Newsletter: Where Service Meets Reader Approval.
TMI Tax Updates - e-Newsletter
July 19, 2022
Case Laws in this Newsletter:
GST
Income Tax
Customs
Corporate Laws
Insolvency & Bankruptcy
PMLA
Service Tax
Central Excise
CST, VAT & Sales Tax
Indian Laws
Articles
News
Notifications
Circulars / Instructions / Orders
Highlights / Catch Notes
GST
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Cancellation of petitioner's registration - The petitioner was not confronted either with the substance of the allegation of violation of the provisions of the Act and the Rules framed thereunder and it is not shown that alleged violations were such, as may have warranted cancellation of the petitioner’s registration under Section 29(2)(a) of the Act. Also, since the material if any that may have founded the basis for such allegation had not been confronted to the petitioner, the entire exercise would remain an irregular exercise. - HC
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Classification of supply - mixed supply or not - Locomotive parts - goods and services are supplied at individual price separately but not for a single price - - AAAin this case there are two or more individual supplies, supplied in conjunction with each other by a taxable person for a single price, which does not constitute a composite supply. Thereby, the supply satisfies all the pre-requisites to be termed as a “Mixed Supply”.
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Classification of services - supply of space for advertisement in print media - As the appellant is selling space and also providing design or art work, the activity cannot be called as mere selling of advertising space but ‘Advertising Service’ falling under HSN 998361. Therefore, the concept of composite service for deciding the rate of tax, cannot be applied to Advertising Service, which involves host of activities which have their own relevance and importance. - As such any additional work or service provided to enhance the appearance of advertisement cannot be called as mere sale of advertising space in print media. - AAAR
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Classification of services - rate of GST - M/s SAIL. Rourkela qualifies to be called and termed as a “Government Entity” for the purpose of GST law. Therefore, the supply of works contract service which is being supplied to M/s SAIL. Rkl for construction of ISPAT Post Graduate Medical Institute and Super Specialty Hospital would merit entitlement for concessional rate of GST @ 12% - AAR
Income Tax
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Addition u/s 68 - Whether assessee furnished full details regarding the creditors? - ITAT deleted the addition - the assessing officer brushed aside the explanation offered by the assessee by stating that merely filing PAN details, balance sheet does not absolve the assessee from his responsibilities of proving the nature of transactions. It is not enough for the assessing officer to say so but he should record reasons in writing as to why the documents which were filed by the assessee along with the reply dated 22.12.2017 does not go to establish the identity of the lender or prove the genuineness of the transaction or establish the creditworthiness of the lender. - HC
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Exemption u/s 10(23C)(vi) - scope of the term "Education" - no specific definition for "education" under the Income Tax Act of 1961 - assisting Banking Institutions in the matters such as appraisal programmes, conducting morale and productivity studies etc., also fall within the category of education. It is not in dispute that the assessee is a Staff Training College for Bank employees. Therefore, in our considered view, assessee must be construed as an Educational Institution because the main object is to train the Bank Officials. - HC
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Addition of loan creditors - loan from farmers (having agriculture income) - AO has categorically mentioned that all of them are uneducated and having meagre agricultural land and some of them are having savings account with no balance - there is no satisfactory evidence about the credit worthiness of the creditors. We are of the view that the assessee failed to establish about the genuineness of the loan transactions except filing the affidavits. - Additions confirmed. - AT
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Exemption u/s. 54 - denial of claim on the ground that the assessee has commenced the construction of the residential house property before the sale of long term capital asset - Date of completion of the construction should be within the period as specified U/s. 54 of the Act and the commencement of construction is not the criteria as mentioned in section 54 of the Act - AT
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Addition made on account of interest on fixed deposits - the business nexus is clearly proved. Under these circumstances, the interest income earned on fixed deposits should have to be construed as inextricably linked with the project and should be treated as recovery of part of the project cost and cannot be treated as income from other sources. - AT
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Penalty u/s 271C - Non deduction of tds u/s 194C - payment made to the Government and not to the HUDA - Once the fact of receipt of amounts received by HUDA being deposited in Consolidated Fund of State is established, there can be no second opinion that Assessee was rightly directed by DTCP, Haryana to not deduct the TDS. Even otherwise no intentional default is attributed to assessee and the default, if any, was on account of ambiguity which had arisen out of a direction contained in a statutory document, so no penalty can be justified u/s 271C of the Act, which is meant to address contumacious conduct - Levy of penalty u/s 271C of the Act cannot be sustained - AT
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Revision u/s 263 by CIT - sale of impugned land measuring 10.162 acres below the stamp duty value - under the given circumstances, it can be safely concluded that the price realized by SBI is fair market value of land as on the date of sale - Where there are two possible views and the Assessing Officer has taken one of the possible views, no action to exercise powers of revision can arise, nor can revisional power be exercised for directing a fuller enquiry to find out if the view taken is erroneous. This power of revision can be exercised only where no enquiry, as required under the law, is done. - AT
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Addition for cash component of interest - Reliance on statement of the assessee during survey proceedings - There is no other evidence on record except the statement of the assessee recorded during survey proceedings, which has already been retracted by the assessee. - Additions deleted - AT
Customs
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Seeking amendment in the shipping bills - conversion from Drawback Scheme to Advance Authorization Scheme - When no time limit for making a request for amendment of any document is specified under Section 149 of the Act, it is clear that the legislature has not thought fit to restrict the scope of this provision for the amendment of the documents in terms of the time limit for making a formal request for such amendment. Moreover, Section 149 of the Act or any other provision of the Act does not confer any power or jurisdiction over the Board for laying down any time limit for operating this provision in respect of the amendment of documents. - HC
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Denial of Duty Free Credit Entitlement [DFCE] Certificate to the petitioner - The dispute is as to whether the petitioner was status holder or a Star Export House. The said question is answered by the order of the very Department made on 16.06.2006 wherein the petitioner has been recognized as a Star Export House as on 01.04.2003. Therefore, it is clear that the petitioner had satisfied the requirements of the amended provisions of the scheme. - HC
PMLA
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Extension of time limitation - provisional order of attachment of immovable properties - whether the Enforcement Directorate (ED) can seek refuge under the orders passed by the Supreme Court extending the period of limitation in all general and special laws - The litigants have been conferred a benefit under Section 5(1)(b) and 5(3) of the PMLA on the failure of the Authority to take action within the specified time frame. If the Authority does fail to take requisite steps, the right to relief arises immediately after exhaustion of the 180 days window and once such right is given to a litigant, it cannot be taken away.- HC
Service Tax
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Scope of SCN - Presumption with regards to documents seized - In view of Section 36A of Central Excise Act, 1944 it is only when such document is tendered in evidence against the person who produced the same or from whose custody or control it was seized that the presumption under Section 36A is available - In the present case admittedly none of the alleged invoices / documents was produced by the Appellant or seized from the Appellant’s premises or control. In view of the above, when the presumption under Section 36A is not available. The burden of proof is squarely on the Department to prove that the source documents are related to the Appellant - AT
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Evasion of service tax - allegation that Appellant have collected the service tax from the customers but not paid it to Department - In the present matter revenue in support of their contentions nowhere produced any corroborative evidence in the form of Bank Details or any documents recovered from the business premises of the Appellant by which it can be concluded that Appellant have collected the Service tax. In the present matter department clearly failed to prove the case that Appellant have collected the service tax from their customers. - Tri
Central Excise
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Classification of goods - Sikko Sol - Special boiling spirit - the “common parlance test”, “marketability test”, “popular meaning test” are all tools for interpretation to arrive at a decision on proper classification of a tariff entry. These tests, however, would be required to be applied if a particular tariff entry is capable of being classified in more than one heading. In the present case, it is submitted by the appellant that since 2010 they were clearing Sikko Sol classifying under tariff item 38140010 - the “Sikko Sol” cannot be classified under tariff item 27101213 of the CETA, 1985. Accordingly, the demand of duty with interest and imposition of penalty would be set aside on merit and on limitation. - AT
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Levy of penalty - fraudulent passing of CENVAT Credit - Since the appellant’s case falls under Rule 26 (2) (ii) but the same is not existing at the relevant time the appellant cannot be penalized when the goods dealt with by him was not liable for confiscation on the ground that the same was admittedly duty paid. - AT
VAT
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Levy of penalty under Section 10-A of the Central Sales Tax Act, 1956 - existence of mens rea - plea of bonafide belief had been raised - it was incumbent on the assessing authority to consider the same and pass appropriate order especially with respect to allegation of false declaration. Unless that finding had been returned by the assessing authority, it is difficult to sustain the penalty under Section 10-A of the Act.- HC
Case Laws:
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GST
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2022 (7) TMI 760
Cancellation of petitioner's registration - Section 29(2) (a) of U.P. Goods and Services Tax Act 2017 - HELD THAT:- In the present case, the show cause notice was issued, ostensibly with reference to Section 29(2)(a) of the Act, inasmuch as, the notice dated 9.7.2021 alleged non-compliance of specified provisions of GST Act or the Rules. However, that notice did not disclose the exact violation of the Act or the Rules, alleged. Unless that allegation was specified in the notice with details and unless material considered adverse to the petitioner had been confronted to it for the purposes of eliciting its reply thereto, the notice dated 9.7.2012 would remain completely vague and mute. A person who may be visited with the notice proposing such a harsh civil consequence had a perfect right to be informed of the exact allegations levelled against him. In a way, the harshest penalty contemplated is cancellation or registration of the assessee. The cancellation of the registration has the consequence of bringing the business of an assessee to a complete stand still. Its a death of his business. It has adverse impact on his fundamental right to do business. The petitioner was not confronted either with the substance of the allegation of violation of the provisions of the Act and the Rules framed thereunder and it is not shown that alleged violations were such, as may have warranted cancellation of the petitioner s registration under Section 29(2)(a) of the Act. Also, since the material if any that may have founded the basis for such allegation had not been confronted to the petitioner, the entire exercise would remain an irregular exercise. In fact, the proceedings had been initiated, continued and concluded without jurisdictional facts shown to exist. Since the cancellation notice did not refer to the notice dated 8.6.2021, reference made to it in the appeal order is irrelevant and uncalled. Even then, it does not make out allegation of violation of Section 29(2)(a) of the Act. Let the registration of the petitioner be restored forthwith - Petition allowed.
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2022 (7) TMI 759
Maintainability of petition - availability of alternative remedy of appeal - Seeking release of detained goods along with vehicle - HELD THAT:- The petitioner does not dispute that the petitioner has remedy of appeal under Section 107 of the Act, 2017. This writ petition is dismissed on the ground of alternative remedy leaving it open for the petitioner to file an appeal before the Appellate Authority.
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2022 (7) TMI 758
Attachment of Bank accounts of petitioner - learned ASGI and learned counsel for respondent no. 2 could not produce any opinion of the respondent no. 2 before this Court under Section 83 of the CGST Act, 2017 indicating that the Commissioner has recorded his opinion on some materials that it is necessary to attach the bank account of the petitioner to protect the interest of revenue - HELD THAT:- Hon'ble Supreme Court in the case of M/S RADHA KRISHAN INDUSTRIES VERSUS STATE OF HIMACHAL PRADESH ORS. [ 2021 (4) TMI 837 - SUPREME COURT ] which has explained the provision of Section 83 of the CGST Act, 2017 and the phrases 'the opinion' and 'that it is necessary so to do for the purpose of protecting the interest of government revenue' and held that The Commissioner is duty bound to deal with the objections to the attachment by passing a reasoned order which must be communicated to the taxable person whose property is attached. Learned counsel for the petitioner prays for and is granted a week's time to file rejoinder affidavit - Put up as a fresh case on 26 July, 2022 for further hearing at 10 AM.
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2022 (7) TMI 757
Seeking grant of Anticipatory bail - seizure of Gold Coins and Gold Bars - involved in the creation of numerous fake firms - HELD THAT:- It has already been observed that no whisper was made on behalf of the complainant from 25.01.2022 till 19.03.2022 despite being represented through counsels in proceedings initiated by him, with reference to raid conducted on 25.01.2022. The signatures of Yogesh Mittal are duly appended on copy of panchnama which had been produced on 12.04.2022 during course of submissions by counsel for petitioner. In view of above, it cannot be assumed that Yogesh Mittal or Saurabh Mittal (son of Yogesh Mittal) were not aware of the contents of panchbama dated 25.01.2022. Even otherwise, during the course of proceedings, the petitioner Aishwarya Attrey as well as Ritesh only subsequently joined the proceedings as referred in panchnama. Further, no recovery of the gold has been effected despite joining of the investigation by the petitioner pursuant to the interim protection granted by this Court vide order dated 12.04.2022. On the basis of recoveries effected from the residential/rental premises of the petitioner, no incriminating evidence pertaining to the proceedings conducted by the raiding party have been brought on record except to the extent that a cash of Rs.11 lacs was recovered from the premises. The explanation for the same is stated to have been given by the petitioner during the course of investigation and can be duly investigated in accordance with law. The petitioner is admitted to bail subject to furnishing of personal bond in the sum of Rs.1 lac with one surety in the like amount to the satisfaction of the Investigating Officer/learned Trial Court concerned and subject to conditions imposed - application allowed.
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2022 (7) TMI 756
Refund of Central tax and state tax - proper jurisdiction to process the refund claim - proper officer or RAC - Section 54(5) and (6) of the Central Goods and Services Tax Act, 2017 - HELD THAT:- The non-application of mind is sought to be demonstrated by Mr Jain by adverting to the contents of the said notice. The notice sought to give the petitioner ten days to file a reply, even while its authorized representative was directed to appear before the concerned officer within three days i.e., 25.05.2018. Mr Jain says that Rule 92(3) of the Central Goods and Services Rules, 2017, required the respondents to grant 15 days to the petitioner for filing the reply - Since Mr Satyakam is in difficulty today, list the matter on 14.07.2022, at the end of the Board.
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2022 (7) TMI 755
Revocation of cancelled registration of petitioner - appellate authority afforded an opportunity to the appellant to file pending returns and to make payments towards GST liability within 30 days from the date order revoking the cancellation of registration was passed - HELD THAT:- Since the respondents had not taken the follow up steps in the matter, the petitioner had approached this Court by way of a writ petition i.e., It is at that point that the respondents complied with order of the appellate authority. Consequently, the petitioner affirmed, when the aforementioned writ petition came up for hearing that its GSTIN number had been restored. Issue notice to the respondents.
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2022 (7) TMI 754
Refund of IGST - rejection on the ground that the petitioner did not fulfill the condition contained in Clause (v) of Section 2(6) of the Integrated Goods and Service Tax Act 2017 - HELD THAT:- Broadly, this condition required the petitioner to demonstrate, that the supplier of service and the recipient of service are not mere establishments of a distinct person. The Order-in-Appeal dated 19.04.2022, has returned the finding that the petitioner fulfilled the condition stipulated in clause (v) of section 2(6) of the IGST Act, but proceeded to reject the appeal on an entirely different ground i.e., non-fulfillment of condition contained in Clause (iii) of Section 2(6) of the IGST Act. Issue notice - List the matter on 26.09.2022.
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2022 (7) TMI 753
Rejection of refund claim - ground mentioned for rejecting the claim is Wrong ITC Claim - infirmities in the grounds of rejection - the grounds indicated for proposed refusal for refund were inter alia that the claim for refund was more than two years old - Section 54 of CGST Act - HELD THAT:- The striking infirmity in the impugned order whereby the refund was rejected was that it was entirely new ground than the aforesaid mentioned in the show cause notice. The claim was negatived on the ground that refund was inadmissible because of wrong ITC claim. It turns out that the new ground is relied on by the authority. It rejected claim of refund which was never mentioned in the show cause notice. The petitioner has never opportunity to meet with the said ground. The refund claim/application of the petitioner shall be reconsidered by the authority concerned afresh after following due procedure in law and appropriate order in accordance with law shall be passed to complete the entire exercise within 12 weeks from today - petition allowed.
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2022 (7) TMI 752
Determination of GST amount alongwith interest and penalty - opportunity of personal hearing, as contemplated under Section 75(4) of the CGST Act, 2017, not allowed - violation of principles of natural justice - HELD THAT:- Section 75(4) of the CGST Act, 2017 provides that an opportunity of hearing is to be provided where a request is received in writing from the person chargeable with tax or penalty or where any adverse decision is contemplated against such person. The stand on the part of the Department is that the Online Portal mode was chosen by the petitioners, which had resulted in the entire matter having been proceeded Online. The opportunity of hearing was not granted since the same was not requested for. However, while so arguing, the provision of Section 75(4) has been missed out. Even without any request having been made on the part of the party concerned, when any adverse decision is contemplated, personal hearing is a must. Hence, the same is missing in the instant case and the request on the part of the petitioners is to remand the matter by directing the respondents to consider the matter afresh by giving the fullest opportunity to the parties to present their case. Without entering into the merits of the matter, only on the ground of non-availment of opportunity of personal hearing, it is deemed appropriate to quash the impugned Order-in- original and two (2) Summary Orders in Form DRC-07 passed by respondent No.3. The respondent No.3 shall avail the opportunity of personal hearing on 18.07.2022 - petition disposed off.
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2022 (7) TMI 751
Classification of supply - mixed supply or not - Locomotive parts - goods and services are supplied at individual price separately but not for a single price - Sub-section (74) of section 2 of the CGST/TGST Acts - HELD THAT:- Price break up doesn t necessarily imply that the items are being supplied separately for separate prices. Here, though the supplies are capable of being made individually, the essential concomitant of the present agreement is that they should be supplied in conjunction with each other to function as one complete rake set. The schedule of delivery mentions that the entire set is to be delivered at once but not the individual items separately. Even as per terms of payment, payment is done for the entire set and not individual items, implying the supply is being made for single price per unit. Further, this supply cannot be termed a composite supply because the supplies involved are not naturally bundled and only one of the supply cannot be determined as a principal supply. Hence, in this case there are two or more individual supplies, supplied in conjunction with each other by a taxable person for a single price, which does not constitute a composite supply. Thereby, the supply satisfies all the pre-requisites to be termed as a Mixed Supply . The decisions relied upon by the applicant are distinguishable to the facts of the case on hand - the said supply is held to be a mixed supply.
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2022 (7) TMI 750
Classification of services - supply of space for advertisement in print media - whether the activity is classifiable under HSN 998363 and whether the GST @ 5% is applicable in terms of Sl. No. 21(i) of Notification No. 11/2017-Central Tax (Rate) dated 28.06.2017 as amended? - HELD THAT:- HSN 998366 relates to space other than print media, i.e., advertisements on Billboards, Buildings, Vehicles, Electronic media, and advertising in video motion pictures. Print media includes books, brochures, pamphlets, etc.; newspapers, journals and periodicals; postcards, timetables, forms, posters or other printed matter. The activity of the appellants in the subject case is sale of advertising space in print media and is not on Bill boards, Buildings, Vehicles etc. Therefore, the findings of AAR and its ruling with regard to classification of service is not in consonance with the explanatory notes. As such a fresh look at the activity or service provided by the appellant has to be examined. It is pertinent to note that, Advertising services is a specialized service, which includes a host of activities like planning, concept development, creating the basic idea for an advertisement, writing the words, selection of media to be used, design of ads, illustrations, posters, placement of advertisements in media etc. In the instant case, appellant is selling space for advertisement in print media. Further in some cases, apart from selling space, he is also providing art work, which makes the advertisement more appealing and attractive. And such additional activity is done at no extra cost. However, costing comes into picture after classification. Value addition does not have a bearing in classifying the nature of service provided. As such, the processes, the ingredients, quantity of inputs used in supply, the purpose of art work and its impact of appearance of advertisement will have a bearing on the nature of service supplied. Apart from selling the space for advertisement in print media, the appellant is also providing the services of designing or art work as pronounced in their contentions. Advertising in itself is a specialized service, where the act of exhibiting or marketing information about a product or service provided is important, so as to attract the attention of prospective customer who is likely to be a buyer or customer of the advertiser of that product or service provider. Certainly design or art work will have an impact on the content of advertisement, by which the prospective customer is attracted and falls a prey for the proposed business activity. Therefore, addition of art work cannot be called as a mere activity, but a special feature which enhances the appearance of advertisement and draws attraction of prospective customer. As the appellant is selling space and also providing design or art work, the activity cannot be called as mere selling of advertising space but Advertising Service falling under HSN 998361. Therefore, the concept of composite service for deciding the rate of tax, cannot be applied to Advertising Service, which involves host of activities which have their own relevance and importance. The intent of leaving a space empty is for the purpose of advertisement only. In general, advertising means the action of calling something to the attention of public for the purpose of business - The appellant has not submitted any contract or agreement which tells about the scope of activity involved in printing the advertisement within the given space in print media. As such any additional work or service provided to enhance the appearance of advertisement cannot be called as mere sale of advertising space in print media.
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2022 (7) TMI 749
Classification of services - Composite supply of works contract - construction work of ISPAT POST- GRADUATE MEDICAL INSTITUTE AND SUPER SPECIALLY HOSPITAL, at Rourkela is a work entrusted by Central Government; to SAIL - Applicant being the Principal Contractor, whether the tax rate applicable to value of contract between the Applicant and M/s SAIL is also leviable at 12% - applicability of Entry no 3(vi) (a)or (b) of Notification No. 11/2017-Central Tax (Rate), dated 23-6-2017 - whether the rate of taxes so determined would be applicable to the entire value of the works contract covered by Memorandum of understanding dated 13.08.2018 - refund of excess tax paid - proper procedure under GST provisions for claiming the excess amount so paid. HELD THAT:- In the instant case, it is observed that the MoU was entered into between the Applicant and M/s SAIL for construction of Ispat Post Graduate Medical Institute and Super Specialty Hospital at Rourkela Steel Plant. Subsequently, the said work was entrusted to M/s URC Construction (P) Ltd (the sub contractor of the Applicant) for execution. AAR. Odisha vide Order dated 09.03.2021 held that M/s SAIL, Rourkela qualifies to be called and termed as a Government Entity' and the works contract service which is being supplied by M/s URC Construction Private Limited would merit entitlement for concessional rate of GST @ 12% in terms of Notification No. 11/2017-Central Tax (Rate), dated 28-6-2017 (and as amended). It has been observed that all the pre-requisites as stipulated in para 6.4 are satisfied /fulfilled for the supply to qualify for the notified exemption. Accordingly. we hold that M/s SAIL. Rourkela qualifies to be called and termed as a Government Entity for the purpose of GST law. Therefore, the supply of works contract service which is being supplied to M/s SAIL. Rkl for construction of ISPAT Post Graduate Medical Institute and Super Specialty Hospital would merit entitlement for concessional rate of GST @ 12% in terms of Notification No. 11/2017-Central Tax (Rate), dated 28-6-2017 9and as amended).
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2022 (7) TMI 708
Blocking of electronic credit ledger in respect of reversed Input Tax Credit (ITC), interest and penalty amounting to as determined by the order under Section 74(9) of CGST/UPGST Act - HELD THAT:- As per Circular of the Commissioner, Commercial Tax Uttar Pradesh, (GST Section), Lucknow dated 23.11.2021, the power to take action under Rule 86A of the Rules has been conferred upon the Deputy Commissioner/Assistant Commissioner as per their jurisdiction not exceeding Rs. 1 Crore, the Joint Commissioner (Executive)/Joint Commissioner (Corporate Circle) as per their jurisdiction above Rs. 1 Crore but not exceeding Rs. 5 Crore and the Additional Commissioner Grade- I has jurisdiction above Rs. 5 Crore. The impugned order has been passed by the respondent no.3 i.e. Assistant Commissioner, Commercial Tax Department, Sector- 1, Kanpur, who, in view of the aforesaid Circular dated 23.11.2021; is not authorized officer. That apart the attempt of the respondent no.3 to pass the impugned order dated 04.04.2022 is to defeat the provision of Section 107 (6)/(7) of CGST/UPGST Act. Thus, prima facie the impugned order appears to be not only arbitrary, illegal, but also without authority of law and abuse of the process of law. Put up as a fresh case before the appropriate bench on 12.07.2022.
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Income Tax
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2022 (7) TMI 748
Disallowance u/s 40(a)(ia) - short deduction of tax in violation of Section 197(1) - ITAT deleted the addition - HELD THAT:- A perusal of the paper book reveals that the Commissioner of Income Tax (Appeals) while disposing of the appeal filed by the assessee had directed the Assessing Officer to verify whether copies of non-deduction of tax/deduction of tax at lower rate were filed by the assessee before passing the assessment order. The ITAT in the impugned order has recorded that the Assessing Officer after verifying the said tax deduction certificate had deleted the disallowance in order giving effect order. Further, this Court is of the opinion that in cases of short deduction of TDS, disallowance under Section 40a(ia) of the Act cannot be made and the correct course of action would have been to invoke Section 201 of the Act. On similar facts, the Calcutta High Court in CIT vs SK Tekriwal [ 2012 (12) TMI 873 - CALCUTTA HIGH COURT] dismissed the Revenue s appeal Disallowance u/s 40A - Also, both the CIT (A) and ITAT have given concurrent findings on facts in favour of the assessee on the issue of remuneration paid to the director Shri Sunil Baijal by observing that higher salary paid to the said director was accepted as remuneration by the assessing officer during the scrutiny assessment in the subsequent assessment year; and that the assessing officer had not brought any evidence/material for making disallowance under Section 40A(2)(b) of the Act. The ITAT also noted that the Assessing Officer, without any reason or material facts, had arbitrarily disallowed 50% of the remuneration. The ITAT further held that the Assessing Officer had not given cogent reasons to conclude that the remuneration paid was not commensurate with the market value of the services rendered by the Managing Director. No substantial question of law.
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2022 (7) TMI 747
Addition u/s 68 - Whether assessee furnished full details regarding the creditors? - ITAT deleted the addition - HELD THAT:- Fortunately, for the assessee, CIT(A) has done an elaborate factual exercise, took into consideration, the creditworthiness of the 13 companies the details of which were furnished by the assessee. More importantly, the CIT noted that all these companies responded to the notices issued under Section 133 (6) of the Act which fact has not been denied by the assessing officer. On going through the records and the net worth of the lender companies, the CIT has recorded the factual findings that the net worth of those companies is in crores of rupees and they have declared income. AO if in his opinion found the explanation offered by the assessee to be not satisfactory, he should have recorded so with reasons - no discussion on the explanation offered by the assessee qua, one of the lenders. Admittedly, the assessee was not issued any show cause notice in respect of other lenders. However, they are able to produce the details before the CIT(A) who had in our view rightly appreciated the facts and circumstances of the case. As pointed out earlier, the assessing officer brushed aside the explanation offered by the assessee by stating that merely filing PAN details, balance sheet does not absolve the assessee from his responsibilities of proving the nature of transactions. It is not enough for the assessing officer to say so but he should record reasons in writing as to why the documents which were filed by the assessee along with the reply dated 22.12.2017 does not go to establish the identity of the lender or prove the genuineness of the transaction or establish the creditworthiness of the lender. In the absence of any such finding, we have to hold that the order passed by the assessing officer was utterly perverse and rightly interfered by the CIT(A). Tribunal re-appreciated the factual position and agreed with the CIT(A). The tribunal apart from taking into consideration, the legal effect of the statement of Ashish Kumar Agarwal also took note of the fact that the notices which were issued by the assessing officer under Section 133 (6) of the Act to the lenders where duly acknowledged and all the lenders confirmed the loan transactions by filing the documents which were placed before the tribunal in the form of a paper book. These materials were available on the file of the assessing officer and there is no discussion on this aspect. Thus, we find that the tribunal rightly dismissed the appeal filed by the revenue.
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2022 (7) TMI 746
Exemption u/s 10(23C)(vi) - Whether Tribunal erred rejecting the application for exemption u/s 10(23C)(vi) of the Act without considering the vast definition that the word education embraces although there being no specific definition for education under the Income Tax Act of 1961? - HELD THAT:- In the case on hand, it is not in dispute that assessee has written to the DDIT to permit deletion of Objects No. 7 and 10. According to the Commissioner, Objects No. 4 and 7 disentitle the assessee from exemption. Shri. Parthasarathi is right in his submission that the Department not having granted permission to delete Objects 7 and 10, cannot record a finding against the assessee. So far as Object No.4 is concerned, we are of the view that assisting Banking Institutions in the matters such as appraisal programmes, conducting morale and productivity studies etc., also fall within the category of education. It is not in dispute that the assessee is a Staff Training College for Bank employees. Therefore, in our considered view, assessee must be construed as an Educational Institution because the main object is to train the Bank Officials. The question of law raised by the assessee is answered in its favour and against the Revenue.
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2022 (7) TMI 745
Reopening of assessment u/s 147 - set off of brought forward of loss was sought to be withdrawn in the reopened proceedings - Addition on protective basis - assessee pleaded that the additions made in the hands of the assessee for Asst Years 2009-10 and 2010-11 were only on protective basis and hence the brought forward losses could not be set off against the business income assessed on protective basis - HELD THAT:- We hold that though there may not be apparent failure on the part of the assessee in making full and true disclosure of facts at the time of filing of return, there was certainly failure on the part of the assessee in not bringing to the knowledge of the ld. AO during the course of scrutiny assessment proceedings of Asst Year 2011-12, about the assessments of Asst Years 2009-10 and 2010-11 getting completed with huge positive income in the hands of the assessee, though on protective basis. Atleast, AO suo moto should have brought to the attention of the ld. AO in the course of original scrutiny assessment proceedings for the Asst Year 2011-12 that though he has claimed set off of brought forward loss, but the same would not be eligible in the absence of the said loss. Hence we hold that there was failure on the part of the assessee to make full and true disclosure of facts that are material for the completion of original assessment. Moreover, the reopening has been done in the instant case to address the mistake of fact rectifying the mistake of allowing wrong set off of brought forward losses which was not available with the assessee company in Asst Year 2011-12. Hence the ratio laid down in the case of PVS Beedies [ 1997 (10) TMI 5 - SUPREME COURT] would squarely come to the rescue of the revenue in the instant case. We hold that the reopening has been done properly in the instant case and the ld. CIT(A) ought not to have quashed the reassessment as void abinitio. Accordingly, the Grounds raised by the revenue challenging the quashing of reassessment by the ld. CIT(A) are allowed. Appeals against the substantive additions framed in the hands of some other assessee are pending disposal before the ld. CIT(A) - We find that the ld. CIT(A) had not adjudicated the issue of set off brought forward losses against the current year s income and further allowing the remaining loss to be carried forward, ON MERITS. We find that no opinion is given by the ld. CIT(A) on merits of the issue in dispute before us. Hence we deem it fit and appropriate, in the interest of justice and fair play, to remand this issue to the file of ld. CIT(A) for denovo adjudication of the issue on merits and also tag this appeal with the appeals of the assessee where substantive additions were made , so that a cogent and cohesive decision could be taken in this regard. This, in our considered opinion, would meet the ends of justice for both the parties. Accordingly, the ground raised by the revenue on merits is allowed for statistical purposes.
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2022 (7) TMI 744
Income accrued in India - treating receipt from Support and Maintenance Services rendered in relation to software sold as chargeable to tax as Fees for Technical Services ( FTS ) under the Act and also India-Singapore Double Taxation Avoidance Agreement (DTAA) - whether IT Support service charges in relation to the software sold will still constitute FTS under para 4(a) of Article 12 of the DTAA? - HELD THAT:- There can be two situations of income arising from licensing of software and also from support and maintenance services for such software. First, where the amount received by the assessee from licensing of software satisfies the condition of `royalty as right to copy is also assigned to the licensee; and second, where copyright is not assigned. In the first situation, income from licensing of software would descend in para 3(a) of Article 12 and accordingly the amount of support and maintenance charges will be governed by para 4(a) of Article 12. In the second scenario, income from licensing of software would not satisfy the condition of `royalty and hence will not drop into para 3(a) of Article 12 with sequitur that the question of application of para 4(a) to support and maintenance charges will not arise. Since there is no amount taxable as royalties under Article 12(3)(a) in this case, the IT Support service charges, as a natural corollary, cannot be brought within the purview of Article 12(4)(a) of the DTAA. Do IT Support charges fall under Article 12(4)(b)? - From the description of services, it is graphically apparent that the assessee has been called upon to perform sizing review for new integrations and new lines of businesses; assisting Customer Operations team to perform Remedy operations; reviewing application performance and health check; quarterly review of activities undertaken. Further, the assessee was asked to deploy two persons for rendering on-site services. Judicially settled meaning of the term `make available has been incorporated in para 4(b) of Article 12 of the DTAA itself, which opens with making available technical knowledge etc. and culminates with: which enables the person acquiring the services to apply the technology contained therein . On going through the nature of services discussed supra , it is unequivocal that albeit the assessee provided the services laced with technical knowhow, but did not provide any technical knowledge, experience or skill etc. to the recipients for their own application in future without assistance of the assessee. The services provided by the assessee were consumed with their provision. In the hue of the command of Article 12(4)(b), it is palpable that the assessee, with the provision of IT Support services, did not make available any technical knowledge, experience or skill etc. to its customers to apply in future. Ex consequenti, receipt for IT Support services does not become FTS under this provision as well. Once it is held that the amount received by the assessee for providing the IT Support services does not fall under para 4(a) and also misses the prescription of para 4(b), the same ceases to be FTS. The same way in which income from sale of software license in the present case broadly falls under para 3(a) of Article 12 but has been held by the DRP to not satisfy the condition of taxability, income from Support and Maintenance charges of the licensed software also largely fall under para 4(a b) but fail to magnetize taxability within its purview. DRP has arrived at the conclusion of taxability of IT Support service charges as FTS by distinguishing the earlier years tribunal orders. It held that the Tribunal did not separately examine the nature of Support services charges de hors receipts on account of software licenses and proceeded to treat both as software royalty. Firstly, the DRP in the earlier orders did not draw any such distinction and held the entire amount as chargeable to tax as royalty in the light of the decision in Samsung ( 2011 (10) TMI 195 - KARNATAKA HIGH COURT] . When the matter came up before the Tribunal, the decision in Engineering Analysis ( 2021 (3) TMI 138 - SUPREME COURT ) had been delivered by then, based on which the decision of the AO, treating the composite amount as royalty, was reversed. When neither the AO nor the DRP had treated the two streams of income as separate from each other, having different connotation in terms of the DTAA, there could have been no question of the Tribunal setting up a new case. Be that as it may, we have eloquently discussed the issue above and reached the conclusion that the income from IT Support services, even if viewed independent of software license income, is not chargeable to tax. The impugned order is, ergo, overturned and the addition and odd is directed to be deleted. Assessee appeal allowed.
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2022 (7) TMI 743
Addition of loan creditors - loan from farmers (having agriculture income) - assessee failed to furnish any documentary evidences in support of identity, credit worthiness and genuineness of the transaction - as claim of unsecured loans by the assessee stood unproved and hence, the AO added the same to the income of assessee, treating the same as income from other sources - main grievance of the assessee is that the lower authorities have not properly appreciated the evidences placed before the AO as well as the Ld.CIT(A) - HELD THAT:- The copies of the affidavits produced by the assessee before the AO were verified and the said loan creditors were examined on oath and sworn statements were recorded. On examination, the AO has categorically mentioned that all of them are uneducated and having meagre agricultural land and some of them are having savings account with no balance - AO further observed that all of them had given unsecured loans to the assessee on a single day without charging any interest, without any collateral security or guarantee, which appears to be unreasonable and far from reality. Based on this remand report, CIT(A) also observed that creditors are having meagre extent of land and the agricultural income of these land holdings would be sufficient only to manage their livelihood and domestic expenditure. CIT(A) further held that persons with lower income, advancing such a huge amount in a single day is improbable. The main contention of the assessee is that there is nothing wrong in receiving the amount of Rs.25,00,000/- in a single day and they all are agriculturists and they have accumulated profits from their agricultural holdings. But there is no satisfactory evidence about the credit worthiness of the creditors. We are of the view that the assessee failed to establish about the genuineness of the loan transactions except filing the affidavits. Even before us also the assessee has not filed any satisfactory evidence about the loan transactions. Therefore, we do not find any infirmity in the orders passed by the lower authorities and the ground raised by the assessee is dismissed. Unexplained capital/Investment - AO noted that the assessee has made total investment of Rs.20,33,333/- towards first instalment of license fee and first purchase of liquor - assessee has submitted that the assessee is doing business for several years and filing the returns of income regularly and the present investments in business represent his accumulated savings and he has not made any further investment during the year under consideration - HELD THAT:- Admittedly, the assessee has not placed any evidence regarding this amount even before the Tribunal to substantiate his claim. In the absence of any evidence, we do not find infirmity in the order passed by the lower authorities and the ground raised by the assessee is dismissed.
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2022 (7) TMI 742
Exemption u/s. 54 - denial of claim on the ground that the assessee has commenced the construction of the residential house property before the sale of long term capital asset - HELD THAT:- We find merit in the argument of the Ld. AR that the cost of land even though purchased prior to the date of sale of residential house on 28/2/2015, shall be allowed as a deduction U/s. 54. Date of completion of the construction should be within the period as specified U/s. 54 of the Act and the commencement of construction is not the criteria as mentioned in section 54 of the Act It is not disputed by the Revenue that the new residential house has been constructed within the time stipulated in section 54(1) of the said Act. It is the cost of the new residential house and not just the cost of construction of the new residential house which is to be allowed as deduction. In view of the above by respectfully following the ratio laid down in the case of C. Aryama Sundaram [ 2018 (8) TMI 864 - MADRAS HIGH COURT] where the cost of new residential house which should necessarily include the cost of land, cost of materials used in the construction, the cost of labour and other relatable cost of construction of the residential house has to be considered for the purpose of deduction U/s. 54 of the Act. We therefore direct the Ld. AO to consider the cost of land purchased by the assessee while computing the deduction U/s. 54 of the Act and we allow the appeal of the assessee.
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2022 (7) TMI 741
Deemed rental income - Addition on account of notional rent being 8% of the value of the property held as stock in trade in books of accounts - HELD THAT:- We find that the issue in dispute is no longer res integra in view of the co-ordinate bench decision of this tribunal in the case of Shri Rajendra Godshalwar [ 2019 (1) TMI 1879 - ITAT MUMBAI] wherein after considering the various decisions in the case of CIT vs Neha Builders Pvt Ltd [ 2006 (8) TMI 105 - GUJARAT HIGH COURT] tribunal had rendered the decision in favour of the assessee stating that the deemed rental income cannot be assessed on value of unsold stock of flats. Thus we hold that the addition made towards deemed rental income is hereby directed to be deleted. Accordingly, the Ground No. 1 raised by the assessee is allowed. Addition made on account of interest on fixed deposits earned by the assessee by treating the same as Income from Other Sources - HELD THAT:- We find that since the bank guarantees (both performance and financial guarantees) were obtained for the purpose of project, investment in fixed deposits also would have to be construed for the purpose of the project undertaken by the assessee, as admittedly the fixed deposits were invested only as cash margins for the purpose of obtaining those bank guarantees. Hence the business nexus is clearly proved. Under these circumstances, the interest income earned on fixed deposits should have to be construed as inextricably linked with the project and should be treated as recovery of part of the project cost and cannot be treated as income from other sources. As we hold that the interest income earned on fixed deposits should be treated as capital receipt and to be reduced from the project cost. Hence we do not find any infirmity in the treatment given by the assessee in the instant case. Accordingly, the Ground No.2 raised by the assessee is allowed.
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2022 (7) TMI 740
Rejection of books of accounts - net profit estimation - HELD THAT:- We find that the book results of the assessee were rejected by the ld. AO u/s.145(3) of the Act. This action of the AO was upheld by the ld. CIT(A). We find that the said book results of the assessee had been rejected with valid reasons which have already been stated supra. No evidences were filed by the assessee either before the ld. AO or before the ld. CIT(A) or before us to controvert the said findings of the lower authorities. Hence, we uphold the action of the lower authorities in rejecting the book results u/s.145(3) of the Act. Accordingly, the ground raised by the assessee in its cross objections are dismissed. NP estimation - Once the book results are rejected u/s.145(3) of the Act and net profit @1% is estimated by the ld. AO, then there cannot be further disallowance that could be made separately on account of commission expenses, travelling and conveyance expenses and depreciation by looking into the same entries in the books. Hence, we hold that the ld. CIT(A) had rightly deleted the disallowance made on account of commission, travelling and conveyance and depreciation. Accordingly, the grounds raised by the Revenue are dismissed. Addition made u/s.69C on account of bogus purchases - alleged seized materials found during the course of search - HELD THAT:- The book results of the assessee had been rejected by the lower authorities for not addressing the defects pointed out by the lower authorities. Hence, once the book results are rejected as stated supra, there cannot be separate addition that could be made on account of purchases which are already reflected in the book results, based on alleged seized material. Hence, we direct the ld. AO to delete the addition made on account of bogus purchase as the said issue also gets subsumed in the net profit estimated at 1% of turnover. Accordingly, the ground Nos. 11 12 raised by the assessee in its cross objections are allowed. Validity of the search assessment on the ground that notice u/s.143(2) of the Act was not served - HELD THAT:- The assessee before the ld. CIT(A) had challenged the non-issuance of notice u/s 143(2) of the Act which had been rightly adjudicated by the ld. CIT(A). Before us, the assessee had challenged the non-service of notice u/s 143(2) of the Act. This fact was never raised before the lower authorities and not raised before us by way of an additional ground. No further evidences in this regard were produced by the assessee in support of this contention. Hence we hold that this ground raised before us does not emanate from the orders of the lower authorities . Hence, the ground raised by the assessee in its cross objections is hereby dismissed as not maintainable. Validity of search assessment framed in the hands of the assessee by challenging on the ground that search assessment is barred by limitation u/s.153B - As per assessee search assessment completed on 28/03/2013 is barred by limitation in terms of Section 153B - HELD THAT:- We find that this objection was also raised by the assessee before the ld. CIT(A) and the ld. CIT(A) addressed the issue in detail by stating that though the search was conducted on 23/02/2010, the last authorisation of search was issued on 19/04/2010 and panchanama was duly drawn thereon and there were seizure of books of accounts and certain documents on the said date. Hence, the search conducted on 19/04/2010 was a valid search. While this is so, the date for completion of assessment should be reckoned from 19/04/2010, in which case, the last date to complete assessment would be 31/03/2013. In the instant case, the search assessment has been completed on 28/03/2013 and hence, the objection raised in this regard by the assessee is devoid of merits and hence dismissed. Disallowance made on account of proportionate interest - HELD THAT:- As stated in earlier grounds of the Revenue, once the net profit is estimated @1% of turnover, there cannot be further addition made on account of business income either by way of disallowance of interest on borrowed funds or by way of adding notional interest income on loans and advances. This is in view of the fact that the said interest addition would get subsumed in the determination of net profit @1% of turnover. Hence, we direct the ld. AO to delete the addition made in the sum of Rs.3,14,160/-. Accordingly, the ground Nos. 13 14 raised by the assessee in its cross objections are allowed. Addition made in the search assessment completed u/s.153A - HELD THAT:- We hold that a statement recorded u/s.132(4) of the Act does not constitute any incriminating material found during the course of search within meaning of Section 153A to 153D of the Act. Reliance in this regard is placed on the decision in the case of PCIT vs Best Infrastructure (India) (P) Ltd. [ 2017 (8) TMI 250 - DELHI HIGH COURT] - In view of the above, we hold that no additions could be made in the search assessment completed u/s.153A of the Act for the A.Y.2007-08. Hence, the grounds raised by the Revenue are dismissed
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2022 (7) TMI 739
LTCG computation - Change in land use of the property in question - adoption of fair market value Rs. 60/-per sq. mtr as on 01.04.1981 of the land sold - HELD THAT:- We do not find any merit into the objection of the assessee that the land in question being agricultural land cannot be treated as capital asset. The sale-deed itself goes to demonstrate that what was being transferred was an industrial land. Therefore, there is no ambiguity on these facts. The objection of the assessee that land was an agricultural land is devoid of merit, hence, rejected. The case laws as relied by the assessee are distinguishable on the facts of the present case. Thus, ground nos. 1 3 of appeal are dismissed. Adoption of indexed cost of acquisition - The assessee has filed circle notified rates of the area. It would be in the interest of justice to set aside this issue for verification. Therefore, the impugned order is hereby set aside on the issue of computation of indexed cost of acquisition as on 01.04.1981. The Assessing Officer would verify the cost of acquisition as on 01.04.1981 from State land revenue authorities and re-compute the indexed cost of acquisition as per the circle rates. Needless to say that Assessing officer would provide adequate opportunity of hearing to the assessee in this regard. Ground no. 2 of assessee s appeal is allowed for statistical purpose.
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2022 (7) TMI 738
Exemptions u/s 11 and 12 - denial of exemption as Form 10B not filled online/electronically - HELD THAT:- CIT(A) has held that Form No. 10B was filed manually on 03/03/2020 during the appellate proceedings but no evidence of the Form 10B when was uploaded electronically by the assessee which is mandatory as per Section 12A(1)(b) of the Act read with Rule 17B of the Income Tax Rules. CIT(A) has observed that the assessee is free to file the said Form 10B online and/or approach the CIT(Exemption), Ahmedabad after filing Form 10B electronically and to condone the delay in accordance with the delegated powers vested u/s. 119(2)(b) - Such a power u/s. 119(2)(b) is not vested with ld. CIT(A). Therefore, the ld. CIT(A) dismiss the appeal filed by the assessee. Now before the Tribunal, the assessee has not produced only details of filing Form 10B electronically with condone delay petition. In absence of the same, We do not find any infirmity in the order passed by the ld. CIT(A) and therefore we have no hesitation in confirming the order passed by the ld. CIT(A). - Decided against assessee.
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2022 (7) TMI 737
Penalty u/s 271C - Non deduction of tds u/s 194C - payment made to the Government and not to the HUDA - Assessee has paid EDC to HUDA for carrying out civil works, construction work and other related works - HELD THAT:- As case was called for hearing on 12/7/22 none appeared for the appellant. The report of registry shows notice stand issued on 17/10/19. As the issue involved has been examined on various occasion by co-ordinates benches. No further notice is required. Arguments of Ld Sr. DR were heard who submitted that HUDA is a taxable entity and the notification relied by assessee of directions to not deduct tax at source is of later in time then the relevant assessment year. He also relied the Circular of CBDT whereby directions have been issued for deduction of TDS in payments made to authorities like HUDA. It was submitted that HUDA was neither Government department nor a local authority. Therefore any payment being made to it was to be subject to TDS u/s 194C of the Act. Giving thoughtful consideration to the matter on record it can be observed that the Co-ordinate Bench orders in M/s. Perfect Constech P. Ltd. case [ 2020 (12) TMI 1158 - ITAT DELHI] and in RPS Infrastructure Ltd. [ 2019 (9) TMI 39 - ITAT DELHI] which is also relied in M/s Santur Infrastructure Pvt Ltd [ 2019 (12) TMI 1106 - ITAT DELHI] cast sufficient light on the controversy where in it is held that assessee builder or developers or colonizers are not required to deduct tax at source at the time of payment of EDC to the HUDA and otherwise also there is no justification of penalty. As in case of TDI Infrastructure Ltd [ 2022 (7) TMI 388 - ITAT DELHI] issued by the Directorate of Town and Country Planning, Haryana which made it very obvious that receipts on account of EDC are being deposited in the Consolidated Fund of the State, accordingly directions were issued to colonizer like present assessee, to not deduct TDS. Once the fact of receipt of amounts received by HUDA being deposited in Consolidated Fund of State is established, there can be no second opinion that Assessee was rightly directed by DTCP, Haryana to not deduct the TDS. Even otherwise no intentional default is attributed to assessee and the default, if any, was on account of ambiguity which had arisen out of a direction contained in a statutory document, so no penalty can be justified u/s 271C of the Act, which is meant to address contumacious conduct - Levy of penalty u/s 271C of the Act cannot be sustained - Decided in favour of assessee.
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2022 (7) TMI 736
Nature of loss - speculative or non speculative - action of the Ld. A.O. in treating the loss from the share business as speculative allegedly in view of Explanation to section-73 - assessee had carried forward a loss loss from Trading in Derivatives on stock exchanges as Non-speculative in view of provisions of section 43(5) - HELD THAT:- As in view of the authoritative pronouncement of M/S SNOWTEX INVESTMENT LIMITED case [ 2019 (5) TMI 1165 - SUPREME COURT] , we hold that loss from Futures and Derivatives is not speculation loss under Explanation to Section 73. Thus, disallowance of amount is directed to be deleted. - Decided in favour of assessee.
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2022 (7) TMI 735
Disallowance of foreign travel expenses - assessee argued that foreign travel expenses pertained to director/employee which was incurred in the course of business and therefore the disallowance made by the AO out of such expenditure was unwarranted on facts and in law - CIT-A disallowing 50% of the foreign travel expenses of the director - HELD THAT:- As we note that both the authorities below have not doubted at all the genuineness of the foreign expenses. We also note that the disallowance is made at the whims of the AO without pointing out any specific reason. In case the expenditure is not connected with the business of the assessee, it has to be allowed in toto and the disallowance made at 50% of the total expenditure shows an ad hoc approach on the part of the AO based on presumption, assumption and surmises. Similarly, the ld. CIT(A) has confirmed the order of the AO without giving a valid reason as to how the ad hoc disallowance of 50% could be sustained. In view of these facts, we are not in agreement with the conclusion drawn by the CIT(A) and consequently the order of the CIT(A) cannot be sustained. The ld. Assessing Officer is directed to delete the disallowance. Ground No.1 and 2 are allowed. Addition on account of dividend earned from business and held by the assessee as stock-in-trade - AO held that dividend received on shares and securities held as stock in trade embeds the character of business income and is not exempt u/s 10(34) - HELD THAT:- Having persued the provisions of the Act u/s 10(34) and 115 of the Act, we are of the opinion that the dividend received by the assessee is exempt u/s 10(34) of the Act irrespective of the fact that the whether the same is derived from investment in shares or the shares and securities held as stockin- trade. We find merit in the contentions of the ld. AR that the dividend income is exempt u/s 10(34). Decision in the case of CIT vs. Excellent Commercial Enterprises Investment Ltd. [ 2005 (5) TMI 29 - DELHI HIGH COURT] held that the dividend income was taxable in the hands of the shareholders. We also note that section 10(34) was inserted by Finance Act 2003 w.e.f. 01.04.2004 providing that income received by way of dividend as referred to section 115 of the Act which deals with the dividend distribution tax as exempt. The case of the assessee is find force on the decision CIT vs. Maxopp Investment Ltd.[ 2018 (3) TMI 805 - SUPREME COURT] wherein the Hon ble Apex Court has held that where the shares are held as stock-in-trade and the main purpose is trade in those shares and earned profits therefrom and in the process of certain dividends earned which is exempt u/s 10(34), this attributable to that exempt income will have to be disallowed u/s 14A. Accordingly, we set aside the order of the CIT(A) and direct the Assessing Officer to delete the addition. Appeal of assessee allowed.
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2022 (7) TMI 734
Deduction u/s 54F - proportionate deduction - As per AO 'net consideration' for the purposes of Section 54F has to be read with Section 50C and therefore held that the assessee's case fell under Section 54F(b) and allowed proportionate deduction - HELD THAT:- Net consideration is fully invested in new asset, the whole capital gain should not be charged under section 45 we, therefore, delete addition being the amount wrongly included by the appellant under the head capital gain, and considering the same as per section 54F of the Act, no amount is liable to be taxed. Accordingly, appeal of the assessee is allowed.
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2022 (7) TMI 733
Revision u/s 263 by CIT - sale of impugned land measuring 10.162 acres below the stamp duty value in contravention of the provision of the Act (Section 50C) were left unverified - sale under SARFEASI Act - Return was selected for scrutiny under CASS and, accordingly, statutory notices were issued and served upon the assessee - HELD THAT:- PCIT was unaware of the relevant provisions of SARFEASI Act, 2002. We are of the considered view that before issuing notice u/s. 263 of the Act and before assuming jurisdiction thereupon, the PCIT ought to have gone through the underlying facts of the case in hand. If the PCIT had gone through the records of the assessee, he would have come to know that the accumulated losses of the assessee were more than the paid up capital and free reserves, the assessee company became a sick company as per the provisions of Sick Industrial Companies Act [SICA] and was referred to the Board of Industrial and Financial Reconstruction [BIFR] u/s. 15(1) of the SICA [Special Provisions] Act declaring the company as a sick industrial company. In 2006, the assessee company sought permission for disposal of surplus land of 11.02 acres from the Government of India to redeem the mounting financial burden and also to generate funds needed for its revival.The Government of India gave permission in Assessment Year 2006 for the sale of land, but the sale of land could not be completed in Assessment Year 2006-07 due to State Government's intervention for buy-back. Since the assessee company could not pay bank dues as demanded by the State Bank of India and other bankers, SBI, on behalf of consortium of banks, issued a notice dated 18.04.2009 to the company u/s. 13(3) of SARFEASI Act requiring the company to discharge its full dues and attached the assets including the freehold surplus land mortgaged to the extent of 11.02 acres. A conspectus understanding of the underlying facts clearly show that sale/transfer of land is effected by SBI under the SARFEASI Act and it has to be understood clearly that the assessee company has not sold/transferred the land of its own. It is known to everyone that SBI is a bank created by the Act of Parliament who has taken possession of the land of the assessee company and the action of the SBI is akin to compulsory acquisition of land by the Government under SURFEASI Act to recover dues of consortium of banks. Facts on record clearly show that in spite of several attempts, SBI could not sell the land at the stamp duty value of Rs. 387.64 crores. Therefore, under the given circumstances, it can be safely concluded that the price realized by SBI is fair market value of land as on the date of sale - a specific query was raised by the Assessing Officer for a specific reason for which return was selected for scrutiny assessment and specific reply was given by the assessee. Where there are two possible views and the Assessing Officer has taken one of the possible views, no action to exercise powers of revision can arise, nor can revisional power be exercised for directing a fuller enquiry to find out if the view taken is erroneous. This power of revision can be exercised only where no enquiry, as required under the law, is done. It is not open to enquire in case of inadequate inquiry. We are of the considered view that in none of the two cases relied upon by the ld. DR, there was a sale under SARFEASI Act by secured lender.As mentioned elsewhere, in the case in hand, sale was under SURFEASI Act and sale was not by the assessee. Considering the facts of the case in totality from all possible angles, we are of the considered view that the order framed u/s. 263 of the Act deserves to be set aside in light of the peculiar facts of the case in hand. We, accordingly, set aside the order of the PCIT and restore that of the Assessing Officer dated 18.12.2016 framed u/s. 143(3) of the Act. - Decided in favour of assessee.
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2022 (7) TMI 732
Addition for cash component of interest - Reliance on statement of the assessee during survey proceedings - HELD THAT:- The only basis for making addition for cash component of interest is the statement of 'Sh Mahendra Kumar R Patel', which was not in respect of loan given by the assessee. The said envelope was in respect of the loan given by 'Ms. Meenakshi N Shah'. On the basis of said statement of 'Sri Mahendra R Patel', statement of the assessee was recorded in survey proceedings under section 133A of the Act. The contention of the Ld. Assessing Officer that said statement was recorded under section 131 of the Act is incorrect. On perusal of the copy of statement of Sh Nitin A shah i.e. the assessee on 06/10/2013, it is clear that said was recorded under section 133A proceedings. The Hon'ble Supreme Court in the case of CIT Vs S Khader Khan Son [ 2013 (6) TMI 305 - SC ORDER ] has held that section 133A does not empower any ITO to examine any person on oath and so statement recorded under section 133A does not have any evidencing of value and any admission made during such a statement cannot be made basis for addition. There is no other evidence on record except the statement of the assessee recorded during survey proceedings, which has already been retracted by the assessee. The action of the Ld. CIT(A) in sustaining the addition made by the Assessing Officer is not justified and we accordingly set aside the said finding of the Ld. CIT(A). The ground of the Assessee appeal is accordingly allowed.
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2022 (7) TMI 731
Nature of receipts - sale of Renewable Energy Certificate (REC) carbon credits as revenue receipt or a capital receipt - DRP disallowed the claim of the assessee claiming the sale of REC as capital receipt being not offered to tax by holding that the same is a revenue receipt and is liable to be subjected to tax - HELD THAT:- Following the order passed by the co-ordinate Bench of the Tribunal in assessee s own case for A.Y. 2015-16 which is based upon the decision rendered in case of My Home Power Ltd. [ 2014 (6) TMI 82 - ANDHRA PRADESH HIGH COURT] we are of the considered view that sale of REC (carbon credits) income received by the assessee is a capital receipt and could not be a business receipt or income nor it is directly linked with the business of the assessee nor any asset is generated in the course of business but it is generated due to environmental concern. Therefore, addition made by Ld. TPO/AO on account of sale of RECs/carbon credits during the year under assessment is not sustainable in the eyes of law, hence, ordered to be deleted. - Decided in favour of assessee.
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2022 (7) TMI 730
Validity of assessment u/s 153A - Assessment order having been passed without approval - mandation of Prior approval necessary for assessment in cases of search or requisition u/s 153D - AR submitted that assessment in this case has been completed by Assessing Officer who is below the rank of ACIT/DCIT and therefore necessary approval was required to be obtained as per the provisions of Section 153D - HELD THAT:- We note that assessment in this case has been completed on 30.12.2018 and approval has also been obtained u/s. 153D on 30.12.2018 itself. Such approval has been obtained in 72 cases together, which is apparent from the consolidated sanction letter placed on record and the name of the assessee appears at S. No. 11. While granting approval the approving authority has not applied his mind and has given approval mechanically, which fact is apparent from the fact that had the approving authority applied his mind he would have noticed from the documents that the amount mentioned in the loose paper relating to RTGS was not there in the Bank account reflected in the books of account of the assessee and therefore did not relate to the assessee. As submitted that non application of mind by approving authority has caused prejudice to the case of the assessee. We noted that the issue involved in the present appeal is duly covered in favour of the assessee as in the case of Shri Naresh Kumar Jain [ 2021 (9) TMI 1080 - ITAT LUCKNOW ] Thus we allow Ground No. 1 of the appeal and annual the assessment order having been passed without approval. Nothing further survives for adjudication nor was any other point argued. - Decided in favour of assessee.
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2022 (7) TMI 729
Revision u/s 263 - interest income has claimed a deduction u/s 80P - HELD THAT:- We note that this tribunal in the case of Shree Keshav Co-operative Credit Society Limited [ 2022 (7) TMI 79 - ITAT RAJKOT] involving identical facts and circumstances has decided the issue in favour of the assessee. Thus we hold that there is no error in the assessment framed by the AO under section 143(3) causing prejudice to the interest of revenue. Thus, the revisional order passed by the PCIT is not sustainable and therefore we quash the same. Hence the ground of appeal of the assessee is allowed.
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2022 (7) TMI 728
Unexplained cash deposits - A.O. had information that there was cash deposit during the year in 16 bank accounts of the assessee - CIT-A deleted the addition - HELD THAT:- The issue of cash deposits in the bank account of the assessee has been examined exhaustively at various levels and no merit has been found in the contention of the Revenue that it represented any undisclosed income of the assessee, noting the fact that the assessee was into business of Shroff and earned only commission on the monetary transactions carried out by it; the cash deposits representing money belonging to his customers. Even the AO in reassessment proceedings for the impugned year was convinced that the cash deposits in another bank account of the assessee related to the assessee money lending business. Therefore there is no reason to uphold the original assessment order of the same AO holding them to be unexplained when subsequently he was convinced that the assessee being in money lending business the cash deposits related to the same. We see no reason to interfere in the order of the Ld. CIT(A) deleting the addition made of cash deposits. - Decided against revenue.
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Customs
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2022 (7) TMI 727
Maintainability of application filed by petitioner under section 127C of the Customs Act, 1962 - the case is that the application stood abated by virtue of sub-section 6 of section 127C of the said Act because the application was filed prior to 30.06.2007 and it did not get disposed before 29.02.2008, the cut-off date - HELD THAT:- The petitioner should be permitted to file an application afresh before the Settlement Commission and the Settlement Commission shall consider the same on merits in accordance with law. The provisions cannot be construed as punishing an applicant for the inability or failure of the Settlement Commission to dispose the application within the period specified where such delay in disposal is not attributable to petitioner. Otherwise it would amount to punishing petitioner for the inability of the Settlement Commission to fulfill its statutory obligation, for matters completely beyond his control. The time lost from the date of the impugned order till the application is filed, which Mr. Motwani states will be filed within 4 weeks from today, shall be excluded. Since, the application had already been admitted earlier, we would request the Settlement Commission to endeavour to finally dispose the application in the first hearing itself. Petition disposed off.
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2022 (7) TMI 726
Revocation of two licenses issued by respondent no.2 under the Manufacture and Other Operations in Warehouse (no.2) Regulations, 2019 - HELD THAT:- The petitioner has set up a prima facie case. The balance of convenience also appears to be in favour of the petitioner, since the petitioner has operated under the scheme captured in the 2019 Regulations and up until now, has obtained deferral of customs duty and IGST to the extent indicated - the coercive measures, if any, taken by the respondents, at this juncture, when the petitioner s import consignment is due to arrive in the country, will cause detriment to the petitioner s interest. Issue Notice.
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2022 (7) TMI 725
Seeking amendment in the shipping bills - conversion from Drawback Scheme to Advance Authorization Scheme - seeking adjustment of the expenses made under the shipping bills towards export obligation - grant of Export Obligation Discharge Certificate (EODC) under the said scheme - sixth shipping bill rejected on the ground that documentary evidence has not been produced - HELD THAT:- Mr. Namboodiri states that all documentary evidence had been produced but if Respondent No.3 wants these documents again petitioner would provide the same during the personal hearing. As regards five shipping bills that came to be rejected on the ground of being time barred, Respondent No.3 has relied upon Circular No.36/2010-Customs dated 23rd September, 2010 - HELD THAT:- A Circular could not have been issued by the Central Board of Excise Custom (CBEC) providing for three months time period to make a request for amending the shipping bills. This is because in Section 149 of the Act no time period has been prescribed and if in any specific statutory provision of law, no time period has been prescribed, then such circular could not have been issued by the CBEC. As rightly submitted by Mr. Namboodiri where the legislature wanted to prescribe any time limit for taking action like Section 128, 129 and 130 etc., of the Act, such time limit has been specifically laid down in the relevant provisions of the Act. When no time limit for making a request for amendment of any document is specified under Section 149 of the Act, it is clear that the legislature has not thought fit to restrict the scope of this provision for the amendment of the documents in terms of the time limit for making a formal request for such amendment. Moreover, Section 149 of the Act or any other provision of the Act does not confer any power or jurisdiction over the Board for laying down any time limit for operating this provision in respect of the amendment of documents. Therefore, the time limit of three months laid down vide paragraph no.3(a) of the circular is especially illegal and without jurisdiction. Respondent No.3 is directed to consider the amendment application without raising an issue of time limit and dispose the amendment application on merits and in accordance with law - petition disposed off.
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2022 (7) TMI 724
Seeking release of detained goods - Betel Nut Supari - to be classified Betel Nut Supari or not - prohibited goods or not - Section 110A of the Customs Act - HELD THAT:- It is the consistent view of this Court that in case of provisional assessment, provisional release is permissible. Hence, this Court permits the petitioner to make an application for provisional release under Section 110-A, on such application, when received, shall be disposed of by the Adjudicating Authority, after hearing the petitioner and simultaneous with a prima facie determination of the classification of the commodity, within a period of two (2) weeks from the date of receipt of the application - The Commissioner of Customs (Imports) is hereby directed to release the cargo covered under Bill of Entry No.7556557, dated 18.02.2022, provisionally subject to furnishing of PD bond for full value of the goods and furnishing of bank guarantee at 50% of the differential duty considering, Duty Free Tariff Preference Scheme for Least Developed Countries (LDC) benefit. The Department shall continue their adjudication process and conclude the same without delay. The entire exercise shall be completed within a period of three (3) weeks from the date of receipt of a copy of this order. The writ petition is allowed.
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2022 (7) TMI 723
Denial of Duty Free Credit Entitlement [DFCE] Certificate to the petitioner - whether the petitioner was status holder or a Star Export House? - HELD THAT:- The petitioner had satisfied the requirements of the amended provisions of the scheme. The stand of the respondents that de hors the amendment, the petitioner should have been a status holder for the year 2002-03 is in negation of the rights conferred on the petitioner under the Amendment and therefore, the said stand cannot be sustained. There will be a direction to the respondents to issue the relevant benefit under the current scheme known as ''Merchandise Exports from India'' Scheme formerly known as ''DFCE Scheme/Target Plus Scheme'' to the petitioner as claimed by the petitioner - petition allowed.
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2022 (7) TMI 707
Seeking release of goods - Betel Nuts/Supari of Myanmar Origin - Section 110 A of Customs Act - HELD THAT:- The petitioner has made representations before the respondents, both dated 16.04.2022 that shall be disposed by R4 within a period of two (2) weeks from date of receipt of a copy of this order after hearing the petitioner. Writ petition disposed off.
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Corporate Laws
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2022 (7) TMI 722
Scope of the term Deposit - it is alleged that the Respondent No.3 Company has been accepting deposits from Public/Individuals beyond its objective specified in Memorandum of Association and without taking requisite permission and certification from the RBI and concerned government departments - Applicability of Companies Act 2013 and the Companies (Acceptance of Deposit) Rules, 2014 - the amount in question can be treated as deposit or not - HELD THAT:- Section 2(31) of the Companies Act, 2013 that defines deposit , came into force from 1st April 2014 and as such, it cannot be applied retrospectively for the share-purchase agreement between the Company and Petitioner that was entered into between the parties back in the year 2010, way back in time before the commencement of the 2013 Act and its provisions - Furthermore, the Companies (Acceptance of Deposits) Rules, 2014 as notified by MCA vide notification No. G.S.R 256(E) dated 31st March 2014 came into force on 1st April 2014. Therefore, the said Rules of 2014 can also not be applied on the amount in question. This Court has come to the conclusion that the amount in question cannot be treated as deposit and as such does not attract the penal interest that would have otherwise applied, for the following reasons: a. firstly, the money was given by the Petitioner in the year 2010, and was returned by the Respondent Company to the Petitioner in the year 2018, and hence the same shall be governed by the provisions of The Companies Act, 1956 read with Companies (Acceptance of Deposits) Rules, 1975; b. secondly, as per the General Circular No. 05/2015 dated 20th March 2015 released by the Ministry of Corporate Affairs in consultation with RBI, the amount received by the private companies prior to 1st April 2014 shall not be treated as deposits under the Companies Act, 2013 and Companies (Acceptance of Deposits) Rules, 2014 provided that the same was disclosed by in financial statement for the financial year commencing on or after 1st April, 2014; and c. thirdly, as rightly contended by the learned counsel for the Respondents No. 1 2, the inaction of the Office on the said letters dated 11th December 2018 and 31st October 2019 was by virtue of the fact that the prayers contained therein were outside the purview of jurisdiction of Respondents No. 1 2. There are no cogent reasons to entertain the petition and allow the prayers sought therein - petition dismissed.
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Insolvency & Bankruptcy
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2022 (7) TMI 721
Maintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its dues - Operational Creditors - existence of debt and dispute or not - HELD THAT:- On 05.02.2019, the Operational Creditor sent the demand notice upon the Corporate Debtor under Section 8 of IBC. It could not be received by the Corporate Debtor due to a change of address. Again on 11.02.2019, the Operational Creditor sent one more demand notice under Section 8 of IBC. It was received by the Corporate Debtor but was not replied to by them. The fact is to be considered that though the Corporate Debtor did not reply to the demand notice under Section 8 of IBC sent by the Operational Creditor but had admittedly replied earlier notices pointing out the dispute about services rendered by the Operational Creditor, whether it can be held that there is no pre-existing dispute pending in between them. In view of all the evidence and record, it cannot be said that the Corporate Debtor did not bring to the knowledge of the Operational Creditor about the pendency of the dispute prior to filing of this application and even prior to receipt of demand notice under Section 8 of IBC by them - It is seen from the evidence on record that number of times notices were sent upon the Corporate Debtor demanding the outstanding payment by the Operational Creditor but the Corporate Debtor went on denying the same on the ground of deficiency of service. In view of the above admitted fact, it is held that there is a pre-existing dispute pending in between Operational Creditor and Corporate Debtor relating to services rendered by the Operational Creditor and payment of operational debt as claimed herein. Thus, there is a pre-existing dispute in between the Operational Creditor and Corporate Debtor about the services rendered and payment of debt. Such dispute cannot be said to be spurious, feeble or vexatious. The disputed facts require detail investigation which exercise cannot be undertaken by us in our limited jurisdiction of enquiry of application under Section 9of Insolvency and Bankruptcy Code. Application dismissed being not maintainable.
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PMLA
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2022 (7) TMI 720
Extension of time limitation - provisional order of attachment of immovable properties - whether the Enforcement Directorate (ED) can seek refuge under the orders passed by the Supreme Court extending the period of limitation in all general and special laws - HELD THAT:- What was being protected by the orders of the Supreme Court was the right to remedy, not the right to take away a remedy under a given statute. The respondents before this Court seek to do the latter. The only step taken by the ED is the order of the provisional attachment dated 30th September, 2021. No other steps were taken by the ED before the petitioners reply on 3rd January, 2022 or before the expiry of 180 days period on 31st March, 2022. By its inaction and failure to act in terms of Section 5(1)(b) or the other conditions of the said section, the ED has made itself vulnerable to Section 5(3) of the PMLA. The petitioner in turn has been given the breather of exhaustion of the 180 days window from 1st April, 2022 and the ED cannot now revive the proceedings after more than 80 days have passed from the end point of the 180 days period - In RAJENDRA KUMAR MURARKA VERSUS MOHSINA TABASSUM ORS. [ 2021 (7) TMI 1273 - CALCUTTA HIGH COURT] , the Court noted that the writ petitioner had not only participated in the adjudication but the hearing had also been concluded and final orders were awaited. In the appeal from this order, the Division Bench declined to interfere taking into account that the Single Bench had expressed its wish to finally adjudicate the issue on the strength of affidavits directed to be exchanged by the parties. The Division Bench also took note of the fact that the Single Bench had directed that any decision taken by the Adjudicating Authority would abide by the result of the writ petition. In the present facts, the petitioner has only replied to the ECIR case, which cannot be equated to participating in the proceedings. In Rajendra Kumar Murarka, the hearing was complete and final orders remained to be passed. The Court also noted the element of personal liberty of a person which was required to be protected. Although, the right of the petitioners before the Court is more to do with the right not to be deprived of property save by authority of law - Article 300A, the petitioners have established a case where such right is under threat by the action of the ED. The litigants have been conferred a benefit under Section 5(1)(b) and 5(3) of the PMLA on the failure of the Authority to take action within the specified time frame. If the Authority does fail to take requisite steps, the right to relief arises immediately after exhaustion of the 180 days window and once such right is given to a litigant, it cannot be taken away. This Court is therefore of the considered view that the petitioners are entitled to the relief claimed - Application disposed off.
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Service Tax
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2022 (7) TMI 719
CENVAT Credit - common inputs used of providing both taxable and exempted service - failure to maintain separate account as required under Rule 6(2) of the Cenvat Credit Rules - failure to exercise option as stipulated under Rule 6(3) of the Cenvat Credit Rules, 2004 - requirement of proportionate Cenvat Credit in respect of trading activity which is exempted in terms of Rule 2(e) of the Cenvat Credit Rules, 2004 - invocation of extended period of limitation - HELD THAT:- There is no specific allegation against the assessee of any deliberate suppression or misstatement with an intent to evade taxes - on examination of the allegations in the show cause notice, it is found that there is no specific allegation or prima facie finding of any wilful misstatement or suppression on the part of the assessee. That apart, the details have been culled out by the adjudicating authority from the available records and there is no new or fresh tangible materials available in the hands of the adjudicating authority to make out a case of wilful misstatement or wilful suppression. Therefore, the tribunal was fully justified in holding that the extended period of limitation could not have been invoked. What is important to note is that the amount of legible Cenvat credit to the assessee was Rs.41,17,269/- whereas the demand which was impugned before the tribunal fastened a liability of Rs.3,29,07,268/- which is not legally sustainable. The substantial questions of law are answered against the revenue - Appeal dismissed - decided against Revenue.
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2022 (7) TMI 718
Scope of SCN - Presumption with regards to documents seized - Revenue strongly argued that the Appellant have filed fresh and new evidences before this Tribunal by submitting for the first time and said fresh evidence/documents are not allowed - evasion of service tax - Business Auxiliary Service - Advertising Agency Service - Market Research Agency Service - Management or Business Consultancy Service - tax collected from customers but not paid to Revenue - burden to prove - demand alongwith Interest and penalty - HELD THAT:- This Tribunal being the final fact finding authority can consider the additional documents/arguments - On this legal issue the decision of the Hon ble Supreme Court (Three Member Bench), in the case of NATIONAL THERMAL POWER COMPANY LIMITED VERSUS COMMISSIONER OF INCOME-TAX [ 1996 (12) TMI 7 - SUPREME COURT] , is noted, which is to the effect that the Tribunal has jurisdiction to examine the question of law which arises on facts, as found by the authorities below, and having bearing on tax liability of assessee, even though said question was neither raised before the lower authorities nor in appeal memorandum before the Tribunal, but sought to be added later as an additional ground by a separate letter. In view of Section 36A of Central Excise Act, 1944 it is only when such document is tendered in evidence against the person who produced the same or from whose custody or control it was seized that the presumption under Section 36A is available - In the present case admittedly none of the alleged invoices / documents was produced by the Appellant or seized from the Appellant s premises or control. In view of the above, when the presumption under Section 36A is not available. The burden of proof is squarely on the Department to prove that the source documents are related to the Appellant and that any taxable services under the source documents were actually provided by the Appellant. This burden has not been discharged in the present case. The department could not have simply accepted the customers documents provided by them on its face value and the same needed strict corroboration which is completely absent in the present case. On the basis of documents/ records received from customers of Appellant, revenue alleged that they have collected the service tax payment. However on the basis of records of other persons it cannot be concluded that Appellant have collected the service tax from their customers. In the present matter revenue in support of their contentions nowhere produced any corroborative evidence in the form of Bank Details or any documents recovered from the business premises of the Appellant by which it can be concluded that Appellant have collected the Service tax. In the present matter department clearly failed to prove the case that Appellant have collected the service tax from their customers. The demand of service tax (except the amount of service tax payable as per the appellant, admitted by the appellant and deposited as stated in the appellant s submission) interest and penalty is not sustainable and the same is accordingly set aside - appeal allowed.
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2022 (7) TMI 717
Maintainability of appeal - time limitation - appellate jurisdiction - power of Commissioner (Appeals)to condone delay beyond 60 plus 30 days - refund of rebate - CESTAT has jurisdiction to entertain the appeal in view of operation of Section 83 of the Finance Act, 1994 read with Section 86 amended provisions vis. a. vis Section 35EE of Central Excise Act, 1944 or not - HELD THAT:- In acceptance of the death of Managing Director and brain haemorrhage of the present Director of the Appellant Company as legal disability due to mental insanity, etc. delay in filing the appeal before the Commissioner (Appeals) is condoned at this end by invoking the principle enumerated under Section 6 of the Indian Limitation Act and the matter is remanded back to the Commissioner (Appeals) for a de novo hearing on merit of the appeal against the order passed by the refund sanctioning authority. The Commissioner (Appeals) is supposed to give his/her findings also on the nature of refund claim if made as a claim on rebate or claim on deposit made under mistake of fact, which reference to the judicial precedent - Delay of 1354 days in filing both appeals before the Commissioner (Appeals) is hereby condoned and the matter is remanded back for a de novo hearing.
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2022 (7) TMI 716
Evasion of service tax - allegation that appellant have collected the service tax from the customers but not paid it to Department - availment of cenvat credit without having any corroborative evidence - suppression of facts or not - whether this tribunal is competent to consider the fresh documents submitted first time for deciding the present case? - HELD THAT:- It is held in catena of cases that the tribunal is the final fact finding authority, any documents even submitted first time before this tribunal can be considered in the interest of justice. Hon ble Supreme Court (Three Judges Bench), [ 1996 (12) TMI 7 - SUPREME COURT] , which is to the effect that the Tribunal has jurisdiction to examine the question of law which arises on facts, as found by the authorities below, and having bearing on tax liability of assessee, even though said question was neither raised before the lower authorities nor in appeal memorandum before the Tribunal, but sought to be added later as an additional ground by a separate letter - the Law/Rules has not precluded CESTAT for considering new grounds/ evidence. Section 9D is applicable in the case of Service Tax matters also. The Department for confirmation of service tax demand also relied on the statement of the Director of the Appellant. We find that, it is settled law that though the admission is extremely important piece of evidence but it cannot be said to be conclusive and it is open to the person who has made the admission to show that this is incorrect. - there are numerous decisions of the Tribunal laying down that such admission of persons, cannot be considered to be conclusive evidence to establish the guilt of the assessee. Burden of proof is on the Revenue and same is required to be discharged effectively. The details contained in records of service recipient cannot be accepted as admissible piece of evidence. Moreover, none of the persons on whose statement reliance was placed by the department were cross-examined. On the basis of documents/ records received from customers of Appellant revenue alleged that they have collected the service tax payment. However on the basis of records of other persons it cannot be concluded that Appellant has collected the service tax from their customers. In the present matter revenue in support of their contentions nowhere produced any corroborative evidence in the form of Bank Details or any documents recovered from the business premises of the Appellant by which it can be concluded that Appellant have collected the Service tax. In the present matter department clearly failed to prove the case that Appellant have collected the service tax from their customers. CENVAT Credit - HELD THAT:- The charges against the Appellant that they have not produced the input service documents on which they have taken cenvat Credit, It is found that contrary to this fact, the appellant has recorded the receipt of the input services in their cenvat account and produced the cenvat credit account along with input service invoices on the basis of which Cenvat credit has been availed by them - there are no reason to deny the Cenvat Credit. Other issues such as Limitation, demand to be made under Section 73 or 73A, omission of Chapter V the Finance Act, 1994 vide Section 173 of CGST Act etc. are not dealt with and the same are kept open - the demand of service tax (except the amount of service tax payable as per the appellant, admitted by the appellant and deposited as stated in the appellant s submission) interest and penalty is not sustainable - appeal allowed.
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Central Excise
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2022 (7) TMI 715
Clandestine Removal - suppression of production of processed fabric - imposition of penalty by Settlement Commission - HELD THAT:- This court is not court of appeal but this court in its jurisdiction under Article 226 is entitled to consider whether the Authority has exercised its discretion correctly. Whether to impose penalty and to what extent is purely discretionary order and we would not in normal circumstances, interfere with such discretionary order. It is true that a party will approach a Settlement Commission and has to either accept the opinion of the Settlement Commission in its entirety or not accept but when the Settlement Commission has exercised its discretion to impose penalty of Rs. 10,00,000/-, we would have expected the Settlement Commission to at least give some reasons, if not, very elaborate detailed reasons to indicate why it had imposed penalty of Rs. 10,00,000/-. This is particularly in view of the fact that the Settlement Commission has, in the impugned order, appreciated the conduct of petitioner and held that petitioner s claim for duty benefit was well founded and petitioner had made full and true disclosure of its duty liability, that petitioner has already deposited the admitted amount and co-operated with the Settlement Commission in the proceedings before it. The Settlement Commission has also concluded that petitioner was entitled to cum duty benefit and settled the case at Rs. 57,49,970/- as against the demand made by the department of Rs. 69,63,995/- and it was petitioner s case that only Rs. 54,89,101/- was payable and the petitioner had already deposited that amount. With such a background simply saying Bench grants immunity from penalty to the applicant in excess of Rs. 10,00,000/-, will not suffice. Right to reason is an indispensable part of sound judicial system. Reasons, at least sufficient to indicate an application of mind or the rationale in imposing penalty, should be given in the order. It is also not the case of respondents that petitioner was a habitual offender. The impugned order passed by the Settlement Commission to the extent of imposing the penalty of Rs. 10,00,000/-, needs to be interfered - petition disposed off.
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2022 (7) TMI 714
Classification of goods - Sikko Sol - to be classified under tariff item 38140010 as thinner or under tariff item 27101213 as Special boiling spirit Confiscation - levy of redemption fine - penalty - extended period of limitation - HELD THAT:- It is noted that tariff item 27101213 is the sub classification of sub heading no. 271012 of CETA. Sub heading Note 4 of Chapter 27 provides that for the purpose of Sub Heading 271012 Light Oil and Preparation are those of which 90% or more by volume (including losses) distilled at 210 c (ASTMD 86 Method). On perusal of the Serial no. 5 of Test Report, it is seen that Sikko Sol 90% by volume is distilled at 106 c. So, the condition of the Sub heading Note 4 of Chapter 27 would not satisfy Sikko Sol as per Test Report. When sub- heading 271012 would not satisfy Sikko Sol then, sub classification under tariff item 27101213 cannot be sustained. The Adjudicating authority observed that the Chemical Examiner has opined that the two samples of Sikko Sol being the finished products is a Special Boiling Point Spirit. On perusal of the Test Report, it is found that the Chemical Examiner opined that it is Special Boiling Spirit. The word point is not mentioned in the Chemical Examiner Report. So, the finding of the Adjudicating authority at this regard is not correct and beyond the scope of Chemical Examiner Report. In any event, it is required to examine the Chemical analysis of the Test Report. It is well settled that the Chemical Examiner has only to give composition of the goods and not to comment on the classification of goods in any manner. It is well settled that while determining the classification of the goods, the broad description of the articles fits in with the expression used in the tariff is relevant. It is also required to examine the meaning of the product in the commercial parlance. The End Use of the goods would strengthen the conclusion that it is known in the market - In the instant case, the appellant purchased raw material Condensate (which is a regulated item) from Oil India Limited, a Public Sector Undertaking. In exercise of the Essential Commodities Act, 1955 ( 10 of 1955), the Ministry of Petroleum and Natural Gas issued Order dated 05.06.2000, which may be called Solvent, Raffinat and Slop (Acquisition, Sale, Storage and Prevention of use in Automobile) Order 2000 . It is seen that the appellant filed the End User Certificate to Oil India Limited as well as the District Magistrate as per provision of Order dated 05.06.2000 of the Ministry of Petroleum Natural Gas. Thus, it is evident that Sikko Sol is not used in Automobile. There are no evidence that Sikko Sol is used as Light Oil and/or motor spirit suitable for use in Spark Ignition Engine as mentioned in the Supplementary Note (a). So, there is no merit to classify Sikko Sol under tariff Item 27101213 of CETA 1985. The demand of duty along with interest and penalty by the impugned Orders classifying the product under Tariff No. 27101213 cannot be sustained. Confiscation of seized goods - levy of redemption fine - HELD THAT:- The Central Excise Officer seized Sikko Sol and raw materials under the provision of Rule 24 of the Central Excise Rules, 2002. Rule 24 of the Central Excise Rules provides that if a Central Excise Officer has reason to believe that any goods which are liable to excise duty but no duty has been paid thereon, or the goods were removed with the intention to evading Central Excise duty payable thereon, the Central Excise Officer may detain or seize such goods. In the present case, the goods were lying in the appellant s factory. There is no material available on record that the appellant had any intention to remove the goods without payment of duty. Hence, the confiscation of goods and imposition of redemption fine cannot be warranted. Extended period of limitation - HELD THAT:- The finding of the Adjudicating authority are not convincing, in so far as there is no material available on record to establish willful misclassification and/or misstatement as the ingredients to invoke extended period of limitation under Section 11A of the Central Excise Act, 1944. The decision of M/S BIOMAX LIFE SCIENCES LTD VERSUS COMMISSIONER OF CUSTOMS, CENTRAL EXCISE SERVICE TAX, HYDERABAD-IV [ 2020 (7) TMI 585 - CESTAT HYDERABAD] on limitation is applicable in the instant case and therefore it is held that demand of duty for extended period of limitation cannot be invoked. In the facts and circumstances of the instant case, the Sikko Sol cannot be classified under tariff item 27101213 of the CETA, 1985. Accordingly, the demand of duty with interest and imposition of penalty would be set aside on merit and on limitation. The confiscation of goods, imposition of redemption fine and recovery of credit are also set aside. Appeal allowed - decided in favor of appellant.
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2022 (7) TMI 713
Levy of penalty - fraudulent passing of CENVAT Credit - in the LR the destination was shown as Daman/Silvassa whereas the goods were admittedly delivered at Bhiwandi - HELD THAT:- The penalty under Rule 26 was imposed upon the appellant for an amount of Rs. 3 Lakh on the alleged charge that the appellant being transporter has issued an incorrect LR knowingly showing the destination Daman/Silvassa but the goods were delivered at Bhiwandi. It is found that the adjudicating authority imposed the penalty on the ground that the appellant dealt with the goods which were liable for confiscation. From the plain reading of Rule 26 it is clear that the appellant s offence falls under Rule 26 (2)(ii) of Central Excise Rules, 2002 as the appellant had issued incorrect LR in respect of goods on which the fraudulent credit was availed by M/s. Taha wires. The aforesaid amended Rule 26 came into effect from 01.04.2007 whereas in the present case period involved is 2004-2005, 2005-2006, 2006-2007 (upto December, 2006) - Since the appellant s case falls under Rule 26 (2) (ii) but the same is not existing at the relevant time the appellant cannot be penalized when the goods dealt with by him was not liable for confiscation on the ground that the same was admittedly duty paid. The penalty is not sustainable hence, the same is set aside - Appeal allowed - decided in favor of appellant.
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CST, VAT & Sales Tax
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2022 (7) TMI 712
Levy of penalty under Section 10-A of the Central Sales Tax Act, 1956 - existence of mens rea (Guily mind/intent to evade) or not - Whether in absence of finding of mensrea, which is condition precedent for levying penalty under Section 10(b) read with Section 10A of the Central Sales Tax Act? - HELD THAT:- The penalty order cannot be sustained as the essential condition for imposition of penalty under Section 10-A of the Act is issuance of false declaration. In the present case, all that the revenue has been able to establish in the penalty order is - though the applicant was authorized to furnish Form C to purchase Furnace Oil and Light Diesel Oil, it wrongly made purchases of High Speed Diesel Oil by utilizing Form C. Whether the explanation furnished by the assessee to entertain bonafide belief that the goods High Speed Diesel Oil were similar to and, therefore, covered under the list of items appended to its registration certificate has not been considered and no discussion exists as to that - Perusal of the reply furnished by the assessee indicates, plea of bonafide belief had been raised. The merits of that explanation apart, it was incumbent on the assessing authority to consider the same and pass appropriate order especially with respect to allegation of false declaration. Unless that finding had been returned by the assessing authority, it is difficult to sustain the penalty under Section 10-A of the Act. In view of the absence of any finding recorded on the essential issue, the question of law is answered in negative i.e. in favour of the assessee and against the revenue.
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2022 (7) TMI 711
Enhancement of Turnover - absence of any material to indicate suppressed turnover of inter-state sale entered into by the assessee - rejection of Form F - all material documents had not only produced but had been endorsed by the Assessing Officer upon inspection during assessment - HELD THAT:- It is settled law - for the purposes of central assessment, there must exist material with the revenue authorities to establish that goods had moved from inside the State to outside pursuant to prior contract of sale. That principle extends to cases involving estimation of turnover on best judgement basis. Thus, unless the revenue claims existence of material disclosing sale arising from movement of goods from inside the State to outside, pursuant to prior contract of sale, enhancement to turnover may not arise on best judgement assessment basis, under the Central Sales Tax Act, 1956 - The enhancement made by Assessing Authority under the central assessment, as was confirmed by the first appeal authority and the Tribunal, cannot be sustained. In the present case, there is no material existing. Serious doubt arose as to the legality and sustainability of the finding recorded by the Assessing Officer that no books of accounts had been maintained by the assessee and no details had been furnished of consignments sent to ex- U.P. principal. On that, the original records had been summoned - Upon perusal of the record, as produced, the contention of the assessee is found correct. Besides the original Form F, photocopies of the receipt/gate pass Form 9R (issued under the Mandi Adhiniyam), photocopies of the proforma invoice, bilty and stock register on Form 44 (issued under Mandi Adhiniyam) are found existing together with endorsement of the Assessing Officer. The position that existed prior to the amendment when issuance of Form F were not mandatory and, therefore, the Rules prescribed for other course to establish commission sale or to establish stock transfer etc could not have been invoked to override the change of law caused by the amendment. Thereunder, Form F was made mandatory. The alternative mode that exists for benefit of the assesse, prior to the amendment refused above, cannot now be relied to defeat the effect of amendment made. The A.Y. in question is 2003-04. Eighteen years have passed and no further enquiry appears to be necessary in face of the facts noted above. Therefore, though in such matters, normally the Court would remit the matter, at present, no useful purpose would be served in that course being adopted. It would only lead to wastage of time and effort, especially, keeping in mind the petty disputed demand of tax, not more than Rs. 2,25,000/-. The revision stands allowed.
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2022 (7) TMI 710
Validity of assessment order - legality and validity of the ex-parte order of assessment - opportunity of hearing - principles of natural justice - HELD THAT:- One opportunity should be given to the writ applicant to question the legality and validity of the ex-parte order of assessment dated 26.03.2018 passed by the Assistant Commissioner of Commercial Tax. This matter was taken up for hearing in the first session and at that point of time, we inquired with Mr. Modh whether his client would be ready and willing to deposit an amount of Rs.5,00,000/- with the Assessing Officer. Mr. Modh, made a request to keep the matter at 2:30 p.m. to enable him to obtain necessary instructions from his client. Mr. Modh has reverted to us with necessary instructions. The client of Mr. Modh i.e. the writ applicant is ready and willing to deposit an amount of Rs.5,00,000/- with the Assessing Officer by day after tomorrow i.e. 11.02.2022. Once the amount of Rs.5,00,000/- is deposited with the Assessing Officer, the writ applicant shall produce the proof of such deposit with the respondent no.3 herein and proceed to hear the appeal against the original order of assessment dated 26.03.2018 passed by the Assessing Officer. For that purpose, the respondent no.3 shall restore the appeal to its original file - application disposed off.
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Indian Laws
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2022 (7) TMI 709
Dishonor of Cheque - discharge of legal liability towards complainant or not - accused has failed to to rebut the onus of proof and statutory presumption or not - preponderance of probabilities - privity of contract - HELD THAT:- In the case under NI Act, the cheque drawn by a person on an account maintained by him with a banker for payment of any amount of money to another person from out of that account for the discharge, in whole or in part, of any debt or other liability. Further, explanation to this section defines the debt and other liability to mean a legally enforceable debt or other liability. In this context, after due appreciation and evaluation of the evidence on record, the learned trial Judge has come to a conclusion that the debt in question cannot be said to be legally enforceable debt and the complainant has failed to prove otherwise. It is observed by the learned trial Judge that in the present case, the complainant has not produced any documentary evidence to prove his case and hence, it cannot be believed that the complainant had a legal dues from the respondent accused. As admitted by the complainant himself, it is clear that there was no privity of contract between the company and the accused. Further, it is also an admitted fact that the contract/agreement was made by Pankajbhai Dhirajlal Varia in his personal capacity and not by the company. Besides, there is nothing on record to show as to how and as to why for the so-called affairs of the company, Pankajbhai Dhirajlal Varia acted in personal capacity. If at all it is believed that the cheques were issued by accused to the company, in that case also, there is not an iota of evidence to show that the cheques were issued for the debt in question inasmuch as no details of transaction, books of accounts or any other document is produced on record to show the privity of contract between the parties. Thus, the presumption under Section 139 is a rebuttable presumption and the onus is on the accused to raise the probable defence. The standard of proof for rebutting the presumption is that of preponderance of probabilities - the presumption under Section 139 of the NI Act merely raises a presumption in favour of a holder of the cheque that the same has been issued for discharge of any debt or other liability and existence of legally recoverable debt is not matter of presumption under the said section. In the instant case, from the cross-examination of Pankajbhai Dhirajlal Varia by the accused, it has come on record that there was no contract and/or agreement between the company and the accused but the same was in the personal capacity by Pankajbhai Dhirajlal Varia. Further, Pankajbhai Dhirajlal Varia has not produced original contract/agreement on record. Moreover, as said earlier, the complainant has not produced any books of account and/or any details of transaction between them - when the complainant has failed to fulfill the initial burden of proving the legally enforceable debt, the presumption against the respondent accused is justifiably rebutted. In the considered opinion of this Court, in fleri the complainant has failed to bring home the charge against accused for want of sufficient material. The findings recorded by the learned trial Judge do not call for any interference - Appeal dismissed.
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