TMI 517
Seeking grant of Bail - Search of vehicle - conspiracy of financing illicit trafficking of contraband and harbouring offender, punishable in terms of Section 27A NDPS Act - seizure of contraband - applicability of restriction of Section 37 NDPS Act - HELD THAT:- It appears questionable if the respondent was entitled to be granted bail in this matter, particularly having regard to the facts and circumstances that: (a) the accusation is essentially of financing the trafficking of contraband and also of harbouring offenders, which relates to the offence under Section 27A NDPS Act and to which, the rigours of Section 37 NDPS Act do apply; (b) the accusation is supported by prima facie evidence, including the statements of witnesses as also CCTV footage and call data records; (c) on 23.02.2021, even though the respondent attempted to question the notice summoning him to appear at 04:00 p.m. and the High Court dismissed his writ petition but, he did not appear and was apprehended later in the night at a distant place; (d) the prosecution has shown that the respondent was involved in as many as 53 criminal cases and he has been convicted in at least two of them; and (e) the prosecution has alleged that even in relation to this particular case, the respondent had been separately charge-sheeted for the offence pertaining to Section 353 IPC and he has attempted to threaten the law enforcing agencies and personnel. According to the prosecution, the FIR in question for offences under Sections 21(b) and 29 NDPS Act came to be registered on the basis of a written complaint dated 19.02.2021, as submitted to the Officer In-Charge of New Alipore Police Station, Kolkata by Somnath Sarkar, SI after the aforesaid proceedings of search of the said motorcar as also seizure of contraband from the motorcar. This complaint dated 19.02.2021 is an admitted document of the appellant and is rather the foundation of the entire matter - the motorcar in question was in motion and was moving from west to east direction, which was detained by police with the help of other raiding team members; and second, that during search, the occupants of motorcar pointed towards two specific places inside the vehicle where the contraband drug/cocaine was placed in a concealed manner i.e., rear zip cover of the left front seat and beneath the driver s seat. Both these assertions, when examined with reference to the alleged statements of the three motorcar-occupants, as placed before us with supplementary written submissions, their incompatibility and contradiction strikingly come to the fore. At the present stage and on prima facie consideration of the matter, the only logical approach could be to proceed on the basis of the version of the SI as given in the written complaint because, it is not the case of the appellant that the version in the written complaint is not correct. In this view of the matter, the very edifice of the prosecution case against the respondent crumbles down and falls flat. Putting it differently, the story of planting of contraband in the vehicle in question by some third person like Amrit Raj Singh could only be disbelieved, for being squarely contrary to the initial case of the prosecution, as stated in the written complaint - Once the veracity of prosecution case against the respondent is in serious doubt, further analysis on the other factors about financing the drug trafficking and harbouring of offender need not be undertaken because, when the story of planting of contraband is removed out of consideration, all other factors by which respondent is sought to be connected with such alleged planting could only be regarded as false and fanciful, at least at this stage. There are no reason to consider interference in the order passed by the High Court granting bail to the respondent with specific conditions - it is deemed appropriate to observe that none of the comments herein would be of any bearing on the final view to be taken by the Trial Court after the trial because, the observations herein are only of prima facie view and that too, so far relevant for the purpose of the question of grant of bail to the respondent. Appeal dismissed.
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2022 (7) TMI 516
Contempt of Court - Punishment and purging of contempt - guilty of disobeying the Orders passed by this Court in not disclosing full particulars of the assets - whether the actions on the part of Respondent No.3 in disbursing the amount of US$ 40 million was against the text and tenor of the orders passed by the High Court of Karnataka? - whether this Court can take cognizance of such violation or should it leave it to be decided by the High Court of Karnataka itself in a properly instituted legal proceeding? HELD THAT:- The actions on part of the Contemnor having been found to be contumacious and established in the Judgment and Order dated 09.05.2017, we are presently concerned with the issues as to what orders be passed regarding punishment and purging of contempt. The approach in such cases was succinctly stated by this Court in Pravin C. Shah v. K.A. Mohd. Ali Anr. [ 2001 (10) TMI 1049 - SUPREME COURT] where it was held that merely undergoing the penalty imposed on a contemnor is sufficient to complete the process of purging himself of the contempt, particularly in a case where the contemnor is convicted of criminal contempt. The danger in giving accord to the said view of the learned Single Judge in the aforecited decision is that if a contemnor is sentenced to a fine he can immediately pay it and continue to commit contempt in the same court, and then again pay the fine and persist with his contemptuous conduct. There must be something more to be done to get oneself purged of the contempt when it is a case of criminal contempt. It is, thus, well settled that apart from punishing the contemnor for his contumacious conduct, the majesty of law may demand that appropriate directions be issued by the court so that any advantage secured as a result of such contumacious conduct is completely nullified. The approach may require the court to pass directions either for reversal of the transactions in question by declaring said transactions to be void or passing appropriate directions to the concerned authorities to see that the contumacious conduct on the part of the contemnor does not continue to enure to the advantage of the contemnor or any one claiming under him. It is precisely for these reasons that the direction to have vacant possession delivered to the rightful claimant was passed by this Court in NOORALI BABUL THANEWALA VERSUS K.M.M. SHETTY [ 1989 (12) TMI 350 - SUPREME COURT ] - thus Mere passing of an order of punishment as stated by this Court in Pravin C. Shah v. K.A. Mohd. Ali Anr. would not be enough or sufficient. In a given case, to meet the ends of justice, the concept of purging of the contempt would call for complete disgorging of all the benefits secured as a result of actions which are found by the court to be contumacious. Considering the facts and circumstances on record and the facts that the Contemnor never showed any remorse nor tendered any apology for his conduct, we impose sentence of four months and fine in the sum of Rs.2,000/- upon the Contemnor. The fine shall be deposited in the Registry of this Court within four weeks and upon such deposit, the amount shall be made over to the Supreme Court Legal Services Committee. In case the amount of fine is not deposited within the time stipulated, the Contemnor shall undergo further sentence of two months. The contempt petitions, thus, stand disposed of.
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2022 (7) TMI 515
Dishonor of Cheque - insufficiency of funds - legally valid debt or liability existed against the Petitioner towards R1 or not - failure to rebut the presumption as enshrined in Section 139 of the NI Act - HELD THAT:- The existence of an agreement between the parties has also not been denied. The issuance of the cheques as partial payment towards the terms of the agreement has also not been denied. The evidence of the Complainant stating that the two cheques were towards discharge of a legal liability has not been demolished under cross-examination. Hence, it is evident that Exhibits 1 and 2 were issued by the Petitioner in the discharge of a legal liability. The Agreement was subsisting between the parties in view of Section 4 of the Contract Act and considering the date of posting of Notice Exhibit 11 by the R1 to the Petitioner and the fact that it was received by the Petitioner only on 08-02-2018. The impugned judgement requires no interference - petition disposed off.
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2022 (7) TMI 514
Dishonor of Cheque - insufficiency of funds - non-service of statutory notice of demand - address on which the respondent has dispatched the said notice is incorrect to the knowledge of the respondent - HELD THAT:- The respondent/complainant had mentioned wrong address of the petitioner/accused both in the statutory notice of demand as well as in the complaint because Priyag Apartment, Vasundra Enclave-96 is located in Delhi not in Jammu. Thus, it can safely be stated that statutory notice of demand was sent by the respondent/complainant to the petitioner/accused on an address which was not correct. Whether a notice of demand sent on wrong address of the drawer of a cheque would amount to giving of notice to him as contemplated in clause (b) of proviso to Section 138 of the NIA Act? - HELD THAT:- In the instant case, the trial court record clearly shows that the address of the petitioner/accused is not correctly mentioned either in the complaint or in the notice of demand. It is for this reason that the respondent/complainant was directed by the trial Magistrate to furnish fresh particulars of the petitioner/accused. The address of the petitioner is shown as Vasundra Enclave, Jammu which is patently incorrect. The second address of the petitioner shown in the notice of demand and the complaint as Anand Prabat, New Delhi is incomplete, inasmuch as it lacks necessary details that would enable a postman to locate the addresses. Once the material on record clearly suggests that the statutory notice of demand was sent by the respondent/complainant on a wrong address, the presumption of receipt of notice by the petitioner/accused does not arise - Thus, the pre-condition of filing a complaint under Section 138 of the NI Act of sending a statutory notice has not been satisfied in the present case. Therefore, no cause of action arose in favour of the respondent/complainant to file the subject complaint. He, therefore, could not have instituted the complaint nor the trial court could have taken cognizance of the offence and issued process against the petitioner. Thus, it is clear that the material on record does not disclose commission of offence under Section 138 of the NI Act against the petitioner/accused, as such, the impugned complaint and the proceedings emanating therefrom deserve to be quashed - petition allowed.
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2022 (7) TMI 513
Dishonor of Cheque - power vested in the learned Court below under Section 311 Cr.P.C. is not exercised - HELD THAT:- In the instant case, the petitioner has taken the loan from the bank and he has issued cheques to the bank towards payment of loan amount. It is not in dispute that consideration for the issuance of cheques is the loan amount, which the petitioner was to repay to the bank. It is also not in dispute that cheques bear signatures of the petitioner. In these circumstances, this Court has no reason to come to the conclusion that any other evidence is required to be adduced on record in proceedings under Section 138 of the Act, which are summary proceedings, for the simple reason that when the loan was taken, the petitioner supposed to have mortgaged the property to the bank by depositing the title deeds and thus, the bank had adopted its normal procedure and so judicial notice of the same can be taken. There is no relevance of witness to be examined when proceedings are based upon the Negotiable Instruments, as the petitioner has himself admitted that cheques were signed/issued by him and the consideration is also there for loan amount - Further, it is clear from the action of the respondents that he wanted to delay the proceedings by one way or the other, as one after the another, he kept on moving different applications when the case was at the final stage. Petition dismissed.
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2022 (7) TMI 512
Dishonor of Cheque - compounding of offences - amicable settlement arrived between the parties - Section 138 of NI Act - HELD THAT:- Though order directing the petitioner-accused to deposit the compounding fee with the District Legal Services Authority passed by the learned Sessions Judge appears to be in terms of guidelines framed by the Hon ble Apex Court in DAMODAR S. PRABHU VERSUS SAYED BABALAL H. [ 2010 (5) TMI 380 - SUPREME COURT ], but since parties herein have mutually agreed to resolve their dispute amicably and respondent has no objection in compounding the offence without there being payment of compounding fee, this Court without going into the correctness of the order deems it fit to modify the order dated 10.7.2021, passed by the learned Sessions Judge to the extent that petitioner shall not be liable to pay any compounding fee as ordered by the court below. This court finds merit in the present petition and accordingly, same is allowed.
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2022 (7) TMI 510
Condonation of delay of about 9 years and 4 months in filing application - HELD THAT:- A litigant should not be penalised for the laches or misconduct on the part of his learned advocate. In the present case, though the petitioner should have been more diligent in pursuing his case before this Court, an opportunity should be granted to him to contest his appeal on merit. The delay in preferring this revisional application is condoned subject to the condition that the petitioner will pay a cost of Rs.10,000/- to the State Legal Services Authority, West Bengal within a period of two weeks from date. Application disposed off.
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