TMI Tax Updates - e-Newsletter
July 27, 2023

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

• Power to arrest under GST is statutory in character and ordinarily the writ court should not interfere with exercise of such power
• Book adjustment a valid method of consideration under GST
• INDIRECT TAXES AS OPERATIONAL DEBT UNDER IBC
• To levy Sec 69A on excess cash, the burden of proof is on the AO, to bring out the alleged source.
• PENALTY CANNOT BE IMPOSED UPON THE CUSTOMS HOUSE AGENT FOR INCORRECT CLASSIFICATION OF GOODS
• Services provided by university to affiliate colleges and students is exempt from GST

News

• GDP GROWTH

  ---

Circulars / Instructions / Orders

SEBI

• SEBI/HO/IMD/IMD-I –PoD1/P/CIR/2023/126 - dated 26-7-2023
  Resources for Trustees of Mutual Funds

Highlights / Catch Notes

GST

• Time limit for application for revocation of cancellation of registration under CGST Act extended to 31st August 2023
  Visit to Get Source

  ---

• Cancellation of registration of petitioner - inability to avail the opportunity of hearing extended for bonafide reasons - If the petitioner can demonstrate bonafides, there would be no need to take a pedantic approach. The reasons assigned by the petitioner could be bonafide and the petitioner must have another opportunity of hearing to establish the same. - Matter restored back - HC
  Visit to Get Source

  ---

• Input Tax Credit on Rent out Commercial Property - (i) Eligibility of ITC on: Replacement of windows and doors. (ii) On painting the commercial building. - Discussion Forum
  Visit to Get Source

  ---

• Period of limitation for claiming refund under GST - Relevant Date - Discussion Forum
  Visit to Get Source

  ---

• Wrongful claim of Input tax credit - bogus supply - vague SCN - SCN did contain the details about the foundation of the case - principles of natural justice - From the SCN, it is clear that it contains necessary details and grounds, which are the basis for issuing the same. Still, at the tail end of the impugned notice, instead of seeking a reply on the allegation mentioned in the impugned show cause notice issued under Section 74 (1) of the Act, 2017, petitioner was directed to reply with regard to the tax and penalty - petitioner directed to submit the reply to the SCN - HC
  Visit to Get Source

  ---

Income Tax

• No deduction of tax u/s 194 of the IT Act 1961 from any income in the nature of dividend paid by any unit of an International Financial Services Centre [engaged in the business of leasing of an aircraft] - Notification
  Visit to Get Source

  ---

• Exemption from Taxation of gift received U/s 56(2) - any movable property, being shares or units or interest in the resultant fund received by the fund management entity, in lieu of shares or units or interest held by the investment manager entity in the original fund, pursuant to the relocation, subject to conditions - Rule 11UAC of the Income Tax Rules, 1962 amended.
  Visit to Get Source

  ---

• Income-tax (Twelvth Amendment) Rules, 2023 - (i) Amends Rule 21AK regarding Exemption from income tax u/s 10(4E) to the non-residents, (ii) Amends Rule 114AAB regarding Exemption from obtaining PAN u/s 139 for non-residets having income from specified funds, and (iii) Amends Form 10CCF with regard to reporting u/s 80LA - Notification
  Visit to Get Source

  ---

• Exemption to Non-Residents and Foreign Company from requirement of furnishing a return of income u/s 139(1) - Meaning of "investment fund" modified - Notification
  Visit to Get Source

  ---

• Filing of writ petition instead of appeal before CIT(A) - Petitioner contended that appointed of CIT(A) is not legal and valid - We do not find any such stipulation in the Act of 1961, requiring grant of approval to the appointment of Commissioner of Income-tax (Appeals) by the Appointment Committee of the Cabinet. Even creation of a separate cadre of officers for Commissioner of Income-tax (Appeals) does not appear to be essential or mandatory in the scheme of the Act of 1961. - Writ petition dismissed - HC
  Visit to Get Source

  ---

• Jurisdiction of rectification notice issued u/s 154 by the Income Tax Officer - authority competent to issue notices - Central Government has not made any scheme u/s 157A for the purpose of rectification - There is no merit in the petitioner's contention that, in the absence of such scheme, the jurisdictional authority, i.e. the Income Tax Officer ceases to have jurisdiction to issue the rectification notice. - HC
  Visit to Get Source

  ---

• Taxability of foreign income in India - use of Virtual Voice Network (VVN) - Income deemed to accrue or arise in India - PE in India - The grounds of the Revenue were correctly rejected in coming to a finding that no technical services had been provided by the Assessee to treat the subscription fees as to be in the nature of fees for technical services - HC
  Visit to Get Source

  ---

• Demand Interest u/s 201(1A) - Non deduction TDS u/s 194IA - As per the sale deed the details of the sellers / transferors of the said property and in fact the sellers individuals share in the said joint property was below Rs. 50,00,000/-, therefore, both seller and purchaser was under bonafide impression that threshold limit for TDS is Rs. 50,00,000/- and no TDS is required to be deducted. - Interest liability directed to be re-calulcated - AT
  Visit to Get Source

  ---

• Taxability of LTCG - assessment in the hand of assessee or his wife - double taxation - The issue has to be dealt only by the tax authorities and the credit in the hands of the assessee’s wife has to be refunded are adjusted against the demand raised in the hands of the assessee. The method by which it has to be carried out left to the tax authorities without there being any burden on the assessee. Since the assessee has paid the due tax on this transaction. The legislature intention is not to tax twice on the same transaction. - AT
  Visit to Get Source

  ---

• Condonation of delay - The assessee has not prosecuted its litigation either before the AO or before the ld. 1st Appellate Authority. Thus it is not very serious in contesting the issues. A ‘vague application’ (extracted supra) suggest its conduct. It does not contain any reason to show, why this appeal has been delayed by the assessee. - AT
  Visit to Get Source

  ---

• LTCG computation - Deduction of expenditure cost of acquisition u/s 48 - Various High Courts have held that the interest incurred on borrowed funds are to be treated as ‘cost of acquisition’ and deduction u/s 48 of the Act was allowed for the said expenditure. - AT
  Visit to Get Source

  ---

Customs

• Confiscation - Smuggling - Gold Bullion - Gold Jewellery - The appellant has not adduced any evidence to indicate that the same were procured locally. Appellants who claim that the gold to have been legally procured have to produce documents evidencing payment of duty as well as documents evidencing their legal ownership/possession. During the course of investigation, it is recorded that gold bullion/coins/jewellery which was satisfactorily explained by the appellant was released to him by the investigating agency themselves. - AT
  Visit to Get Source

  ---

DGFT

• Import policy of Gold - The Import Policy of ITC (HS) code 71131911, 71131919 and 71141910 has been amended from “Free” to “Restricted” with immediate effect. However, import under HS code 71131911 shall be permitted freely without any import license under a valid India-UAE CEPA TRQ.
  Visit to Get Source

  ---

• The General Notes regarding Import Policy under Schedule-I(lmport Policy), ITC (HS), 2022 have been amended, to update relevant details regarding Food Import Entry Points, in sync with the relevant FSSAI Notifications
  Visit to Get Source

  ---

IBC

• Eligible criteria for registration of Insolvency Professional - The condition of passing the "Graduate Insolvency Programme" modified to "Post Graduate Insolvency Programme" - Insolvency and Bankruptcy Board of India (Insolvency Professionals) (Amendment) Regulations, 2023 - Notification
  Visit to Get Source

  ---

• CIRP - Exemption from Regulatory fee, where the resolution plan is submitted by the association or group of allottees in such real estate project - Insolvency and Bankruptcy Board of India (IBBI) (Insolvency Resolution Process for Corporate Persons) (Amendment) Regulations, 2023 - Notification
  Visit to Get Source

  ---

• Initiation of CIRP - Recovery of Interest - the Adjudicating Authority has erred in not looking into the facts that the principal amount has entirely been paid and the issue was only regarding to interest for which the application under Section 9 of the Code was not maintainable as the spirit of the legislation of the Code is for ‘resolution of debt’ and not for ‘recovery’. - AT
  Visit to Get Source

  ---

PMLA

• ED to share information with GSTN for launching prosecution - Notification No. G.S.R. 381(E), dated the 27th June, 2006 amended vide 7th July, 2023
  Visit to Get Source

  ---

Service Tax

• Condonation of delay in filing appeal - The Commissioner (Appeals) can only condone the delay in filing an appeal if the same is barred by one month and the Commissioner is not having any power to condone the delay in filing the appeal after expiry of 30 days period. - no illegality is committed by the appellate authority in dismissing the appeal on the ground of limitation. - HC
  Visit to Get Source

  ---

Central Excise

• Valuation of goods - Misdeclaration of export goods - the appellants sold the goods of prime quality mis-declaring the same as “rejects” and the same was sold to the related company UIL. It has been found that the UIL sold the goods at a higher rate. Therefore, the valuation ordered to be done under Rule 7 on the basis of the same cannot be said to be arbitrary and/or illegal. - SC
  Visit to Get Source

  ---

• Valuation of goods - customised motor vehicle parts sold to various classes of buyers i.e. industrial customers as well as industrial and another domestic customers including export sales - Decision of the CESTAT regarding the applicability of valuation rules, sustained - SC
  Visit to Get Source

  ---

VAT

• The fact that an exemption prevailed and enured in favour of a unit does not in any way detract from the circumstance that the levy subsists. This fundamental aspect appears to have been completely ignored by the High Court when it ruled that such sale had to be ignored altogether. - SC
  Visit to Get Source

  ---

• Doctrine of promissory estoppel - Determination of compensation against denial of extension of New Package Scheme of Incentives for Tourism Projects - A reasonable method of calculating benefit of tax exemption, for the purpose of considering (whether the 100% limit equivalent to capital expenditure) was reached or not is to notionally determine the tax amounts payable during the relevant period, when the multiplexes enjoyed tax exemption. - SC
  Visit to Get Source

  ---

Case Laws:

• GST

• 2023 (7) TMI 1056
  Seeking stay on recovery of GST for grant of mining lease / royalty / DMF from the petitioner - Entry 17 (viii) of the Table in Notification No. 11/2017 CT (Rate) dated 28.06.2017 (Annexure-5) as amended vide Notification No. 27/2018-CT (Rate) dated 31.12.2018 - HELD THAT:- In the case of M/S. MANDHAN MINERALS CORPORATION AND OTHERS VERSUS 1. UNION OF INDIA THROUGH THE SECRETARY, MINISTRY OF FINANCE, DEPARTMENT OF REVENUE, GOVERNMENT OF INDIA NEW DELHI, DIRECTOR GENERAL OF G.S.T. INTELLIGENCE, REGIONAL UNIT, JAMSHEDPUR, ADDITIONAL DIRECTOR, G.S.T. INTELLIGENCE, REGIONAL UNIT, JAMSHEDPUR, SUPERINTENDENT (ADJUDICATION) , CENTRAL GOODS AND SERVICE TAX, DHANBAD [ 2022 (4) TMI 1296 - JHARKHAND HIGH COURT] , this court has been pleased to stay the recovery of GST for grant of mining lease / royalty / DMF from the petitioner till further orders. Since in the present writ petition also, same issue of levy of GST on royalty is involved, case of the petitioner shall be governed by the interim order passed in M/S. MANDHAN MINERALS CORPORATION. Let this matter be listed along with W.P (T) No. 432/2021.

  ---

• 2023 (7) TMI 1055
  Suspension of Deputy Commissioner of GST - Extension of suspension of the petitioner beyond the initial period of 90 days - allegation was that petitioner has committed irregularities while processing the refunds of nearly Rs. 30 crore - HELD THAT:- The Tribunal has by referring to the judgment of the Ajay Kumar Choudhary [ 2015 (6) TMI 592 - SUPREME COURT] and also the judgment of this Court in the case of GOVT. OF NCT OF DELHI VERSUS DR. RISHI ANAND [ 2017 (9) TMI 2005 - DELHI HIGH COURT] , has held that the judgment in Ajay Kumar Choudhary [ 2015 (6) TMI 592 - SUPREME COURT] has not laid down absolute law regarding continuance and discontinuance of power for extending suspension by the competent authority under Rule 10 CCS(CCA) Rules, 1965. Transfer of petitioner to Cochin, Thiruvananthapuram Zone - HELD THAT:- There is no need for the respondents to continue the suspension of the petitioner is concerned, though the submission looks appealing on a first blush but while suspending the petitioner, the competent authority decided to fix the headquarter of petitioner at Cochin, Thiruvananthapuram Zone, may be for the reasons, it thought appropriate. So in that sense, it is not a case of transfer - the Tribunal is justified in upholding the continuance of the suspension of the petitioner for a further period of 180 days by dismissing the OA. This Court is of the view that the impugned order should not be interfered with, more so in exercise of power under Article 226 of the Constitution of India - Petition dismissed.

  ---

• 2023 (7) TMI 1054
  Violation of principles of natural justice - inability to avail the opportunity of hearing extended for bonafide reasons - Cancellation of registration of petitioner - failure to file returns - HELD THAT:- The petitioner has preferred first appeal contending that the petitioner has filed response but could not appear for personal hearing because he was suffering from lungs disease and was advised bed rest which had a cascading effect on his business including the failure to file monthly returns. The petitioner's appeal is rejected on the ground of limitation. If the petitioner can demonstrate bonafides, there would be no need to take a pedantic approach. The reasons assigned by the petitioner could be bonafide and the petitioner must have another opportunity of hearing to establish the same. The third respondent will therefore have to necessarily extend an opportunity and consider the circumstances that are relied upon by the petitioner. The petition is allowed in part, setting aside the cancellation order dated 19.04.2022 [Annexure-B] restoring the proceedings to the third respondent for reconsideration.

  ---

• 2023 (7) TMI 1011
  Wrongful claim of Input tax credit - bogus supply - vague SCN - SCN did contain the details about the foundation of the case - principles of natural justice - HELD THAT:- It would be proper for this Court to consider the issue of whether the impugned notice can be challenged by way of this writ petition, though remedy of filing reply is available. The issue regarding the proper show cause notice was considered by the Apex Court in the cases of GORKHA SECURITY SERVICES VERSUS GOVT. OF NCT OF DELHI ORS. [ 2014 (8) TMI 1081 - SUPREME COURT ], METAL FORGINGS VERSUS UNION OF INDIA [ 2002 (11) TMI 90 - SUPREME COURT ] as well as in the case of CCE VERSUS SHITAL INTERNATIONAL [ 2010 (10) TMI 19 - SUPREME COURT ] - In the judgement mentioned, Apex Court observed that it is trite law that unless the foundation of the case is laid in the show cause notice, the same cannot be treated as proper show cause notice and notice issued in a format without even striking out any relevant portion and without stating clear contraventions committed by the petitioner, will not substitute the requirement of proper show cause notice. Hon'ble Apex Court in DILIP N. SHROFF VERSUS JOINT COMMISSIONER OF INCOME-TAX AND ANOTHER [ 2007 (5) TMI 198 - SUPREME COURT ], has also observed that expression in Section 73/74 of the Act, 2017 appears to be proper officer is not to a casual act but should show the full application of mind by proper officer. From the perusal of the impugned notice, it is clear that it contains necessary details and grounds, which are the basis for issuing the same. Still, at the tail end of the impugned notice, instead of seeking a reply on the allegation mentioned in the impugned show cause notice issued under Section 74 (1) of the Act, 2017, petitioner was directed to reply with regard to the tax and penalty and it was stated that if no reply was furnished then order under Section 74(9) of the Act, 2017 would be passed. Therefore, the impugned notice because of the facts mentioned in the earlier part of the notice cannot be said to be patently illegal, being without jurisdiction. Therefore, there is no ground for quashing the same under Article 226 of the Constitution of India. The petitioner should be relegated to the remedy of filing a reply to the impugned show cause notice. Because the notice did contain the details about the foundation of the case, i.e. that there was no actual supply of goods on 12 June, 2018 by M/s Raghav Enterprises to petitioner, the show cause notice is not quashed instead the petitioner is permitted to also reply with regard to the fact that goods were in fact supplied to the petitioner from M/s Raghav Enterprises. Petition disposed off.

  ---

• Income Tax

• 2023 (7) TMI 1053
  Penalty u/s 271D 271E - acceptance and repayment of loan or deposit in excess of Rs. 20,000/- in cash from/to any other person - violation of the provisions of Section 269SS and Section 269T - HC confirmed order of Tribunal in accepting the assessee's explanation that there existed reasonable cause in mobilizing these deposits in rural and semi-urban areas within the meaning of Section 273B - HELD THAT:- SLP dismissed.

  ---

• 2023 (7) TMI 1052
  Validity of Revision u/s 263 - as per ITAT direction in respect of stock differences found from the record does not require further verification - HELD THAT:- The facts are, the assessment had been made on basis of audit report and copy of ledger bank statements etc., in absence of books of accounts. There was discrepancy found by the AO in taking into account difference of stock found during course of survey. It must be remembered that a survey is finding on physical verification, by survey. Hence, the difference was taken and added back as income of the assessee. Tribunal held that the order u/s 263 was a good one except the direction for verification of the stock by reason of the PCIT having discovered there was on record inflated stock statement, submitted by assessee to the bank and therefore further verification of stock was necessary. The Tribunal relied on Malabar [ 2000 (2) TMI 10 - SUPREME COURT] for its view that the AO had correctly taken into account the position of stock of the assessee In Malabar (supra), it will appear from above quoted paragraph, the Supreme Court noted that the AO had accepted the entry in the statement of account filed by appellant in absence of any supporting material and without making any inquiry. On those facts the conclusion, the Supreme Court said, the order of the ITO was erroneous, is irresistible. Moving on to Coimbatore Spinning Weaving Co. Ltd [ 1973 (3) TMI 27 - MADRAS HIGH COURT] it is seen that the Division Bench in the Madras High Court took view earlier in point of time, consistent with view taken by the Supreme Court in Malabar (supra). It said, once the Tribunal finds that there were excess stocks after rejecting the explanation of the assessee, the conclusion is inescapable that the excess stocks should have come from undisclosed sources. It is evident that the Tribunal, in that case, found existence of stock as unexplained. Here, the Tribunal noted that the PCIT had only come upon an inflated stock statement and there was no inquiry or verification in respect thereof. No substantial question of law arises

  ---

• 2023 (7) TMI 1051
  Challenging the assessment order - filing of writ petition instead of appeal before CIT(A) - Petitioner contended that appointed of CIT(A) is not legal and valid - Appointment made by Central Government of Commissioner of Income-tax (Appeals) - Officers belonging to the cadre of Indian Revenue Services - HELD THAT:- As we find that the statute, i.e. the Act of 1961 is a self contained code which clearly vests jurisdiction with the Central Government to appoint such persons as it thinks fit to be income tax authorities as are specified in Section 116 of the Act. No express or implied provision contained in the Act of 1961 which may require import of the procedure stipulated for appointment of Joint Secretary to the Government of India to the appointment procedure specified for the Commissioner of Income-tax (Appeals). The appointment of Commissioner of Income-tax (Appeals) is regulated by the provisions of the Act of 1961 and procedure for appointment of Joint Secretary to the Government of India would not get attracted by a ingenious process of reasoning unless there is a specific provision in law to indicate so. We do not find any such stipulation in the Act of 1961, requiring grant of approval to the appointment of Commissioner of Income-tax (Appeals) by the Appointment Committee of the Cabinet. Even creation of a separate cadre of officers for Commissioner of Income-tax (Appeals) does not appear to be essential or mandatory in the scheme of the Act of 1961. In light of the deliberations and observations made above, we find this petition to be lacking in substance. The right of the petitioner to avail the remedy of appeal against the order of assessment is amply protected. The writ petition, therefore, is dismissed.

  ---

• 2023 (7) TMI 1050
  Jurisdiction of rectification notice issued u/s 154 by the Income Tax Officer - authority competent to issue notices - HELD THAT:- It is not in issue that assessment order in this case has been passed by the National Faceless Assessment Center. The notice for rectification has now been issued by the Income Tax Officer, who is the competent authority otherwise for passing the order of assessment. Section 157A refers to rectification where the assessment is done by the National Faceless Assessment Center. Section 157A is clearly an enabling provision which permits the Central Government to make a scheme, by notification in the official gazette, for the purposes of rectification of any mistake apparent from record u/s 154 of the Act. However, our attention has not been invited to any specific scheme framed by the Central Government u/s 157A which specifies any other authority as being the competent authority to initiate rectification proceedings. In the absence of any such scheme having been produced before the Court, we are not inclined to accept the petitioner's contention that the jurisdictional authority, i.e. the Income Tax Officer ceases to have jurisdiction to issue the rectification notice. Leaving it open for the petitioner to respond to notice and raise available arguments in that regard, this petition is consigned to records.

  ---

• 2023 (7) TMI 1049
  Taxability of foreign income in India - Income deemed to accrue or arise in India - PE in India - consideration Received from Indian customers for use of Virtual Voice Network - Whether VVN is not taxable as Royalty u/a 13(3) of India-U.K. Taxation Avoidance Agreement (DTAA)? - Tribunal has come to a conclusion that the Revenue earned by Petitioner on this ground was only for a service rendered and not in the nature of making any technology available to the persons receiving the service - HELD THAT:- Apex Court in the case of Kotak Securities Ltd. [ 2016 (3) TMI 1026 - SUPREME COURT ] held that constant human endeavor or human intervention is essential requirement for treating the rendering of services as technical. If any technology or a process has been put to operation automatically, wherein it operates without much human interference or intervention, then such technology per-se cannot be held as rendering of technical services by human skills. As decided in Alibaba.Com Singapore E-Commerce Pvt. Ltd. [ 2023 (7) TMI 134 - BOMBAY HIGH COURT ] If any technology or a process has been put to operation automatically, wherein it operates without much human interface or intervention, then such technology per se cannot be held as rendering of technical services by human skills. Where there is a standard facility made available for public at large, without giving any special or exclusive services whether to a particular client or class of clients, then it cannot be brought within the ambit of technical services as stipulated in Explanation 2 to section 9(1)(vii). Therefore, on facts, even these grounds of the Revenue were correctly rejected in coming to a finding that no technical services had been provided by the Assessee to treat the subscription fees as to be in the nature of fees for technical services - No substantial question of law.

  ---

• 2023 (7) TMI 1048
  Addition u/s 68 - Bogus investment receipts - undisclosed income in the hands of the assessee - HELD THAT:- The undisputed facts narrated hereinabove clearly show that the Revenue has issued notices to all nineteen companies. The Companies have appeared before the ADIT and submitted their papers and in the case of Matajwala Infrastructure, addition has been made by the Revenue. In the case on hand, the identity of the investors have been established. They have appeared before the authority and submitted the records showing the source of income. In the facts of this case, additions made by the Revenue are not sustainable. - Decided in favour of assessee.

  ---

• 2023 (7) TMI 1047
  Penalty u/s 271(1)(c) - evade taxes in respect of capital gain - Default by accountant of the assessee - as per DR assessee has filed inaccurate particulars of income as the assessee has not disclosed Long Term Capital Gain as well as the interest income - HELD THAT:- It is an admitted position that there was a mistake on part of the accountant for which the assessee has filed the affidavit of the accountant as well. From the perusal of the affidavit it appears that during the preparation of the particulars of return of income for A.Y. 2013-14 the said accountant was unwell and the subordinate accountant being ignorant above the actual quantification has filed incorrect return of income. The mistake on part of the accountant cannot be treated as mistake of the assessee and therefore, the decision of Price Waterhouse Cooper Pvt. Ltd. [ 2012 (9) TMI 775 - SUPREME COURT ] is squarely applicable in the present case. AO as well as the CIT(A) was not right in imposing the penalty under Section 271(1)(c) - Decided in favour of assessee.

  ---

• 2023 (7) TMI 1046
  Revision u/s 263 - unexplained cash deposit to bank account not verified by AO - HELD THAT:- Copy of the questionnaire issued u/s 142 has not been placed. It is not discernable whether AO has verified this aspect i.e. source of cash available with the assessee for making deposits in two Bank accounts as narrated by the ld. Pr. Commissioner. Though assessee has placed on record details in tabulated form, wherein Bank Pass Book of the Burdwan Central Cooperative Bank Limited, Bank statement of Axis Bank Limited, the cash available with the assessee and host of details running into more than 50 pages, but no authority has recorded any finding of fact, namely neither the ld. Assessing Officer has examined this aspect during the assessment proceeding nor ld. Pr. CIT. Thus in any case, it is to be relegated before one of the authority to record a specific finding. Faced with this situation, we deem it appropriate to uphold the finding of the ld. Pr. CIT to a limited extent that ld. Assessing Officer shall verify the source of cash available with the assesese for making deposits in two Bank accounts. In case, AO is satisfied with the explanation of assessee, no addition will be made. However, if he was not satisfied, then, he will treat the alleged deposits of cash in accordance with law. Decided against assessee.

  ---

• 2023 (7) TMI 1045
  Unrecorded sales - data as found by the custom authorities during the course of search - AR argued that achieving this level of unrecorded sale was humanly impossible considering the capacity of the assessee company and hence the amount of such unrecorded sales be reduced - HELD THAT:- We are disinclined to accept the assessee s contention for the obvious reason that the figure of unrecorded sales was deduced from the data found in the assessee s computer during the course of search by Central Excise authorities. Not only this, even the director of the assessee company also accepted the unrecorded sales at this level during the course of search. The later retraction is of no avail because the data from the computer corroborated the amount of unrecorded sales. We, therefore, reject the assessee s version about the amount of unrecorded sales at a level lower than that taken note of by the authorities below. GP estimation - CIT(A) reduced it to the declared gross profit rate at 4.86% for the year under consideration - Tax is not charged on the amount of sales but on the income embedded in such sales. It clearly emerges from the discussion made in the assessment order that not only the sales but also the purchases were unrecorded. The assessee was into manufacturing the goods outside the books of account to evade excise duty. Since both the sales and corresponding purchases were unrecorded, it is but natural that only the profit element could have been added and not the amount of sales in entirety. We, therefore, affirm the view taken by the ld. CIT(A) in restricting the addition to the level of gross profit rate declared by the assessee for the year under consideration. The grounds taken by the assessee as well as the Revenue in this regard stand dismissed. Addition on account of working capital required for manufacturing the goods outside the books of account, which was reduced by the ld. CIT(A) to 50% - In the original assessment, the AO estimated suppressed production on the basis of higher electricity consumption and also made addition towards working capital required for purchase of raw materials and day-to-day activities. The ld. CIT(A), firstly, sustained the addition at the level of the gross profit rate applied on the undeclared sales and deleted the addition towards the working capital. Both the assessee as well as the Revenue came up in appeal before the Tribunal. The Revenue raised in [ 2016 (11) TMI 1742 - ITAT PUNE] challenging the deletion of addition towards working capital. Tribunal, upheld the deletion of addition on account of working capital. Since the issue under consideration is fully covered by the order of the Tribunal in assessee s own case for the year under consideration itself, we are satisfied that no addition was called for on account of working capital required for the suppressed production and the same was rightly deleted. The ground of the assessee is allowed and that of the Revenue is dismissed. Addition of cash deposited in the bank account of the three employees - It is but natural that the cash realized on unrecorded sales was utilized for making purchases as well as meeting expenses in addition to deposit of Rs. 79.04 lakh. Since we have upheld the addition of Rs. 3.90 crore towards profit on unrecorded sales, which is far in excess of amount of bank deposits of Rs. 79.04 lakh, we hold that the ld. CIT(A) was justified in deleting the addition to this extent. Addition u/s. 40A(3) - cash purchases for effecting unrecorded sales - Amount Not added in the computation of total income because the amount of unrecorded sales was added - HELD THAT:- As there is no specific reference to any cash purchases exceeding the prescribed amount, warranting disallowance u/s 40A(3) of the Act. In fact, the addition on account of such unrecorded business was made by the AO on the basis of unrecorded sales and sustained in the first and the second appeals on the basis of gross profit rate applied on such unrecorded sales only without any reference to any specific amount of purchases in cash. We, therefore, hold that the grievance of the Revenue on the not-made addition by the AO u/s 40A(3) of the Act is uncalled for. This ground is, therefore, not allowed.

  ---

• 2023 (7) TMI 1044
  Demand u/s 201(1A) - non deduction TDS u/s 194IA - purchase consideration qua assessee is less than or more than Rs. 50 Lakhs - Co-ownership in property - HELD THAT:- Assessee as well as the seller of the property were under bonafide and genuine impression that if individual sale price by seller is below Rs. 50,00,000/- in that case no TDS at 1% is deductible under Section 194IA of the Act. As per the sale deed the details of the sellers / transferors of the said property and in fact the sellers individuals share in the said joint property was below Rs. 50,00,000/-, therefore, both seller and purchaser was under bonafide impression that threshold limit for TDS is Rs. 50,00,000/- and no TDS is required to be deducted. The observation of the CIT(A) that the assessee has not filed Form No. 26A alongwith certificate of the Chartered Accountant appears to be correct and thus, the assessee has not fulfilled the condition of Section 201 - In respect of interest liability under Section 201(1A) the said interest was rightly calculated by the Assessing Officer and there is not need to interfere with the same. A.R. submitted that in case of wife of the assessee the CIT(A) has calculated the interest charged under Section 201(1A) at Rs. 7,843/- on the identical facts and therefore, in the present case also the Revenue is directed to calculate the same. Thus, Ground Nos. 1 2 are partly allowed for statistical purpose

  ---

• 2023 (7) TMI 1043
  Reopening of assessment u/s 147 - Lack of jurisdiction of the authorities below - Reasons to believe - non- filing of return - HELD THAT:- Reasons so recorded by the ITO, Ward-3, Gandhinagar of escaping assessment by the assessee as chargeable to tax mainly on the basis of the fact of not filing of return for the year under consideration by the appellant seems to be absolutely wrong in view of the mentioning filing of return by the assessee on 10.01.2015 much prior to the recording of reasons by the ITO, Ward-3, Gandhinagar dated 19.04.2016 itself. The very basis of reopening of assessment was found to be incorrect which leads to the belief of escaping assessment by the assessee and finally culminating into the order of addition under Section 143(3) r.w.s. 147 of the Act. The entire proceeding is thus liable to be quashed in view of wrong foundation. It appear the very basis of assessment u/s 148 of the Act on the wrong finding of fact of non- filing of return by the appellant found to be non-sustainable, we do not find any reason to deviate from the stand taken by DEEPAK WADHWA [ 2021 (3) TMI 332 - DELHI HIGH COURT] and SAGAR ENTERPRISES [ 2001 (12) TMI 18 - GUJARAT HIGH COURT] . In the case in hand, initiation of proceeding by recording of reasons by the ITO, Ward-3, Gandhinagar on the fact of non-filing of return of income for the year under consideration by the appellant which admittedly is found to be wrong, particularly, in view of the recording of filing of return by the appellant by the Ld. AO found to be bad in law. Thus, the entire proceeding is thus vitiated and found to be not sustainable in the eye of law and therefore, quashed. Decided in favour of assessee.

  ---

• 2023 (7) TMI 1042
  Revision u/s 263 - deduction of interest u/s 80P(2)(d) - HELD THAT:- The assessee before us, is a cooperative society registered under the provisions of Gujarat Co-operative Societies Act-1961.The case was selected for scrutiny for examination of deduction of Chapter-VIA. We find that during the assessment order the assessing officer issued specific show cause notice for examination of deduction under Chapter VIA. The assessee filed its reply and explained the admissibility of deduction under section 80P, specifically about the deduction of Rs. 2.01 Crore claimed under section 80P(2)(d). No doubt, there is no reference about the examination of such issue, however, admittedly the issue was examined by the assessing officer. PCIT revised the assessment order on the issue of deduction under section 80P(2)(d). On carful considerations of grounds of appeal and the facts of the case, we find that on similar grounds of appeal on similar set of facts, this combination has this Tribunal allowed similar relief to that assessee, thus in our view, the grounds of appeal raised by the assessee are square covered in favour of assessee and against the revenue. Thus, we hold that the order of ld PCIT passed under section 263 is not justified - Grounds of appeal allowed in favour of the assessee and against the revenue.

  ---

• 2023 (7) TMI 1041
  Long Term Capital Gains on the sale of property - assessment in the hand of assessee or his wife - double taxation - HELD THAT:- Since the assessee has brought on record that the assessee s wife has paid the relevant tax in her return of income it shows that even though by mistake the assessee has remitted the relevant tax on this transaction - income was not declared by the original person and paid the relevant tax by the proper person. We are of the view that the same transaction cannot be charged to tax twice. Therefore, we are directing the AO who is aware of the fact that assessee has declared the relevant transaction in the hands of the assessee s wife, therefore we direct the AO to intimate AO [ITO Ward 16(2)(4)] of the assessee s wife] to revise the assessment in case assessment has been already completed or initiate the proceeding of re-assessment and reject the capital gain declared by her in her return of income and initiate the refund along with interest till this date and as soon as the refund is initiated the present Assessing Officer may initiate the recovery of demand arising out of the assessment in the present case. The issue has to be dealt only by the tax authorities and the credit in the hands of the assessee s wife has to be refunded are adjusted against the demand raised in the hands of the assessee. The method by which it has to be carried out left to the tax authorities without there being any burden on the assessee. Since the assessee has paid the due tax on this transaction. The legislature intention is not to tax twice on the same transaction. Therefore, we partly allowed the grounds of appeal raised by the assessee. Accordingly, Ground No. 1 to 4 are partly allowed Reopening of assessment u/s. 148 - We observe that the submissions of the assessee and the grounds of appeal raised by the assessee are not proper considering the fact that the return of income filed by the assessee is defective, therefore the finding given by the Ld. DRP, in our view, are proper on record. Accordingly, Ground No. 3 raised by the assessee is dismissed.

  ---

• 2023 (7) TMI 1040
  Estimation of income - bogus purchases - AO estimated suppressed profit element on such goods at 12.5% - HELD THAT:- Assessee has failed to show genuineness of the purchases and the parties from whom such purchases were made. We concur with the findings of the Authorities below that the assessee has indulged in obtaining bogus purchase bills from declared hawala dealers. As regards estimation of G.P on bogus purchases, we are of considered view that the estimation of G.P at 12.5% is on the higher side. Considering assesee s nature of business and the G.P already declared by the assessee in the impugned assessment year we deem it appropriate to restrict G.P on bogus purchases to 7.5% over and above the G.P already declared by the assessee. While quantifying bogus purchases the cost of fixed asset (machinery) purchased during the year has been included in bogus purchases - Assessee has already disclosed machinery in the block of assets and has claimed depreciation thereon. AO is directed to reduce the cost of machinery from the bogus purchases - the impugned order is modified to the extent mentioned herein above. The ground No.1 to 3 of the appeal are partly allowed.

  ---

• 2023 (7) TMI 1039
  Unexplained cash credit u/s 68 - Onus to prove - HELD THAT:- It is not in dispute that the assessee has furnished the name and address of the lender, bank statement of the lender and confirmation of the lender before the lower authorities. The lender is situated in Ghaziabad, which is far away from the place of assessee and, hence, explanation given by the assessee that the lender could not be produced before the AO during the course of original assessment proceeding, deserves to be accepted. It is a fact on record that the assessee, indeed produced the lender for examination before the learned Assessing Officer during the remand proceedings, on which date, the AO was on official duty elsewhere and hence, the lender had handed over all the requisite materials in her possession to the assessee and the assessee had in turn furnished the same before the learned CIT(A). We also find that the learned AR has furnished affidavit from the lender duly confirming the fact of advancement of loan to the assessee by also explaining the business carried on by her. Assessee has also furnished the copy of income tax return acknowledgment of the lender for assessment year 2013-14, wherein, the lender had disclosed taxable income - However, the affidavit and the income tax return acknowledgment were placed for the first time by the assessee before this Tribunal. Since these evidences are crucial for adjudication of the issue in dispute before us, the same are hereby admitted and taken on record. Assessee had duly discharged her initial onus of providing the name, address, PAN and bank statement of the lender and confirmation of the lender. Assessing Officer had not sought to make any verification of these evidences filed on record by either issuing notice under section 133(6) of the Act or issuing summons to the lender under section 131 of the Act for recording the statement on oath from the lender. Instead, learned Assessing Officer completely shifted the onus on the assessee to produce the party before him for examination. We are unable to comprehend ourselves to accept this behavior of learned Assessing Officer as the assessee, in the instant case, had duly discharged the initial onus cast upon her. Assessing Officer has drawn adverse inferences on the assessee without making any independent examination from his side. - Decided in favour of assessee.

  ---

• 2023 (7) TMI 1038
  Deduction u/s 54 - new flat was purchased beyond a period of one year from the date of transfer of the old flat - relevant date for the purpose of section 54F - HELD THAT:- As per section 54 of the Act, if the assessee within a period of one year before or two years after the date of transfer of a original residential house purchases a new residential house, or within a period of three years after such date constructs a new residential house then the benefit of section 54 will be available to the assessee on the capital gains so arisen on the transfer of the original residential house. We find that the Hon ble jurisdictional High Court in CIT v/s Smt. Beena K. Jain [ 1993 (11) TMI 7 - BOMBAY HIGH COURT ]in a similar factual matrix affirmed the findings of the Tribunal that the relevant date for the purpose of section 54F of the Act is the date when the assessee paid the full consideration amount and obtained the possession of the new flat Since in the present case also upon payment of full agreed consideration, the possession of the new flat was handed over to the assessee along with his wife on 07/04/2016, which falls within a period of two years from the date of sale of the old flat, i.e. 11/02/2016, therefore assessee is entitled to claim deduction under section 54 in respect of capital gains from the sale of old flat. Decided in favour of assessee.

  ---

• 2023 (7) TMI 1037
  Disallowance of revenue expenditure - HELD THAT:- As assessee out of small turnover of Rs. 2.55 Cr has declared the profit of approximately Rs. 19 lacs which is 7.44% of the turnover. We do not find justification on the part of the lower authorities in disbelieving the small payments booked by the assessee to villagers/labour etc. during the execution of his work specially when execution of the work has not been doubted and the recipients were illiterate labourers/tractor operators etc. Therefore, the impugned addition agitated vide ground No. 2 is ordered to be deleted. Addition of cash credits - assessee claimed in respect of the aforesaid receipts that the same were business receipts - HELD THAT:- No justification on the part of the CIT(A) in confirming the impugned additions. The payment of Shri K.C. Sharma has been made by cheque and there is no denial that assessee has received the said payment from Shri K.C. Sharma. Even there is a cross-verification of the ledger/books of account of Shri K.D. Nirash and there is no denial that the assessee has carried out work from them and the payments were business receipts which have been duly accounted for towards the income of the assessee and due tax paid thereupon. Therefore, the impugned additions are not sustainable, same are, accordingly, ordered to be deleted. Addition u/s 40A(3) - assessee had made cash payments to the labourers, CIT(A) restricted the addition to 50% of the addition made by the AO - HELD THAT:- No justification on the part of the CIT(A) having admitted the contention of the assessee that the aforesaid payment was made out of compulsion to the labourers, therefore, the impugned addition is ordered to be deleted. Addition on account of non-deduction of tax at source (TDS) invoking the provisions of Section 40(a)(ia) - HELD THAT:- This issue is restored to the file of the AO to consider the contentions of the assessee and to verify that the aforesaid payments have been taken into consideration by the respective payees for the purpose of their computation of income and due tax, if any paid thereupon. Disallowance of notional interest - assessee had given certain interest free loans - HELD THAT:- Assessee has explained that the assessee had sufficient own funds to give interest free loan. This fact could not be rebutted by the ld. DR, therefore, the impugned addition is not sustainable. The same is ordered to be deleted.

  ---

• 2023 (7) TMI 1036
  Condonation of delay - reason for delay - Addition u/s 68 - HELD THAT:- Hon ble Courts are unanimous in their approach to propound that whenever the reasons assigned by an applicant for explaining the condonation of delay, then such reasons are to be construed with a justice oriented approach. Hon ble Supreme Court in the case of N. Balakrisknan Vs. M. Krishnamurtky [ 1998 (9) TMI 602 - SUPREME COURT ] has observed that length of delay does not matter. It is the explanation given by an applicant demonstrating the reasons for such a delay matter for consideration. We have discussed the past history of the assessee before the AO as well as with the ld. CIT(Appeals). The assessee has not prosecuted its litigation either before the AO or before the ld. 1st Appellate Authority. Thus it is not very serious in contesting the issues. A vague application (extracted supra) suggest its conduct. It does not contain any reason to show, why this appeal has been delayed by the assessee. It is also pertinent to observe that this conduct of the assessee gives up a feeling that it is just filing the appeal for the sake of filing without submitting any details discharging its onus cast upon by section 68 of the Income Tax Act. In such situation, we do not consider the reasons assigned by the assessee as sufficient reason for filing the appeal beyond the prescribed limit. Accordingly, this appeal is dismissed being time barred. Appeal of the assessee is dismissed.

  ---

• 2023 (7) TMI 1035
  Special discount on sales to sister concern to M/S Ess Ess Kay Marketing Company Pvt. Ltd through credit notes, rebate and discount to other parties, travelling expenses etc. either to director or other employees - HELD THAT:- We in complete consonance with the comparative trading and as well as net profits results of the company Volume II dated 30th June, 2022, which has been ignored by not appreciating. We consider that it is a fit case to be remanded back to the Ld. CIT(A) to adjudicate the issue afresh with due consideration of submissions of the appellant in respect of viewing comparative analysis of the trade discount vis a vis special discount and comparative financial results and the applicable comparables for deciding the reasonableness of Trade discount and other claims of expenditure while arriving at the conclusion whether the addition made by AO were justified, in respect of both the assessment year by passing a speaking order. Assessee appeals are allowed for statistical purpose.

  ---

• 2023 (7) TMI 1034
  Validity of assessment - Validity of order u/s 143(1) passed without giving any reasons - Denial of natural justice - no opportunity of hearing being provided to the assessee - HELD THAT:- We have perused the entire order u/s 143(1) but could not find any evidence of an opportunity of hearing being provided to the assessee before making the adjustment. DR could not demonstrate that opportunity of hearing was provided to the assessee before making the adjustment. In this case the ADIT(CPC) has made the upward changes to the total income by disallowing assessee s claim of expenses without providing any opportunity to the assessee. ADIT(CPC) has not passed a speaking order while making the disallowance. ADIT(CPC) has disallowed the expenses stating that the disallowance may be due to not furnishing the break up of expenditure or error in total. Narration given in the Order u/s 143(1) that the ADIT(CPC)has himself not understood the exact reason for disallowance . We are of the opinion that the disallowance made by the ADIT(CPC) is bad in law and unsustainable. Therefore, we direct the AO to delete the said addition.

  ---

• 2023 (7) TMI 1033
  LTCG computation - deduction of interest paid by the assessee for the loans - addition towards the cost of acquisition u/s 48 claimed as deduction on account of interest expenses while computing capital gains along with other grounds - whether the interest paid for the loan availed for the accuring the asset is said to be wholly and exclusively expended for the asset or not? - HELD THAT:- As decided in Trishul Investments Limited [ 2007 (7) TMI 252 - MADRAS HIGH COURT] interest paid on borrowed funds availed for the acquisition of shares amounted to the cost of share and was held to be cost of acquisition of shares. It was stated that the said interest should be included in the cost of the acquisition for which the assessee was entitled to deduction u/s 48 of the Act. Hon ble Karnataka High Court in the case of CIT vs. Maithreyi Pai [ 1983 (11) TMI 43 - KARNATAKA HIGH COURT] wherein it was held that the interest paid on borrowing for acquisition of capital asset is entitled for deduction u/s 48 of the Act, though in this case the primary issue was about double deduction u/s 48 and section 57 of the Act. Thus various High Courts have held that the interest incurred on borrowed funds are to be treated as cost of acquisition and deduction u/s 48 of the Act was allowed for the said expenditure. By respectfully following the said decisions, we hereby allow the claim of the assessee. Addition towards interest paid from escrow account by not considering the fact that the said interest does not pertain to the assessee and was towards reimbursement - assessee contended that the said amount was retained by the buyer during the slump sale and that the assessee has submitted the details of the TDS which is filed wherein, the A.O. contended that TDS was not deducted towards the said reimbursement and AR controverted the submission of the AO that details pertaining to impugned amount were not furnished before the AO - HELD THAT:- We are of the considered opinion that this issue raised by the assessee requires verification of the documentary evidence relied on by the assessee. For this purpose, we remand this issue back to the learned AO for verifying the relevant documents relied on by the assessee. Additional ground of appeal raised before ITAT - Disallowance u/s 14A r.w.r 8D - DR controverted the said fact and stated that the assessee has not challenged the said ground of appeal before the learned CIT(A) and contended that the said ground shall be dismissed - HELD THAT:- As observed that the assessee s additional ground of appeal raised before us has not been challenged before the learned CIT(A) and since the First Appellate Tribunal has not dealt with this issue, we deem it fit to refrain from deciding this issue as being academic in nature.

  ---

• 2023 (7) TMI 1032
  Reopening of assessment u/s 147 - reasons to believe - tangible material which came to the possession of AO to initiate reassessment - HELD THAT:- We find that the AO has mentioned that they have reasons to believe that the income has escaped assessment on account of failure on the part of the assessee to disclose truly and fully all material facts necessary for assessment within the meaning of proviso to Section 147 This observation of the AO is repellently against the facts on record. AO has made reference of audit report and notes to accounts in reasons recorded which is the assessee s own audit report, which has been filed with the return of income before the revenue authorities. There is no new tangible material with the AO after four years that the assessee company has escaped assessment. Thus, there is no whisper in the reasons recorded, of any tangible material which came to the possession of the Assessing Officer subsequent to the issue of the intimation - no hesitation to hold that the case has been re- opened bereft of the conditions prescribed u/s 148 - assessment u/s 148 is void ab initio. Decided in favour of assessee.

  ---

• Customs

• 2023 (7) TMI 1031
  Seeking permission to withdraw SLP - petitioner would point out that the impugned order shows a patent error insofar as it does not even record reference to the correct facts and prayer. HELD THAT:- The special leave petitions are dismissed as withdrawn with liberty to file review.

  ---

• 2023 (7) TMI 1030
  Redemption fine and penalty - appellant has accepted the enhanced value as per the Chartered Engineer s certificate - redetermination of value of imported Multifunction machines (used and second hand) - HELD THAT:- It is seen from the records that there have been number of orders issued by this Tribunal and High Courts accepting the fact that the impugned MFDs are not liable for absolute confiscation. Hence have taken a lenient view and released these goods on payment of redemption fine of 10% penalty of 5%. In the case of ACCORD DIGITECH VERSUS C. C-BANGALORE [ 2020 (12) TMI 647 - CESTAT BANGALORE] by this Tribunal it is clearly evident that the used Digital Multifunction Printing and Copying Machine were released on payment of redemption fine of 10% and penalty of 5% of the enhanced value of the imported goods. The present appeal is partially allowed by reducing the redemption fine to 10% of the enhanced value and penalty to 5% of the enhanced value. Appellant is allowed to redeem the goods for home consumption.

  ---

• 2023 (7) TMI 1029
  Confiscation - Smuggling - Gold Bullion - Gold Jewellery - Gold Mines - retraction of statements - corroborative evidences or not - burden to prove - release of certain quantity of gold bullion/coins/jewellery to the appellant, based on the statements of the Appellant tendered under the Customs Act, 1962 - HELD THAT:- The critical evidence on which the entire case has been based is on the statements dated 27.04.2017, 28.04.2017 and 29.04.2017 of the appellant, wherein he has stated that he had no bills/invoice for the gold with foreign markings. These statements have subsequently been retracted before the appropriate authority by the appellant. There are no other corroborative evidences which have been unearthed by the investigating team in support of their contention - the appellate authority has concluded that sufficient independent evidence needs to be adduced to corroborate the department s contention regarding smuggled nature of the gold and in the absence of the same, it cannot be concluded that all the gold which was seized from the business residential premises was smuggled. There are catena of decisions that have consistently held that retracted statements cannot be the sole basis for action under the Customs Act without any independent corroborative evidence. In the instant case, the Appellate authority has rightly held in the impugned order that in view of the above, any conclusion that the seized gold, gold coins and jewellery which was not released and which has been subsequently confiscated were smuggled into India or made from the smuggled gold, on the basis of the statements of the appellant dated 27.04.2017, 28.04.2017 and 29.04.2017 is not sustainable . In the light of several decisions which have also been relied upon by the Commissioner (Appeals) in the impugned order, it is difficult to accept the contention of the department that the statements were tendered voluntarily by the appellant and its subsequent retraction is a mere afterthought. To attract Section 123, the goods must be smuggled goods. The term smuggled goods means goods of foreign origin and imported from abroad. In the present case, there is no dispute that the goods with foreign marking are of foreign origin. The appellant has not adduced any evidence to indicate that the same were procured locally. Appellants who claim that the gold to have been legally procured have to produce documents evidencing payment of duty as well as documents evidencing their legal ownership/possession - The appellant has not adduced any evidence to indicate that the same were procured locally. Appellants who claim that the gold to have been legally procured have to produce documents evidencing payment of duty as well as documents evidencing their legal ownership/possession. During the course of investigation, it is recorded that gold bullion/coins/jewellery which was satisfactorily explained by the appellant was released to him by the investigating agency themselves. Inability to discharge burden of proof required under Section 123 of Customs Act, 1962 - HELD THAT:- The contention that the said gold biscuits were purchased some eighteen months back, had been held to be not acceptable inasmuch as ten such gold biscuits with a lesser weight could not have been used to make eleven gold biscuits of higher weight. It was more so when the accused had admitted under Section 108 of Customs Act, 1962 to have purchased ten foreign marked gold biscuits of lesser weight, heated them and hammered to obliterate the foreign marks. Since the lawful possession of the said foreign marked gold biscuits were not proved, the same were held liable to confiscation. The Commissioner Appeals has taken a fair stand and reduced the penalty amount, proportionate to the confiscated gold - there is no infirmity in the impugned order which requires no modification - Appeal dismissed.

  ---

• Corporate Laws

• 2023 (7) TMI 1028
  Professional Misconduct - violation of the Standards of Auditing - failure to plan the audit and understand the entity and its environment - failure to determine the materiality and performance materiality - failure to identify and communicate with TCWG - failure to evaluate the arm s length pricing for the related party transactions that amounted to 54% of the total sales - failure to obtain sufficient appropriate audit evidence regarding the existence and condition of inventory that constituted over 36% of the balance sheet - failure to obtain confirmation of balances from debtors creditors that accounted for over 60% and 29% respectively of the balance sheet - failure to report the non provisioning for Trade Receivables that accounted for nearly 23% of the Trade Receivables - failure to determine the appointment of Engagement Quality Control Reviewer (EQCR). Failure to obtain sufficient appropriate audit evidence regarding the existence and condition of inventory - HELD THAT:- The Audit File has no evidence of verification of the inventory on test check basis, as claimed. The Audit File has only two sheets of paper out of which one gives the stock statement of inventory hypothecated to Bank of Baroda, and the other is a copy of the Certificate of Registration tor Modification of Charge issued by the RoC, Mumbai - EP has displayed lack of due diligence and gross negligence in his audit of inventories, and the charge relating to the EP s failure to obtain sufficient appropriate audit evidence in relation to the existence and condition of inventory, in compliance with SA 501, stands proven. Failure to evaluate the arm s length basis for transactions with related parties - HELD THAT:- As there is no testing of the arm s length pricing in the Audit File and the reply of the EP did not specifically answer the charge in the SCN, it is concluded that the EP did not comply with requirements of SA 550.Thus, the charge in the SCN stands proven. Failure to obtain external confirmation for the Trade Receivables Trade Payables - HELD THAT:- In the absence of documentation regarding balance confirmations from the debtors creditors and lack of any evidence of alternate procedures performed, it is obvious that the auditor has failed to comply with SA 505, and the charge regarding EP s failure to obtain sufficient appropriate audit evidence regarding the trade receivables trade payables, stands proven. Failure to report non-provisioning for doubtful debts - HELD THAT:- The EP was charged with the failure to report non-provisioning for doubtful debts even though the company had disclosed 9.17 crores of debts as doubtful and did not make any provision in the accounts for the doubtful debts as per para 4.2 of the AS 4. The EP was also required to comply with para 6 of the SA 540, which states that the objective of the auditor is to obtain sufficient appropriate audit evidence whether in the context of the applicable financial reporting framework the accounting estimates are reasonable and related disclosures in the financial statements are adequate - The EP in his reply to SCN did not specifically respond to the charge on the failure to report on the non-provisioning for 2 9.17 crores of doubtful debts despite the requirement in AS 4. During the personal hearing also, he did not offer any substantive comments on the non-provisioning in respect of doubtful debts - the charge regarding the failure to report on the non- provisioning in respect of doubtful debts stands proven. Failure to Plan the audit and failure to understand the entity and its environment - HELD THAT:- No basic understanding of the entity has been recorded in the Audit File. Also, as part of entity s risk assessment process the auditor is required as per para 15 of SA 315 to understand whether the entity has a process for identifying business risks relevant to financial reporting objectives, estimating significance of the risks, assessing likelihood of occurrence and deciding how to address those risk. There are no such papers in the audit file. In the absence of appropriate evidence in the Audit File, we are constrained to conclude that the auditor has failed to plan the audit and has also failed to understand the entity and its environment as mandated by the SAs. Failure to identify and communicate with Those Charged With Governance (TCWG) - HELD THAT:- In the absence of any evidence indicating identification of, and communication with, the TCWG, it is evident that the provisions of SA 265 have not been complied with by the EP and it is concluded that the charge related to the EP s failure to identify and communicate with T'CWG stands proven. Failure to determine materiality and performance materiality - HELD THAT:- In the absence of any evidence in the audit file and lack of any response from the EP, it is held that the charge related to his failure to determine materiality and performance materiality is established. Failure to document the sampling methodology adopted for substantive testing - HELD THAT:- The EP was charged with failure to obtain sufficient appropriate evidence to support his Opinion and report as required by SA 500. The Audit File has no documentation regarding extent of verification of the transactions, and whether the entire population was verified, or any sampling methodology was applied for the verification of the transactions such as sales purchases - In the absence of any evidence in the audit file, and lack of any satisfactory reply from the EP, it is held that the charge regarding the EP s failure to document the sampling methodology adopted for the substantive testing stands proven. Failure to determine that Engagement Quality Control Reviewer (EQCR) had been appointed - HELD THAT:- The reply of the EP is not acceptable since there is no documentation in the audit file regarding the engagement of EQCR and the details of reviews carried out by the EQCR. Hence, the charge regarding the failure to determine that EQCR had been appointed, stands proven. Thus, it is established that the EP, CA Narayan Prasad Swami, did not comply with the stipulations in the Chartered Accountants Act, 1949 (CAs Act) regarding the statutory audit engagement and showed gross negligence and lack of due diligence in performing the same. In addition, the EP, CA Narayan Prasad Swami has not ensured audit quality and was grossly negligent in his professional duties by not adhering to the requirements laid down by the relevant SAs. This has led to the issuance of an audit report that is not backed by valid audit evidence and is lacking quality in the audit work. Penalty Sanctions - HELD THAT:- Section 132(4) of the Companies Act, 2013 provides for penalties where professional misconduct is proved. The seriousness with which proved cases of professional misconduct are viewed, is evident from the fact that a minimum punishment is laid down by the law. Considering that professional misconducts have been proved and considering the nature of violations and principles of proportionality, in exercise of powers under Section 132(4)(c) of the Companies Act, 2013, it is ordered that: a) Imposition of a monetary penalty of = Two Lakhs upon CA Narayan Prasad Swami. b) In addition, CA Narayan Prasad Swami is debarred for two years from being appointed as an auditor or internal auditor or from undertaking any audit in respect of financial statements or internal audit of the functions and activities of any company or body corporate.

  ---

• Insolvency & Bankruptcy

• 2023 (7) TMI 1027
  Prayer for interim temporary injunction - Lease agreement - Corporate Debtor disturbing peaceful possession of the appellant in respect of subject land, or not - Lease agreements only notarised not registered. In sum and substance it has been argued that once the appellant had entered into lease rent agreement with Corporate Debtor/landlord and agreed to pay monthly rental as Rs.55000/- the appellant continued as tenant of the Corporate Debtor and such tenancy was not required to be interfered with by the Adjudicating Authority. HELD THAT:- Considering the fact that in another appeal which was filed by the Appellant i.e. Company Appeal (AT)(Ins) No.861/2022 which is already taken note of two rent agreements dated 27.07.2014 and 26.07.2019 which we have considered prima facie as fraudulent documents and noticing the same, it is directed for enquiry by the Delhi Police Commissioner which judgement has been delivered only today i.e. 24th July, 2023, there is no need to go further in detail and this appeal in terms of judgement passed in Company Appeal (AT)(Ins) No.839/2022 and 861/2022 stands dismissed. In this appeal also the appellant has placed on record two lease rent agreements vide Annexure A-2 and A-3 - Let a copy of this order be also communicated to the Delhi Police Commissioner for its needful with a direction to the learned Registrar of this Tribunal to render full assistance and providing necessary documents as and when approached by the Delhi Police doing enquiry or investigation.

  ---

• 2023 (7) TMI 1026
  Initiation of CIRP - Recovery of Interest - invoice not signed by the Appellant - unilateral document or not - interest claimed by the Respondent on the basis of the invoices in which it is mentioned that if the amount is not paid within the due date then 21% interest shall be charged - HELD THAT:- The impugned order is patently illegal and deserves to be set aside. The question which has been raised by the Appellant, is hereby answered in favour of the Appellant in view of the decision taken by this Court in case of S.S. POLYMERS VERSUS KANODIA TECHNOPLAST LIMITED [ 2019 (11) TMI 1428 - NATIONAL COMPANY LAW APPELLATE TRIBUNAL, NEW DELHI] , as well as the decision of the Hon ble Karnataka High Court in the case of JYOTI LTD. VERSUS BOVING FOURESS LTD. [ 2000 (12) TMI 817 - HIGH COURT OF KARNATAKA] , where it was held that The application was pursued for realisation of the interest amount, which, according to us is against the principle of the I B Code, as it should be treated to be an application pursued by the Applicant with malicious intent (to realise only Interest) for any purpose other than for the Resolution of Insolvency, or Liquidation of the Corporate Debtor and which is barred in view of Section 65 of the I B Code. Before parting, it is constrained to observe that the Adjudicating Authority has erred in not looking into the facts that the principal amount has entirely been paid and the issue was only regarding to interest for which the application under Section 9 of the Code was not maintainable as the spirit of the legislation of the Code is for resolution of debt and not for recovery . The impugned order set aside - appeal allowed.

  ---

• PMLA

• 2023 (7) TMI 1025
  Grant of Regular Bail - money laundering - proceeds of crime - predicate offence/scheduled offences - acquittal of the accused - recording of statements under Section 50 of the PMLA, 2002 - HELD THAT:- Considering the judgment of High Court of Karnataka in case of LAXMIKANTH TIWARI VERSUS STATE OF KARNATAKA BY CHIEF SECRETARY, STATE OF KARNATAKA BY KADUGODI POLICE STATION, PAKKIRESH BADAMI S/O KR BADAMI [ 2022 (11) TMI 1381 - KARNATAKA HIGH COURT] , wherein Hon ble High Court of Karnataka has categorically recorded its finding that no case has been registered against the petitioner in Crime No. 129/2022 and prosecution initiated any proceeding based upon this crime number and the petitioner is not an accused in Crime No. 129/2022, as such, offence took place at Bengaluru in Crime No. 129/2022 cannot be predicated offence for registering case under PMLA, 2002 by the ED at Chhattisgarh wherein the applicant along with co-accused Suryakant Tiwari and others are being charged for involving in a money laundering case and the present applicant has been arrested in money laundering case along with co-accused, therefore, even if it is presumed (not accepting it in absence of any better material on record or order from the competent court) that no predicate offence has been levelled, therefore, the applicant is entitled to get bail under PMLA, 2002, is not acceptable and deserves to be rejected and also considering the case diary and other material placed on record, which prima facie shows involvement of the applicant in crime in question, therefore, considering entirety of the matter, this Court is of the opinion that the applicant is unable to satisfy twin conditions for grant of bail under Section 45 of the PMLA, 2002, as such, it is not a fit case for grant of bail to the applicant. The bail application filed under Section 439 of the Cr.P.C. is liable to be and is hereby rejected.

  ---

• Service Tax

• 2023 (7) TMI 1024
  Seeking permission to withdraw the appeal - HELD THAT:- The present Appeals stand dismissed as withdrawn.

  ---

• 2023 (7) TMI 1023
  Condonation of delay in filing appeal before Commissioner (Appeals) - requirement to file appeal within a maximum period of three months in terms of Section 85 of the Finance Act, 1994 - HELD THAT:- Upon perusal of the record, it is seen that the order passed by the authorities dated 26.09.2019 was served upon one Shivpal Singh as indicated by the petitioner and was delivered on 07.10.2019 through Speed Post. The petitioner has admitted in his application filed under the Right to Information Act that he has received a letter from the Range Superintendent, Sehore on 04.12.2020 wherein he was asked to pay service tax along with interest in compliance of the impugned order. This would indicate that the petitioner was having the knowledge of passing of the impugned order on 04.12.2020. In terms of Section 85 of the Finance Act, 1994, the appeals are required to be presented within two months from the date of receipt of the decision or the order passed by adjudicating authority, provided that the Commissioner of Central Excise (Appeals) is having power to condone the delay, if he is satisfied by the reasons assigned. But, the same can only be done if the appeal is filed within a further period of one month. Thus, the Commissioner (Appeals) can only condone the delay beyond the period of prescribed limitation to the extent of one month. In the present case, the appeal has been filed on 01.06.2021 i.e. after the delay of one and a half years from the date of passing of the impugned order. The Hon'ble Supreme Court in the case of SINGH ENTERPRISES VERSUS COMMISSIONER OF C. EX., JAMSHEDPUR [ 2007 (12) TMI 11 - SUPREME COURT] has clarified the aforesaid position with respect to the period of limitation and has categorically held that there is complete exclusion of Section 5 of the Limitation Act. The Commissioner and the High Court were therefore justified in holding that there was no power to condone the delay after the expiry of 30 days' period. In the light of the aforesaid decision, it is clear that the Commissioner (Appeals) can only condone the delay in filing an appeal if the same is barred by one month and the Commissioner is not having any power to condone the delay in filing the appeal after expiry of 30 days period. In view of the judgment passed by the Hon'ble Supreme Court in the case of Singh Enterprises as well as Section 85 of the Finance Act, 1994, it is apparently clear that the Commissioner (Appeals) was not having any power to condone the delay which was huge in terms of the Finance Act, 1994 practically of one and a half years from the date of passing of the order. Under these circumstances, no illegality is committed by the appellate authority in dismissing the appeal on the ground of limitation. Petition dismissed.

  ---

• 2023 (7) TMI 1022
  Violation of principles of natural justice - ex-parte order - failure to respond to the Show Cause Notices - HELD THAT:- It is observed that the respondents do not seriously contest the reasons assigned by the petitioner. This Court is of the considered view that for complete and effective determination of the liability, the petitioner, who pleads bonafides, must have an opportunity but subject to all just exceptions in law. Hence, the petition is allowed in part and the impugned order dated 18.02.2022 (Annexure-Q) is quashed restoring the proceedings to the respondent for reconsideration for extending an opportunity to the petitioner and the petitioner to avail such opportunity shall appear without further notice before the respondent on 19.04.2023.

  ---

• 2023 (7) TMI 1021
  Levy of Service tax - service of construction of residential complex for Gujarat State Police Housing Corporation - HELD THAT:- The issue is no longer res-integra as in the various judgments which bear identical facts, this Tribunal has held that the construction of residential complex provided by the contractor to State Police Housing Corporation is not liable to service tax. The ratio of the decision of this Tribunal in the case of RIDDHI SIDDHI CONSTRUCTION VERSUS C.C.E. S.T. -VADODARA-II [ 2023 (5) TMI 340 - CESTAT AHMEDABAD] where it was held that these organisations are in no way concerned with any Commercial of Industrial activity and therefore, the activity undertaken by the appellant will fall under the exclusion clause of the definition for the Commercial or Industrial Construction Service. From the above decision it can be seen that construction of residential complex for State Police Housing Corporation was held to be non taxable - impugned order set aside - appeal allowed.

  ---

• 2023 (7) TMI 1020
  Scope of SCN - Change in classification by impugned order - SCN demand differs from impugned order - construction of residential complex services to Commercial or Industrial Construction Services - works contract service or not - renting of immovable property service - suppression of facts or not - extended period of limitation - HELD THAT:- It is an admitted fact that the show cause notice has proposed the demand of Service Tax under construction of residential complex. However, in the impugned order the demand was confirmed under Commercial or Industrial Construction Service. Thus, the impugned order has travelled beyond the scope of show cause notice. The show cause notice cannot be rectified by way of Adjudication Order passed in such show cause notice, therefore, on this ground alone demand is not sustainable. Moreover, the period involved is 2005-06, even if it is assumed that the appellant had provided commercial or industrial construction service but undisputedly the service was provided along with material, therefore, it is falling under works contract Service - The levy of Service Tax on Works Contract was brought under the statute only with effect from 01.06.2007. The Hon ble Supreme Court in the case of COMMISSIONER, CENTRAL EXCISE CUSTOMS VERSUS M/S LARSEN TOUBRO LTD. AND OTHERS [ 2015 (8) TMI 749 - SUPREME COURT ] clearly held that if the nature of the services is of works contract, the same is not levy to service prior to 01.06.2007. Extended period of limitation - renting of immovable property service - HELD THAT:- The levy of service Tax on renting of immovable property was not free from doubt, there were contrary judgments on this issue and finally the matter seized by the Hon ble Supreme Court. Therefore, the issue involved is of interpretation of the definition of renting of immovable property service. Moreover, the demand was raised on the basis of scrutiny of the documents of the appellant during the audit. This also shows that appellant have no intention to hide their transaction with intent to evade payment of Service Tax, therefore, in absence of any suppression of fact, fraud or collusion etc. the demand for the extended period cannot be sustained - this demand under renting of immovable property service is set aside on the ground of limitation. Appeal allowed.

  ---

• 2023 (7) TMI 1019
  Levy of service tax - construction of Residential Complex for Gujarat State Police Housing Corporation Limited. - HELD THAT:- In RIDDHI SIDDHI CONSTRUCTION VERSUS C.C.E. S.T. -VADODARA-II [ 2023 (5) TMI 340 - CESTAT AHMEDABAD ], which has considered various Tribunal decisions, it can be seen that the facts of this case being absolutely identical to the said judgment, the demand of service tax in the present case is also not sustainable - it was held in Ridhi Sidhi Construction that the service provided by the appellant are to establishments and organizations which are of non commercial or non industrial nature and therefore, the construction, renovation, repair work undertaken by them fall under the exclusion of the definition of Commercial or Industrial Construction Service hence, we hold that the appellants are not liable to pay any service tax on such activity. Demand set aside - appeal allowed.

  ---

• 2023 (7) TMI 1018
  Principles of natural justice - scope of SCN - no detailed grounds on the basis of which the subject credit was held not admissible - CENVAT credit - input service or not - insurance premium paid on marine cargo policy for the year 2016-17 - Rule 2(l) of Cenvat Credit Rules 2004, with effect from 01.04.2011 - HELD THAT:- What is apparent from the facts and records of the case is that the show cause notice has not given any detailed grounds on the basis of which the Department has alleged that subject credit was not admissible in the facts of the case. The show cause notice has only quoted the legal provisions, but have not brought on record any grounds based on which they have came to the conclusion that the said credit i.e. premium paid for Marine Insurance was not an admissible credit, either on the grounds of nexus to manufacturers or on the grounds that the clearance being ex-work and not FOR basis etc therefore not admissible. In the absence of any clear cut charge and the grounds given in the show cause notice, the confirmation of demand by taking recourse to various contradictory grounds, which were not even alleged explicitly and explained in the show cause notice, would not be legally tenable. It is now a settled law that the matter cannot be decided by the Original Authority or in appeal by the Appellate Authority on the grounds not covered or alleged in the show cause notice. The Delhi Bench of Tribunal in their order in the case of M/s R.K. Singh Company Vs Commissioner of Customs and Central Excise, Bilaspur [ 2023 (5) TMI 721 - CESTAT NEW DELHI] have in a case related to service tax matter, after carefully going through plethora of case laws, found that the Show Cause Notice was vague and therefore set aside the order of Commissioner confirming the demand based on said SCN. Though the case is in relation to service tax, the ratio can be relied upon in the case of matters relating to customs or central excise matter as well. Further, when the SCN lacks clarity of the grounds on which demand is raised, it deprives the noticees an effective opportunity to defend his case before the authority. It is clearly against the principles of natural justice. In this case, it is apparent that no specific grounds for denying the credit has been given except for quoting the legal provisions. Thus, on the ground itself that both Order-in-Original and Order-in- Appeal have travelled beyond allegations in show cause notice, the order of the Commissioner (Appeals) is liable to be set aside without going into the merits of the case advanced by both the sides - Appeal allowed.

  ---

• 2023 (7) TMI 1017
  Levy of Service Tax - Business Auxiliary Service or not - loading/unloading activities and transferring the goods on behalf of the Railways - HELD THAT:- On perusing the documents, it is seen that the Adjudicating Authority has gone into all the details including the Agreements entered into by the Appellant with the Indian Railways. He has passed a considered decision justifying the confirmation of demand holding that the said Agency have provided incidental and ancillary services and hence, fulfilled the criteria of clause (vii) of the definition of the Business Auxiliary Service. There are no reason to interfere with the factual findings of the Adjudicating Authority and the statutory provisions applied by him - appeal dismissed.

  ---

• Central Excise

• 2023 (7) TMI 1016
  100% EOU - Misdeclaration of export goods - Method of valuation - Rule 10-A or Rule 7 of CER - rejection of declared value - redetermination of value - under the guise of clearing Reject the prime quality goods were exported and sold into DTA to avail the benefit of Notification No.2/95-CE dated 04.01.1995 - demand alongwith penalty u/r 209A - Extended period of limitation - HELD THAT:- In the present case the appellants sold the prime quality goods mis-declaring the same as Rejects to the related company UIL and availed the benefit of concessional rate of duty under Notification No.2/95-CE. There are finding of facts recorded by all the authorities below that the appellants mis-declared the goods and sold prime quality goods as rejects and availed the benefit of concessional rate of duty illegally and fraudulently and by misdeclaration the authorities were justified in invoking the extended period of limitation. Therefore, the submission on behalf of the appellants that the authorities were not justified in invoking the extended period of limitation has no substance. It is required to be noted that it was the appellants who got the approval to sell the goods, sold the goods may be at the relevant time the permission was to sell the goods shown as rejects . However, thereafter it was found that the permission to import was obtained fraudulently by mis-declaring the same as rejects though the goods were of prime quality. Therefore, thereafter the appellants cannot be permitted to say that though the permission was to import the goods declared as rejects, subsequently it was found to be prime quality, there was no approval under proviso to Section 3(1). The appellant cannot be permitted to take the benefit of his own wrong and/or fraud committed by it. Once there was an approval/permission to import the goods it is sufficient to attract proviso to Section 3(1) of the Act - the submission on behalf of the appellants that in absence of any approval and/or permission proviso to Section 3(1) shall not be applicable has also no substance and has to be rejected. Valuation of goods - HELD THAT:- It is required to be noted that the appellants sold the goods of prime quality mis-declaring the same as rejects and the same was sold to the related company UIL. It has been found that the UIL sold the goods at a higher rate. Therefore, the valuation ordered to be done under Rule 7 on the basis of the same cannot be said to be arbitrary and/or illegal. Cogent reasons have been assigned by the Tribunal while considering the submission on valuation. Thus, no error has been committed by the Tribunal in rejecting the appeals preferred by the appellants - appeal dismissed.

  ---

• 2023 (7) TMI 1015
  Valuation of goods - customised motor vehicle parts sold to various classes of buyers i.e. industrial customers as well as industrial and another domestic customers including export sales - Extended period of limitation - HELD THAT:- Having heard learned counsel for the assessee who stressed upon the applicability of Rules 9 and 11 of the Central Excise Valuation Rules, as they existed at the relevant time, and sought to urge that the customs valuation rules were inapplicable. This court is satisfied that the concurrent findings with respect to the valuation are correct, and do not call for interference. Appeal dismissed.

  ---

• 2023 (7) TMI 1014
  Seeking permission for withdrawal of SLP - Rejection of rebate claim - failure to satisfy the condition No.15 of the notification No.92/2012 dated 04.10.2012 - HELD THAT:- The special leave petitions are dismissed as withdrawn.

  ---

• CST, VAT & Sales Tax

• 2023 (7) TMI 1013
  Levy falling upon the trade mark or brand name owner in the case of first sale of any product by such brand name holder or owner - Sale of Plastic moulded furniture - First point sale or not - further sale denied to fall within the mischief of Section 5(2) of the Kerala General Sales Tax Act (KGST Act) - holding brand names by two different licensing arrangements - HELD THAT:- In the present case, it is evident that both Kaveri and the assessee are authorized to use the trade mark and brand Nilkamal through separate arrangements. It appears that despite this fact, the present assessee is not engaged in manufacture of the goods in Kerala but is only selling them in that State. On the other hand Kaveri appears to be a manufacturer / dealer whose entire produce is sold to the assessee. In view of the categorical ruling of this Court in Kail there can be doubt that the sale to the assessee by Kaveri cannot be ignored by any stretch of the imagination - not in the least because Kaveri was an exempted unit at the relevant time. The fact that an exemption prevailed and enured in favour of a unit does not in any way detract from the circumstance that the levy subsists. This fundamental aspect appears to have been completely ignored by the High Court when it ruled that such sale had to be ignored altogether. The High Court, therefore, acted clearly in error in reversing the findings of Tribunal - the impugned judgment and order is hereby set aside; the appeals are allowed.

  ---

• 2023 (7) TMI 1012
  Method of calculation or the method of determining the exemption limits under the scheme, extended by the State, to multiplexes, who had put up capital infrastructure - Denial of extension of New Package Scheme of Incentives for Tourism Projects - invocation of doctrine of promissory estoppel - HELD THAT:- It is evident from the terms of the Scheme and the exemption notification which gave effect to it, fixed to limits i.e. (1) a time limit and (2) quantification of the exemption. The latter could be subject to the first i.e., in the event, the amount reached the exemption limit were achieved, before the expiry of the period in question (5-10 years), no further exemption could be claimed. The state, however, omitted to provide any mechanism to determine how the exemption limits could be worked out for the purpose of notional calculation of the quantified limit. This meant that a reasonable workable method of calculation had to be applied. The state s contention is founded on the assumption that the amount collected during the exemption period by the multiplex owners, also included in element of tax. This assumption, in the opinion of this court is flawed because there could have been no collection which amounted to tax. Furthermore, multiplex/theatre-owners were under an obligation to file monthly returns in terms of the enactment. This would have taken care of any allegation of abuse. The state s additional argument was that since the element of tax was notionally included in the collections by multiplexes, -during the exempted period, a further amount equivalent to the tax collectable had to be added. As the High Court concluded- and in the opinion of this Court correctly so, this contention was bereft of any logic and was plainly unreasonable. There is concededly, a gap in the manner how tax exemption limits can be discerned. Undoubtedly, the law is now settled that exemption notifications have to be interpreted strictly, and against assesses in case of ambiguity. A reasonable method of calculating benefit of tax exemption, for the purpose of considering (whether the 100% limit equivalent to capital expenditure) was reached or not is to notionally determine the tax amounts payable during the relevant period, when the multiplexes enjoyed tax exemption. This is possible, having regard to the returns filed by them during the time when they sought and were granted exemption. The outer limit (100% investment) is a discernible amount, which the units would be able to furnish, with appropriate proof in their books of accounts, and valuations furnished by them. Clearly enunciating this principle and applying to the facts of this case, High Court has followed a reasonable method which cannot, in this court s opinion, be faulted. This court holds that there is no merit in this appeal - Appeal dismissed.

  ---

• Indian Laws

• 2023 (7) TMI 1010
  Revocation of permission granted to Madhyamam Broadcasting Limited (MBL) by Union Ministry of Information and Broadcasting (MIB) to uplink and downlink a news and current affairs television channel called Media One - HELD THAT:- The findings are summarised as below: (i) Security clearance is one of the conditions required to be fulfilled for renewal of permission under Uplinking and Downlinking Guidelines; (ii) The challenge to the order of the MIB and judgment of the High Court on procedural grounds is allowed for the following reasons: (a) The principles of natural justice were constitutionalised by the judgement of this Court in Maneka Gandhi [ 1978 (1) TMI 161 - SUPREME COURT ]. The effect is that the courts have recognised that there is an inherent value in securing compliance with the principles of natural justice independent of the outcome of the case. Actions which violate procedural guarantees can be struck down even if non-compliance does not prejudice the outcome of the case. The core of the principles of natural justice breathes reasonableness into procedure. The burden is on the claimant to prove that the procedure followed infringes upon the core of procedural guarantees; (b) The appellants have proved that MBL s right to a fair hearing has been infringed by the unreasoned order of the MIB dated 31 January 2022, and the non-disclosure of relevant material to the appellants, and its disclosure solely to the court. The burden then shifts on the respondents to prove that the procedure that was followed was reasonable and in compliance with the requirements of Articles 14 and 21 of the Constitution. The standard of proportionality has been used to test the reasonableness of the procedure. (c) The judgments of this court in EX. ARMYMEN'S PROTECTION SERVICES P. LTD. VERSUS UNION OF INDIA (UOI) AND ORS. [ 2014 (2) TMI 1422 - SUPREME COURT] and DIGI CABLE NETWORK (INDIA) PVT. LTD. AND ORS. VERSUS UNION OF INDIA AND ORS. [ 2019 (1) TMI 2026 - SUPREME COURT] held that the principles of natural justice may be excluded when on the facts of the case, national security concerns overweigh the duty of fairness; (d) Though confidentiality and national security are legitimate aims for the purpose of limiting procedural guarantees, the state has been unable to prove that these considerations arise in the present factual scenario. A blanket immunity from disclosure of all investigative reports cannot be granted; (e) The validity of the claim of involvement of national security considerations must be assessed on the test of (i) whether there is material to conclude that the non-disclosure of information is in the interest of national security; and (ii) whether a reasonable prudent person would draw the same inference from the material on record; (f) Even assuming that non-disclosure is in the interest of confidentiality and national security, the means adopted by the respondents do not satisfy the other prongs of the proportionality standard. The non-disclosure of a summary of the reasons for the denial of security clearance to MBL, which constitutes the core irreducible minimum of procedural guarantees, does not satisfy the suitability prong; (g) The courts assess the validity of public interest immunity claims, which address the same harms as the sealed cover procedure, based on the structured proportionality standard. The power of courts to secure material in a sealed cover when contradistinguished with the scope of assessment of public interest immunity claims is rather unguided and ad-hoc. The standard of review that is used by the courts in public interest immunity claims and the lack of such a standard in sealed cover proceedings to protect procedural safeguards indicates that public interest immunity claims constitute less restrictive means. Additionally, while public interest immunity claims conceivably impact the principles of natural justice, sealed cover proceedings infringe the principles natural justice and open justice; (h) The courts could take the course of redacting confidential portions of the document and providing a summary of the contents of the document to fairly exclude materials after a successful public interest immunity claim; and (iii) The challenge to the order of MIB is allowed on substantive grounds. The non-renewal of permission to operate a media channel is a restriction on the freedom of the press which can only be reasonably restricted on the grounds stipulated in Article 19(2) of the Constitution. The reasons for denying a security clearance to MBL, that is, its alleged anti- establishment stance and the alleged link of the shareholders to JEI-H, are not legitimate purposes for the restriction of the right of freedom of speech protected under Article 19(1)(a) of the Constitution. In any event, there was no material to demonstrate any link of the shareholders, as was alleged. MIB shall now proceed to issue renewal permissions in terms of this judgment within four weeks and all other authorities shall co-operate in issuing necessary approvals. The interim order of this Court shall continue to operate until the renewal permissions are granted - appeal allowed.

  ---