Newsletter: Where Service Meets Reader Approval.
TMI Tax Updates - e-Newsletter
July 8, 2022
Case Laws in this Newsletter:
GST
Income Tax
Customs
Corporate Laws
Insolvency & Bankruptcy
Service Tax
Central Excise
CST, VAT & Sales Tax
Articles
News
Notifications
Circulars / Instructions / Orders
Highlights / Catch Notes
GST
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Clarification on issue of claiming refund under inverted duty structure where the supplier is supplying goods under some concessional notification - CGST - Circulars
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Clarification on various issue pertaining to GST - (i) refund claimed by the recipients of supplies regarded as deemed export; (ii) interpretation of section 17(5) of the CGST Act; (iii) perquisites provided by employer to the employees as per contractual agreement; and (iv) utilisation of the amounts available in the electronic credit ledger and the electronic cash ledger for payment of tax and other liabilities. - Circulars
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Fraud / Fake Invoice - Clarification on various issues relating to applicability of demand and penalty provisions under the Central Goods and Services Tax Act, 2017 in respect of transactions involving fake invoices - CGST - Circular
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Mandatory furnishing of correct and proper information of inter-State supplies and amount of ineligible/blocked Input Tax Credit and reversal thereof in return in FORM GSTR-3B and statement in FORM GSTR-1 - CGST - Circular
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Period of limitation for issue of Show cause notice (SCN) or passing order for raising Demand u/s 73 and claiming refund u/s 54 or 55 - Exclusion of certain period - Seeks to extend dates of specified compliances in exercise of powers under section 168A of CGST Act - Notification
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Filing of annual return - Seeks to exempt taxpayers having aggregate turnover upto Rs. 2 crores from the requirement of furnishing annual return for FY 2021-22 - Notification
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Input Tax Credit (ITC) - Interest on excessive or wrongly availed and utilized - Retrospective amendment to sub-section (3) made effective as on 5-7-2022 - Section 50 of the CENTRAL GOODS AND SERVICES TAX ACT, 2017
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Amendment relating to cross transfer any amount of tax, interest, penalty, fee or any other amount available in the electronic cash ledger (sub-rule (10)) made effective from 5-7-2022 - Section 49 of the CENTRAL GOODS AND SERVICES TAX ACT, 2017
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Seeking grant of anticipatory bail - The respondents in their reply stated that for affecting the arrest of anybody for offences punishable under Section CGST Act, 2017, written approval of the Principal Additional Director General is required. So far there is not even such proposal, what to speak of approval of the Principal Additional Director General. According to respondents, in such circumstances, the application is pre-mature and not maintainable. Reply of respondents clearly indicates that at present they have no intention to arrest the accused. - application moved by applicant-accused is pre-mature - DSC
Income Tax
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Validity of Assessment u/s 153A - in cases where the assessment or reassessment proceedings have already been completed and assessment orders have been passed, which were subsisting when the search was made, the Assessing Officer would be competent to reopen the assessment proceeding already made and determine the total income of the assessee. The Assessing Officer, while exercising the power under Section 153A of the Act, would make assessment and compute the total income of the assessee including the undisclosed income, notwithstanding the assessee had filed the return before the date of search which stood processed under Section 143(1)(a) of the Act. - HC
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Depreciation u/s 32 - scope of the term "Plant" - bottles and crates appellant-assessee uses in the course of carrying out its business can be treated as plant within the meaning of Section 32(1)(i) - merely because the bottles and crates do not fall under the categories listed in Item 2 of the Schedule, it cannot be said that they need to be excluded from the definition of “Plant”, if they, otherwise fall within the definition of “Plant”. - HC
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Correct head of income - surplus arising from the transfer and assignment of right, title and interest in the agreements for acquisition of office premises - Tribunal has considered the business reality and found that the two office premises by the Appellant-Assessee were acquired with an intention to resell and not for use. - Having found no perversity in the approach of the Tribunal and its conclusion, the first question of law framed will have to be answered against the Appellant–Assessee - HC
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Reopening of assessment - validity of notice issued u/s 148-A - seven days clear notice issued or not? - the authority is only required to form a prima facie opinion of any income having escaped assessment and thereafter proceed under Section 148 of the Income Tax Act. The concept of “free play in the joints” should be made available to the authority which is empowered to take a decision under Section 148-A of Income Tax Act. The decision under Section 148-A of the Income Tax perse does not fasten any kind of liability or penalty upon the assessee. - HC
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Disclosure of income under VDIS - set off of tax under VDIS with advance tax (including TDS) in regular course - a Section 70 and 71 mandate that the income disclosed in VDIS shall not be included income under section 139 means income which had already been disclosed and that assessment is not liable to be reopened. The petitioner in order to avail the undue benefit of this scheme has filed the belated return by contending that the filing of such belated return is permissible and claimed the deduction of income as well as the refund of the tax. - HC
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Exemption u/s 11 - whether benefits were availed by the specified persons without any other compensations or rent paid by such specified persons is inadequate - it is the submission of the appellant trust that the specified persons had been rendering the voluntarily professional services to the appellant trust also remains uncontroverted. Question that arises for consideration before us is, can it be said, that the appellant availed the operation rooms owned by the appellant trust are used by the assessee without any compensations, the answer is “No”, as the appellant trust could have saved the cost of running the trust on rent, salaries as there is no rent or fees or any other claim by the specified persons of the trust for utilization of the premises as well rendering the voluntarily profession services. - AT
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Depreciation on the furniture and fixture against the rental income of movable assets - In case of contract, parties to the agreement make law for themselves to which nothing can be added or deleted. When there was no intention of the parties to the lease agreement (supra) that rent is being paid for immovable and movable assets separately no amount of rent can be attributed to the furniture and fixture as claimed by the assessee. - AT
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Deemed dividend addition u/s 2(22)(e) - substantial shareholding in the company - As submitted assessee has advanced the money on interest to the company and there is a running current account between the company and the assessee - The assessee is making Loan transactions with the company in regular/ ordinary course of business, therefore the provisions of Sec. 2(22)(e) of the Act cannot be applied. - AT
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Additions u/s 30 - deduction of Lease Equalization Charges - type of lease undertaken- scope of accounting standards - AO noticed that, assessee has created Rent Equalization Reserve - The deduction on the basis of average rent per year will not affect the tax revenue of the department because of the reason that when actual payment of lease rent is more than the average rent in subsequent years, then excess deduction claimed in the earlier years would net off the difference and consequently at the end, there would be no difference in actual payment and amount of deduction claimed. - AT
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Disallowance of short term capital loss aroused on the forfeiture of share warrant money - additions u/s 68 - since all the details of the flow of funds was before the assessing officer he has not been able to point out as to which stage and in what respect ingredients of section 68 are not cogently satisfied. There is no mention as to whether the identity is not available, or that the source of funds is not given, or that Assessing Officer has unearthed some other transactions. Hence the assessing officer's order is only based upon surmises and conjecture and hence it is not sustainable in law. - AT
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LTCG - land including factory building of the assessee was acquired by the State Govt. and the assessee had received compensation including interest - As also settled law that the Income-tax authorities are bound by the guidelines laid down the CBDT Circulars. The position as it stands now with the passage of the RFCTLARR Act, is that all compensations received qua this Act are not taxable. It has been clarified by the CBDT Vide Circular No.36/2016 dated 21.10.2016 that even where there is no separate deduction allowable under the Income Tax Act, any compensation covered by sections 105 and 106 of the RFCTLARR Act is exempt from taxation. - AT
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Addition on the bases of seized material procured from corporate office - Since the seized material is neither the regular books of account nor kept in the regular course of business of the assessee. They were not sufficient enough to fasten the liability on the present assessee, against whom they were sought to be used. The seized document collected by the department did not raise a reasonable ground to believe that there is a valid payment to the present assessee so as to award contract to the KNNL and the payment is relating to for awarding the contract of UBP. - The seized material itself would not furnished evidences of the truth of their contents and that was not corroborated by any further evidence so as to hold that the assessee has actually received the said payment - AT
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Unutilized CENVAT and Service Tax credit written off - Bad debts u/s 36(1)(vii) r.w. Section 36(2) - assessee has not been able to bring anything on record to establish that the unutilized CENVAT and Service Tax credit amount in question had become irrecoverable during the year under consideration so that the same can be allowed as business loss in that year. - No deduction - AT
Customs
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BCD and AIDC on Raw Cotton - Seeks to amend Notification No. 21/2022 dated 13 April 2022 - Notification
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Classification of imported goods - Magnetic Iron Centre Copper/Centre Core Assembly - Although it is found that Rule 1 of Interpretation read with Section Note 2 itself resolves the classification dispute, also some other Rules of interpretation are examined to see if they would require a different view to be taken. - Applying Rule 3 (a), it is found that the disputed goods, being child part of spark plugs are a more specific description of part of electro-magnets. Further, applying Rule 3(c), the last of the competing entries would be the correct entry. Thus, viewing from any angle, it is found that the disputed goods have been correctly classified in the impugned order under 8511 90 00 as parts of spark plugs. - AT
DGFT
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Implementation of Paper Import Monitoring System (PIMS) - Clarification w.r.t. applicability of PIMS at the time of import at SEZ/FTWZ/EOU and further import into DTA - Circular
IBC
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Disciplinary Proceedings - Discloser of Relationship of the insolvency professional with various entities - Insolvency and Bankruptcy Board of India (Insolvency Professionals) (Amendment) Regulations, 2022 - Notification
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Operational Debt or not - The observation of this Tribunal in the above case in respect of definition of ‘service’ under Consumer Protection Act, 2019 and Central Goods and Services Tax Act, 2017 are not covered by Section 3(37) of the Code, with regard to which observation, no exception can be taken. However, in the facts of the present case, where Agreement itself contemplate payment of GST for the services under the Agreement, on which GST is payable, the definition of ‘service’ under Central Goods and Services Tax Act, 2017 cannot be said to be irrelevant - in the present case, debt pertaining to unpaid license fee was fully covered within the meaning of ‘operation debt’ under Section 5(21) - AT
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CIRP - Preferential Transactions or not - related transaction or not - Transaction within look bak period - such transactions are carried with intent to defraud creditors or not - These transactions have been executed within the look back period of two years before the commencement of Insolvency proceeding and are therefore covered under section 43(4)(a). Further the transaction mentioned in para 6 above are therefore held to be undervalued transactions in terms of Section 45 of the Code and Transaction as explained in para 7 are held to be fraudulent transactions as defined under Section 66 of the Code. - Tri
SEBI
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Modification in Cyber Security and Cyber resilience framework of KYC Registration Agencies (KRAs) - Circular
Service Tax
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PAN India Jurisdiction - The definition of “Central Excise Officer” in Section 2(b) of the Central Excise Act, 1944 was made applicable for Section 73 of Chapter V of the Finance Act, 1994 which prescribes a machinery for recovery of service tax not levied or paid or short-levied or short-paid or erroneously refunded - under Rule 3 of the Service Tax Rules, 1994, the Board can appoint any other officer to exercise power within the “local limits”. However, that would not mean that the officers of ”Directorate of Central Excise Intelligence (DGCEI) [presently The Directorate of GST Intelligence]” who are already “Central Excise Officers” under Notification No.38/2001-C.E. (N.T), dated 26.06.2001 for whole of India cannot exercise power pan India. - HC
Central Excise
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Ethanol blended petrol - High speed diesel oil blended with bio -diesel - Effective Rate of Duty of excise - Seeks to amend Notification No. 11/2017-Central Excise, dated the 30th June, 2017 - Notification
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Recovery of sums due to Government from the owner of property - default made by the lessee under Leave & Licence Agreement - it is settled that the government dues against the assessee cannot be recovered from the owner of the property which was leased out to the assessee against whom the dues are pending - the amount collected wrongly directed to be refunded with interest - AT
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Penalty under rule 26 of the CER, 2002 can be imposed on a person only when it is proved beyond doubt that the person dealing with excisable goods knew or had reason to believe that such excisable goods were liable to confiscation. There is no evidence on record to prove that Appellant has acted in a way to attract the penalty provisions of rule 26 of the CER, 2002. - AT
Case Laws:
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GST
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2022 (7) TMI 298
Seeking grant of Bail - case of Department is that applicant have never been summoned for participating in the investigation and that the investigation in the present case is at the threshold - wrongful availment and utilisation of Input Tax Credit (ITC) claimed in the present case comes to about Rupees Forty Crores - HELD THAT:- Reliance can be placed in the case of TARUN JAIN VERSUS DIRECTORATE GENERAL OF GST INTELLIGENCE DGGI [ 2021 (12) TMI 135 - DELHI HIGH COURT ] where it was held that Custodial interrogation in the instant matter is neither warranted nor provided for by the statute. Detaining the petition in Judicial Custody would serve no purpose rather would adversely impact the business of the petitioner. Since the present case is also u/s 132 (c) as was the case of Sh. Tarun Jain, the ratio of the said case applies on all fours to the present case. Needless to say that the evidence in the present case is also documentary. Thus, it cannot be said that the said accused persons cannot have any apprehension or that the stage of considering the grant of anticipatory bail has not yet arrived in the present case - considering the ratio of the case of Tarun Jain Vs. DGGI the accused persons are also entitled to anticipatory bail in the event of their arrest by the IO on furnishing of bail bonds and surety bonds in the sum of Rs. 50,000/, each, to the satisfaction of the officer making the arrest. Application disposed off.
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2022 (7) TMI 297
Seeking grant of Regular Bail - fraudulent availment of input tax credit (ITC) - existence of the firm or not - section 132(1)(b) (c) of GST Act, 2017 - HELD THAT:- In the peculiar facts and circumstances of the case, existence and non-existence of the supplier firms of M/s Rajnandini is yet to be determined and so is the tax liability of the applicant. In this case the applicant-accused is in custody since 19.5.2022. His custodial interrogation is no more required. Therefore, keeping in view the totality of facts and circumstances of the case and without commenting anything on merit, the bail application is allowed. This bail order is subject to the condition that the applicant shall deposit 10% of the total liability i.e. 7.2 Crore within 10 working days from today with the concerned competent authority and other conditions imposed - application allowed.
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2022 (7) TMI 296
Seeking grant of Bail - causing a loss to Government Exchequer - economic offences - offence under section Section 132(1)(b)(c) read with 16(2)(b) of the CGST Act, 2017 which is punishable under Section 132(1)(i) of the CGST Act, 2017 - HELD THAT:- It is settled preposition of law that economic offences in itself are considered to be gravest offence against the society at large and hence are required to be treated differently in the matter of bail. It seems that the entire community would aggrieved if the economic offenders who ruin the economy of the State are not brought to book as such offences affects the very fabric of democratic governance and probity in public life. Further, if a murder committed in the heat of moment upon passing being aroused, the economic offence is supposed to be committed with cool calculation and deliberately with an eye on personal profit regardless of the consequence of the community. A disregard for the interest of the community can be manifested only at the cost of forfeiting the trust and faith of the community in the system to administer justice in an even handed manner without fear of criticism from the quarters which view white collar crimes with a permissive eye unmindful of the damage done to the national economy and national interest. Reliance can be placed in the case of STATE OF GUJARAT VERSUS SHRI MOHANLAL JITAMALJI PORWAL AND ANOTHER [ 1987 (3) TMI 111 - SUPREME COURT ] where it was held that The entire Community is aggrieved if the economic offenders who ruin the economy of the State are not brought to books. A murder may be committed in the heat of moment upon passions being aroused. An economic offence is committed with cool calculation and deliberate design with an eye on personal profit regardless of the consequence to the Community. A disregard for the interest of the Community can be manifested only at the cost of forfeiting the trust and faith of the Community in the system to administer justice in an even handed manner without fear of criticism from the quarters which view white collar crimes with a permissive eye unmindful of the damage done to the National Economy and National Interest. The High Court was therefore altogether unjustified in rejecting the application made by the learned Assistant Public Prosecutor invoking the powers of the Court under Section 391 of the CrPC. Bail application dismissed.
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2022 (7) TMI 295
Seeking grant of anticipatory bail - neither any amount was deposited nor any GST returns were filed properly by the company in which the applicant is the Director - HELD THAT:- Undisputedly the applicant was running event management company under the name and style of M/s salt Experience Management Pvt Ltd. The inquiry officer under GST Act asked him to appear before him along with tender statement, purchased sale invoices for the period July 2017 onwards. In response to said notice, the applicant instead of complying with the directions and cooperating, opted to file this pre arrest bail application. The respondents in their reply stated that for affecting the arrest of anybody for offences punishable under Section CGST Act, 2017, written approval of the Principal Additional Director General is required. So far there is not even such proposal, what to speak of approval of the Principal Additional Director General. According to respondents, in such circumstances, the application is pre-mature and not maintainable. Reply of respondents clearly indicates that at present they have no intention to arrest the accused. In the obtaining circumstances, this court is of the view that application moved by applicant-accused is pre-mature and he should respond to the notice dated 24.05.2022 as a law abiding citizen having faith in the rule of law - this court is of the opinion that in such like cases at this stage concession of bail can not be granted. Course of legitimate inquiry cannot be hampered. Hence, the present bail application moved by petitioner-applicant is dismissed being pre-matured.
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Income Tax
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2022 (7) TMI 294
Validity of Assessment u/s 153A - addition for bogus unsecured loan and bogus LTCG/ STCG - incriminating materials found at the time of search/ survey or not? - HELD THAT:- Facts of the present case show that incriminating materials were available on record, which have been used to make assessment/ reassessment of the respondents-assessees. In the absence of any bar under Section 153A of the Act, 1961, it cannot be said that assessment or reassessment under Section 153A cannot be made if incriminating material itself has not been found in the search but is otherwise available on record or it has been brought on record during the course of investigation. Findings of fact recorded in the assessment order and in the order of the CIT(A) clearly reveal voluminous incriminating materials were not available in the hands of the Assessing Officer and on the basis of such incriminating materials, the Assessing Officer assessed the respondents-assessees under Section 153A of the Act, 1961. Incriminating materials relating to the respondents-assessees were available on record and were also found in the search/ investigation relating to certain other person. It is admitted case of the respondents assessees that search under Section 132 of the Act, 1961 was conducted in their premises in November, 2015. Another search was conducted on 28.04.2015 on Nikki Global Finance Ltd. Searches were conducted on premises of certain other persons on 24.04.2014 and statement of one Sri Subodh Agarwal was also recorded who appeared to be the real operator of the Success Vyapar Ltd. through his employee Sri Rishikant Awasthi, a nominal Director. Neil Industries Ltd. was also found being run from the same premises at Kanpur. On the basis of certain incriminating materials found regarding accommodation entries, the proceedings under Section 153A of the Act, 1961 was initiated by the Assessing Officer. Bogus unsecured loans and bogus LTCG/ STCG were assessed in the hands of the respondents-assessees. Thus, it cannot be said that either no incriminating materiel was found or that no incriminating material was available on record against the respondents assessee's on the basis of which assessment orders under Section 153A of the Act, 1961 have been passed - Thus, findings recorded and conclusion drawn by the ITAT, cannot be sustained. As decided in RAJ KUMAR ARORA [ 2014 (10) TMI 255 - ALLAHABAD HIGH COURT] even though an assessment order has been passed under Section 143(1) (a) or under Section 143(3) of the Act, the Assessing Officer would be required to reopen these proceedings and reassess the total income taking notice of undisclosed income even found during the search and seizure operation. The fetter imposed upon the Assessing Officer under Sections 147 and 148 of the Act have been removed by the non obstante clause under Section 153A of the Act. Consequently, we are of the opinion that in cases where the assessment or reassessment proceedings have already been completed and assessment orders have been passed, which were subsisting when the search was made, the Assessing Officer would be competent to reopen the assessment proceeding already made and determine the total income of the assessee. The Assessing Officer, while exercising the power under Section 153A of the Act, would make assessment and compute the total income of the assessee including the undisclosed income, notwithstanding the assessee had filed the return before the date of search which stood processed under Section 143(1)(a) of the Act. Thus the reasons given by the Tribunal that no material was found during the search cannot be sustained, since we have held that the Assessing Officer has the power to reassess the returns of the assessee not only for the undisclosed income, which was found during the search operation but also with regard to the material that was available at the time of the original assessment - Also see KESARWANI ZARDA BHANDAR SAHSON ALLD. [ 2017 (4) TMI 57 - ALLAHABAD HIGH COURT] - Decided in favour of revenue.
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2022 (7) TMI 293
Disallowance u/s 14A r.w.r. 8D - mandation of recording satisfaction - As argued AO has failed to give cogent reasons of dissatisfaction regarding the computation of the disallowance - HELD THAT:- In the case on hand, we have perused the assessment order and we find that no satisfaction has been recorded by the assessing officer as the assessing officer merely comes to the conclusion that the disallowance made suo moto by the assessee is not convincing. This finding does not satisfy the tests laid down by the Hon'ble Supreme Court in the decision in MAXOPP INVESTMENT LTD [ 2018 (3) TMI 805 - SUPREME COURT] referred to above. Therefore, we find that the Tribunal was right in rejecting the appeal filed by the Revenue. - Decided against revenue.
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2022 (7) TMI 292
Reopening of assessment u/s 148 - Eligibility of Reason to believe - capital gains is chargeable to tax for the Assessment Year 2008-09 and not Assessment Year 2009-10 - HELD THAT:- Except stating that assessee had received Rs.30 Lakhs in the financial year 2007-08 from Rohan Monteiro, the ITO has not recorded any reasons much less, 'reasons to believe' while issuing notice under Section 148 of the Act. Shri. Shankar is right in his submission that payment received in every transaction cannot be construed as Income, but the ITO in this case, has issued notice only on the premise that assessee had received Rs.30 Lakhs in financial year 2007-08. Such notice is not sustainable in law. It is also relevant to note that on completion of transaction, the assessee has filed his return for the financial year 2008-09 and the same is not disputed. Appeal allowed.
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2022 (7) TMI 291
Benefit of LTC/HTC to cover foreign travel - TDS liability - Leave Travel Concessions to the officers of the Public Sector Undertakings - HELD THAT:- Regarding the submission of the Income Tax Department, no doubt, the provisions of the Act are to be applied scrupulously. Under Section 10(5) of the Income Tax Act, Travel Concession within India alone is exempted. The Travel Concession, if extended to other countries, then the exemption Clause cannot be applied and the persons are liable to pay tax under the said provision. Thus, the Income Tax Department is empowered to invoke the provisions, if the Travel Concession is extended to abroad and in all such cases, they are liable to deduct TDS as applicable and by following the procedures as contemplated under the Income Tax Act. When the Government of India specifically passed a memorandum that the Leave Travel Concessions to the officers of the Public Sector Undertakings and others to be restricted on par with the Government of India scheme, then there is a context and meaning with reference to certain foreign affairs and therefore, there is no infirmity in respect of the order impugned passed by the respondents in cancelling the concession extended to travel abroad under Leave Travel Concession facility. Rule 44 of the State Bank of India Officers Service Rules, 1992, regarding Leave Travel Concession and Leave Encashment are comprehensive and provides the procedures, definitions etc., The said Rule alone would have the Statutory enforceability. Government of India Memorandum dated 30.04.2014 states that the Public Sector Banks have to adopt the LTC scheme of the Government of India. The letter itself reveals that there are certain reasons and implications in respect of allowing such Bank officials to travel abroad under the LTC scheme as it relates to External Affairs of the country. The said Circular of the Government of India was implemented by the Indian Bank Association and based on the said decision, the State Bank of India also issued the Circular, withdrawing the facility to the officers to travel abroad. Thus, the Government of India policy regarding the Leave Travel Concession to the officers of the Public Sector Banks also to be followed in the interest of public. The instructions earlier issued to facilitate the officers of the Bank to get reimbursement for foreign travel, which is not in consonance with Rule 44 of the State Bank of India Officers Service Rules, 1992 cannot be therefore, construed as an absolute right conferred on the officers of the State Bank of India nor there is a bipartite agreement or settlement exists between the parties. Thus, there is no infringement of service rights or violation of service conditions, as there is no withdrawal of benefit conferred to the officers of the State Bank of India under Rule 44 of the State Bank of India Officers Service Rules, 1992. The concession and the facility extended to get reimbursement of the foreign travel expenses, was given by way of an additional facility through a letter and such letter was cancelled and the facility was withdrawn pursuant to the orders of the Government of India, Ministry of Finance and the Circular issued by the Indian Bank Association. The policy of the Government of India, Ministry of Finance is to be followed in the interest of public by all the Public Sector Banks, which was adopted by the Indian Bank Association. This being the factum established, there is no further scope for any discussion or negotiation with the officers of the State Bank of India as the withdrawal of such additional facility would not infringe the service rights or result in violation of service conditions of the officers of the State Bank of India. Providing an opportunity in such circumstances is a futile exercise and furthermore, the officers of the Bank are not prejudiced nor their service rights are violated. The executive actions regarding the foreign affairs should be viewed with greater latitude and the decision being taken by the State Bank of India is pursuant to the Government of India policy, which was adopted by Indian Bank Association. Thus, this Court do not find any perversity or infirmity in respect of the decision taken by the State Bank of India based on the policy decision of the Government of India, which was adopted by the Indian Bank Association.
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2022 (7) TMI 290
Recovery proceedings - Attachment of PPF account - petitioner was investing HUF s money in the said PPF account and is also a partner of Gujarat Steel Pipes Partnership Firm and the said firm was also holding a Cash Credit Account with the respondent-Bank - bank debited the amount from PPF Account to Cash Credit Account of his partnership firm - HELD THAT:- It is not in dispute that the respondent Bank have withdrawn/debited the aforesaid amount of Rs.85,380/- from the PPF Account of the petitioner. It is well settled proposition of law that the amount of Public Provident Fund account shall not be liable to any attachment in respect of any debt or liability incurred by the account holder. Thus, the action of the respondent Bank of withdrawing/debiting the aforesaid amount from the PPF Account of the petitioner is illegal and unjustified. Under the circumstances, the respondent Bank is directed to deposit the amount of Rs.85,380/- within a period of four weeks in the Savings Bank Account in the name of Rajnikant Punjalal Shah HUF with the Bank of Baroda, Law Garden Branch, Ahmedabad. It is clarified that the observations made by this Court may not be construed adverse to the respondent Bank in any other proceedings.
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2022 (7) TMI 289
Depreciation u/s 32 - bottles and crates appellant-assessee uses in the course of carrying out its business can be treated as plant within the meaning of Section 32(1)(i) - HELD THAT:- As regards the factual position, that is, use of glass bottles, return of bottles in the manner in which crates are used, the Revenue has accepted the facts of the present case and the factual position in the case of Jai Drinks (P.) Ltd. and Sri Krishna Bottlers Pvt. Ltd. are identical. Tribunal did not hold against the Appellant making a distinction in the facts on the factual situation but has not followed the decisions of Rajasthan High Court and Andhra Pradesh High Court as above relying on the decision of the Supreme Court in the case of Steel City Beverages Ltd. Therefore, the only question that will arise for consideration is whether the Supreme Court in the case of Steel City Beverages Ltd., has overruled the view taken in the case of Jai Drinks (P) Ltd. [ 1987 (9) TMI 8 - RAJASTHAN HIGH COURT] and Sri Krishna Bottlers Pvt. Ltd. [ 1988 (4) TMI 10 - ANDHRA PRADESH HIGH COURT] construing the provisions of Section 43 (3) of the Act. Supreme Court, in the case of Steel City Beverages Ltd. [ 1998 (11) TMI 125 - SUPREME COURT ] considered the issue of whether the bottles and crates can be construed the definition of Plant and held bottles those could not be considered as stock in trade. However, the issue that arose before the Supreme Court under the Bihar Sales Tax Supplementary (Deferment of Tax) Rules 1990 Tribunal, before following the decision of the Supreme Court in Steel City Beverages Ltd., had not adverted to these observations of the Supreme Court at all and, therefore, clearly erred in applying this decision and not following the decisions of the High Courts of Rajasthan and Andhra Pradesh cited before it, which had construed the same provision which was under consideration. Respondent that bottles and crates could not be included in the definition of the Plant because they have no reference to the categories mentioned therein; therefore, cannot be accepted. As regards the contention of Respondent based on the Income Tax Rules and Depreciation Table is concerned, the Table is only states that certain categories, which are Machinery and Plants, will have particular rate and rest which fall under the Machinery and Plant will have different rate. Therefore, merely because the bottles and crates do not fall under the categories listed in Item 2 of the Schedule, it cannot be said that they need to be excluded from the definition of Plant , if they, otherwise fall within the definition of Plant . It has to be noted that, however, this question had arisen for the assessment year 1989-90 based on the situation therein, and therefore, the question is whether the Tribunal was right in holding against the Appellant for that particular assessment year. As noted in the decision of Sri Krishna Bottlers Pvt. Ltd [ 2004 (11) TMI 37 - ANDHRA PRADESH HIGH COURT] as to what would happen if plastic bottles were used or the manner of use is changed in future, those would be the facts of that case. - Decided in favour of assessee.
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2022 (7) TMI 288
Correct head of income - surplus arising from the transfer and assignment of right, title and interest in the agreements for acquisition of office premises - whether the office premises could be treated as stock-in-trade by the Appellant Assessee or its investment in fixed assets - whether Tribunal has erred in holding that the surplus arising from the transfer and assignment of right, title and interest in the agreements for acquisition of office premises is an adventure in the nature of trade and therefore, assessable as business income? - HELD THAT:- Tribunal noted that the property admittedly never yielded income to the Assessee, and it was never put to any personal use. When the Appellant Assessee was offered possession of the premises on 13 July 1987, the Appellant Assessee sold the premises to Bank of India on 3 August 1988 and therefore, after the right to occupy arose, within one year, the property was sold. Though it is sought to be contended by the Appellant Assessee that the decision to sell the property was taken earlier, the issue is whether the finding of the Tribunal can be considered as perverse. Tribunal also found that the Appellant Assessee had invested the entire funds in acquiring the premises was a relevant factor in deciding the intention as a man of normal business prudence would not normally invest its entire funds in acquiring the premises when it could easily carry on the business from some other premises. Assessee had not provided any evidence of litigation or paucity of funds. Tribunal rendered its finding that it is not possible for us to reappreciate the evidence on record and come to another finding of fact as that is not the scope of the appeal under Section 260-A -Tribunal has applied the correct test, taking into consideration all the relevant facts and drawing inferences from the same. Tribunal has considered the business reality and found that the two office premises by the Appellant-Assessee were acquired with an intention to resell and not for use. Having found no perversity in the approach of the Tribunal and its conclusion, the first question of law framed will have to be answered against the Appellant Assessee and is accordingly answered.
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2022 (7) TMI 287
Late filing fee under section 234E - Intimation u/s 200A - demand for the period before 01.06.2015 - HELD THAT:- This Court had already declared that section 234E has no application prior to 01.06.2015 since section 200A was inserted only from that day. Thus for the period prior to 01.06.2015, respondents had no jurisdiction or authority to impose the late fee. The decision in M/s. Sarala Memorial Hospital's case has become final and binding. Since the judgment of the jurisdictional High Court was not considered by the Appellate Authority, Ext. P8 and Ext. P9 are perverse, warranting interference under Article 226 of the Constitution of India. Since the judgment in M/s. Sarala Memorial Hospital's case ( 2018 (12) TMI 1818 - KERALA HIGH COURT] upra) declared that late fee under Section 234E cannot be imposed prior to 01.06.2015, no purpose will be served by sending the case back to the Tribunal. The levy of late fee is without authority and legally invalid.
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2022 (7) TMI 286
Eligibility of Vivad se Vishwas scheme - Denial of claim as prosecution proceedings under Section 276 CC of the Act were instituted for the aforesaid assessment years before the date of filing of the declarations and the proceedings were pending - compounding fees for offences committed by the Petitioners under Section 276CC - HELD THAT:- As basic thrust is settlement of direct tax disputes in respect of tax arrears which as already noticed above has a definite connotation under the Vivad se Vishwas Act. Therefore, the interpretation which has been put forward by the respondents runs counter to the scope of settlement as contemplated under the Vivad se Vishwas Act. To that extent answers given to FAQ Nos.22 and 73 are contrary to the very scheme of the Vivad se Vishwas Act. Coming back to the facts of the present case, prosecution against petitioner No.1 is under Section 276 CC which pertains to failure to furnish return under Sections 139 (1) or under Section 153 A etc., of the Act. Such delayed filing of income tax returns cannot be construed to be a tax arrear within the meaning of Section 2 (1) (o) of the Vivad se Vishwas Act. Therefore, such pending prosecution cannot be said to be in respect of tax arrear though it may be relatable to the assessment years in question and cannot render petitioner No.1 ineligible. Thus, having regard to the discussions made above, rejection of the declarations of petitioner No.1 by the respondents on 31.01.2021 and 31.03.2021 cannot be sustained and those are accordingly set aside and quashed. Consequently, the matter is remanded back to the respondents who shall consider the declarations of petitioner No.1 dated 29.12.2020 (or subsequent declarations dated 31.01.2021 and 31.03.2021) in conformity with the provisions of the Vivad se Vishwas Act dehors the answers given to FAQ Nos.22 and 73. In view of the decision rendered on the second grievance of the petitioners, it may not be necessary for us to adjudicate on the other grievance of the petitioners relating to computation of compounding fee by the respondents and the related compounding of offences under Section 276 CC of the Act. Writ petition is accordingly allowed to the extent indicated above
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2022 (7) TMI 285
Reopening of assessment - validity of notice issued u/s 148-A - seven days clear notice issued or not? - petitioner submits that in the present case notice was issued on 22/03/2022 and in the notice, the petitioner was directed to respond by 28/03/2022, thus, according to the petitioner the same was not a seven days clear notice - HELD THAT:- The contention of learned counsel for the petitioner is that since show cause notice issued under Section 148A(b) fell shot by the mandated minimum period of seven days, the entire exercise thereafter has vitiated is considered to be rejected at the very outset. Reason being that though the requirement of affording seven days clear notice to the assessee is couched in mandatory language but in a given case where despite show cause notice having been issued affording less than seven days for assessee to respond, the assessee yet responds to the same within the deficient period, in an elaborate manner without objecting to the very maintainable of such show cause notice, the assessee would be deemed to have waived his right to assail a notice solely on the ground of deficient notice period. The scheme of Income Tax Act and the object behind its promulgation is to ensure maximum collection of tax by the State. Income Tax Act is more Revenue Centric than Assessee-Centric, thus, in case of any ambiguity or gray area while interpreting of any provision of Income Tax Act can be resolved by taking que from the object and intent behind enactment of Income Tax Act. As such in the present case, where a detailed reply on merit was submitted by the petitioner to the show cause notice which afforded six days instead of prescribed seven days to submit reply, the petitioner is estopped from raising any objection to the said show cause notice merely on the aforesaid ground. The authority upon taking into consideration the detailed reply of the petitioner, has taken a decision to issue notice under Section 148 of the Income Tax Act on the basis of material available on record including reply of the petitioner. Thus, this decision in our considered opinion cannot be gone into inasmuch as it is for the authority to act in accordance with Section 148-A of the Income Tax Act, at which stage. In our considered opinion, the authority is only required to form a prima facie opinion of any income having escaped assessment and thereafter proceed under Section 148 of the Income Tax Act. The concept of free play in the joints should be made available to the authority which is empowered to take a decision under Section 148-A of Income Tax Act. The decision under Section 148-A of the Income Tax perse does not fasten any kind of liability or penalty upon the assessee. On the contrary, the decision which is taken under Section 148-A of the Income Tax is followed by a notice under Section 148 of the Income Tax Act where another opportunity of being heard is afforded. Thus, in our considered view, we do not find any illegality in the order impugned dated 31/03/2022 (Annexure P/7) as well as the notice impugned 31/03/2022
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2022 (7) TMI 284
Reopening of assessment u/s 147 - Whether Respondent No.1 has not obtained the requisite approval of the specified authority u/s. 151 of the Income Tax Act before the issuing the impugned notice? - HELD THAT:- Initially, the petitioner has filed the present petitions challenging the show-cause notice and during pendency of the petitions, the assessment proceedings have been completed and final order has been passed. The petitioner has not amended the writ petition challenging the validity of the assessment order, hence the same cannot be examined in this petition. Admittedly, the assessment order is appellable and there is a pre-deposit condition which cannot be relaxed or waived. The petitioner is challenging the jurisdiction of the authority mainly on the ground that there was no material before the Assessing Officer to initiate the proceedings u/s. 148 of the Income Tax Act. In order to decide this issue, this Court is required to examine the merits of the case which is not permissible under Article 226 of the Constitution of India. The appellate authority is competent to decide as to whether there was any material before issuing the show-cause notice or not? Even otherwise, the impugned show-cause notice does not survive now as the final assessment order has been passed. Hence, these petitions are liable to be dismissed. Accordingly, all these petitions are dismissed. However, it is made clear that dismissal of these petitions shall not come in the way of appellate authority to decide the appeal on merits of the case as this Court has not expressed any opinion on the merits of the case.
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2022 (7) TMI 283
Disclosure of income under VDIS - set off of tax under VDIS with advance tax (including TDS) in regular course - assessee i.e. petitioner is an employee of United India Insurance Company, he gave the incorrect reason that there was a delay in payment of income-tax within the prescribed limit under Section 139 (1) due to the non-availability of the TDS certificate - Commissioner has dismissed the revision on the ground that the nature of assets of income disclosed under VDIS as well as in the regular IT returns is different. - description of assets shown in the VDIS applications is not at all match with the source of income shown in the return. No TDS has been deducted or advance tax has been paid with respect to assets declared under VDIS and now filing belated return of these to assessment years, the petitioner is avoiding income-tax by deducting the income disclosed in the VDIS HELD THAT:- The voluntarily disclosed income is not liable to be included with regular income declared in the return under section 139 as tax paid under VDIS is not liable to be refunded at any cost. The income tax return submitted under Section 139 is not liable to be reopened after availing of the VDIS. The source of income shown for voluntary disclose income and income source shown in the return under Section 139 is altogether different. Under Section 64 of the Finance Act only those persons are entitled to give declaration in respect of income chargeable under the tax under the Income Tax Act for any assessment year, firstly for which he has failed to furnish return under Section 139, secondly, which he has failed to disclose in a return of income furnished by him under the Income Tax Act before the date of commencement of the scheme, thirdly, which has escaped assessment by reason of the omission or failure. As per clause sub-clause (a), in this case, the petitioner did not furnish any return under Section 139 before 31.12.1997, therefore, in voluntarily disclosed income, he ought to have disclosed his all income from all the sources because till 31.12.1997, he did not disclose his any of the income by submitting the return under Section 139. He submitted the return under section 139, after 31.12.1997 i.e. 23.01.1998 to bring his case within clause 64 (1) (b). As submitted belated IT returns under section 139 but as per the requirement of section 64 (1)(b) that ought to have been filed before the date of commencement of the scheme. Since he did not submit any return under section 139 before this scheme, therefore involuntarily disclosed income, he ought to have disclosed his entire income. He cannot be permitted to commit mischief with the Act or VDIS by disclosing part of his income in VDIS and thereafter part of his income by submitting belated return in case of Earnest Business Services (P) Ltd ( 2017 (3) TMI 1185 - BOMBAY HIGH COURT] has rightly held that both the tax altogether different and there cannot be any adjustment between them. Section 70 and 71 mandate that the income disclosed in VDIS shall not be included income under section 139 means income which had already been disclosed and that assessment is not liable to be reopened. The petitioner in order to avail the undue benefit of this scheme has filed the belated return by contending that the filing of such belated return is permissible and claimed the deduction of income as well as the refund of the tax.
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2022 (7) TMI 282
Exemption u/s 11 - whether or not the appellant trust had violated the provisions of section 13(1)(c) ? - whether benefits were availed by the specified persons without any other compensations or rent paid by such specified persons is inadequate? - appellant society is also registered under the Bombay Public Trust Act, 1950 and is also registered u/s 12A - HELD THAT:- Admittedly, Dr. G. S. Kulkarni and his two sons (hereinafter referred as specified persons) used the operation rooms owned by the appellant trust for his private practice without paying any rent or fees for such use. Dr. G. S. Kulkarni and his two sons had occupied the accommodation that owned by the appellant trust for the residential purposes on payment of Rs.5,000/- per month for each bungalow. As admitted fact that Dr. G. S. Kulkarni had allowed 50% of the building owned by him for use of the appellant trust to pursue its charitable objects. Dr. G. S. Kulkarni and his two sons were rendering the voluntarily professional services to the appellant trust without charging any fees. The submissions made on behalf of the appellant trust that the buildings owned by the specified persons is used by the appellant without payment of any rent remains uncontroverted by the Department. Therefore, it cannot be said that the specified persons had availed the benefit from the appellant trust without paying any compensations to the appellant trust. Furthermore, it is the submission of the appellant trust that the specified persons had been rendering the voluntarily professional services to the appellant trust also remains uncontroverted. Question that arises for consideration before us is, can it be said, that the appellant availed the operation rooms owned by the appellant trust are used by the assessee without any compensations, the answer is No , as the appellant trust could have saved the cost of running the trust on rent, salaries as there is no rent or fees or any other claim by the specified persons of the trust for utilization of the premises as well rendering the voluntarily profession services. Whether the specified persons had paid adequate consideration paid for occupation of bungalows owned by the appellant trust? - The submission made on behalf of the appellant trust that the specified persons had been rendering voluntarily professional services to the appellant trust and are available for the patients around the clock remains uncontroverted. Therefore, the residential premises are made available for the specified persons only with view to ensure to the availability of the specified persons for the patients around the clock cannot be said to be without adequate consideration. In the circumstances, the provisions of section 13(1)(c) has no application to the facts of the present case. Accordingly, the grounds of appeal filed by the assessee are allowed.
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2022 (7) TMI 281
Deduction u/s 80IB - commencement certificate was obtained first time on 31.03.2005 - allowability of deduction on profits u/s. 80IB(10) of the Act which was withdrawn by the assessee himself in revised return of income - contention of assessee that claim for deduction u/s. 80IB(10) was withdrawn by the assessee on the pressure exercised by the AO during the course of survey proceedings - CIT-A allowed the deduction - HELD THAT:- Contention of assessee cannot be accepted in the absence of any evidence on record. No material was placed before us showing that any complaints were lodged against the AO before the higher officials. Provisions u/s. 80IB provides for a deduction of profits held from the eligible housing project subject to the conditions stipulated therein. The provision of sub-section (5) of section 80A provides that where an assessee fails to make a claim in the return of income, for any deduction under the provisions of Chapter VIA, no deduction shall be allowed. Admittedly, in the present case in the original return of income filed by the assessee, made a claim for deduction of profits under the provisions of section 80IB(10) of the Act. The claim was withdrawn in the revised return of income. Once, the revised return is filed, the original return of income must be taken to be withdrawn and substituted by the revised return. If we are, to accept the contention of assessee that the revised return was not filed on account of any omissions found in the original return, it should be construed to mean that the revised return was filed to cure defects in the original return of income, revised return would relate back to the original filing date, which means that the assessee had not made any claim in the return of income for deduction of profits u/s. 80IB(10) of the Act read with the provisions of sub-section (5) of section 80A of the Act. Claim had not undergone the process of assessment by the AO, therefore, such claims cannot be allowed by the CIT(A) for the first time in contravention of plain provisions of sub-section (5) of section 80IA of the Act and there is nothing on record to indicate that the CIT(A) had satisfied himself as to the satisfaction of conditions necessary for allowing the benefit u/s. 80IB(10) of the Act - CIT(A) failed to refer to material on record, if any, that the assessee is entitled to benefit of deduction u/s. 80IB(10) of the Act and in any event the direction of CIT(A) allowing the benefit u/s. 80IB(10) of the Act is contrary to plain provisions of sub-section (5) of section 80A of the Act. Thus, the order of CIT(A) is illegal and perverse, cannot be sustained in the eyes of law, hence, reversed and the order of AO is restored. Thus, grounds raised by the Revenue are allowed. Rectification of mistake u/s 154 - Deduction on profits earned from housing project u/s. 80IB(10) of the Act in exercise of powers vested u/s 154 - HELD THAT:- Deduction under the provisions of section 80IB(10) can be allowed subject to condition that the assessee makes a claim in the return of income as provided by the provisions of sub-section (5) of section 80A of the Act. There was no claim made by the assessee for deduction u/s. 80IB(10) of the Act in the original return of income. Thus, the order of CIT(A) in allowing benefit of deduction is plainly contrary to the provisions of Income Tax Act. CIT(A) ought not to have exercised his jurisdiction u/s. 154 of the Act, in as much as, there is no mistake apparent on record in the order of CIT(A). It is settled position of law that the CIT(A) does not have power to review his own order in the absence of any express power granted by the statue. The power conferred u/s. 154 is a limited power, conferred with a view to correcting those mistakes which are apparent from the record. CIT(A) had not pointed out the mistakes in the original order passed by him and without referring to any mistakes apparent from the record, the CIT(A) had merely reviewed his own order in the garb of exercising power of rectification, which is not permissible under the law. Thus, the CIT(A) had grossly erred in both exercising the power of rectification as well as allowing the benefit of deduction u/s. 80IB(10) on merits. Thus, we set aside the order of CIT(A) and the order of AO is restored. Thus, grounds raised by the Revenue are allowed.
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2022 (7) TMI 280
Revision u/s 263 - Reopening of assessment u/s 147 - non-declaration of long term capital gain at the net level - HELD THAT:- As claim could not have been made before the AO for the first time during the course of re-assessment proceedings otherwise than through filing a revised return. This, in his opinion, ran contrary to the judgment of the Hon ble Supreme Court in the case of Goetz India Ltd. ( 2006 (3) TMI 75 - SUPREME COURT] - Clearly, the ratio of this decision is that the AO has no power to entertain a claim made otherwise than by way of revised return. However, it is worth mentioning that in this judgment itself, the Hon ble Supreme Court has held that the power of the appellate authorities will not be affected by non-making of a claim in the return and the Tribunal has power to allow relief on a point for which no deduction was made in the return of income. In that view of the matter, it gets graphically clear that even though the AO is not empowered to allow exemption/deduction under the relevant provision unless a specific claim is made in the return of income, but such a clam can be entertained at the appellate stage, if it is really sustainable. Thus, the embargo is only on the AO and not on other higher authorities. Adverting to the facts of the instant case, it is found that the Pr.CIT has nowhere disputed the otherwise eligibility of the assessee to claim exemption u/s.54B - His only objection has been that the AO could not have allowed this claim during the course of assessment proceedings without filing of a revised return. Albeit, technically the AO was not competent to entertain such a claim, but legally the Pr. CIT was duty-bound to accept it, when he was satisfied with its otherwise eligibility. Since the ld. Pr. CIT has not disputed the eligibility of the claim in law, we hold that the assessment order, seen in totality, cannot be declared as erroneous and prejudicial to the interest of the Revenue - Appeal of assessee allowed.
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2022 (7) TMI 279
Rectification of mistake u/s 154 - incorrect computation of disallowance u/s 14A - AO rejected the rectification application filed by the assessee by treating the issue to be an appealable issue - HELD THAT:- We find that as the issue pointed out by the assessee in its rectification application, deals with the correct computation of disallowance u/s 14A therefore, we deem it appropriate to restore this issue to the file of jurisdictional AO for de novo adjudication after verification of all the details as may be filed by the assessee. Needless to mention that no order shall be passed without affording opportunity of hearing to the assessee. As a result, the sole ground raised in assessee s appeal is allowed for statistical purpose.
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2022 (7) TMI 278
Depreciation on the furniture and fixture against the rental income of movable assets - whether assessee is entitled to bifurcate the entire receipts on account of rent from premises (immovable property) and furniture and fixture for the purpose of claiming depreciation on the furniture and fixture against the rental income of movable assets? - HELD THAT:- Bare perusal of the lease agreement entered into between the assessee and the lessee relevant clauses show that there is not even a whisper as to renting out the furniture and fixture by the assessee along with the premises/immovable properties. In case of contract, parties to the agreement make law for themselves to which nothing can be added or deleted. When there was no intention of the parties to the lease agreement (supra) that rent is being paid for immovable and movable assets separately no amount of rent can be attributed to the furniture and fixture as claimed by the assessee. In case of Sultan Brothers Pvt. Ltd. ( 1963 (12) TMI 4 - SUPREME COURT ] held that when a building plant, machinery or furniture are inseparably let the Income Tax Act contemplates the rent from the building as a residuary head of the income and not one to be computed under section 9 of the old Act meaning thereby when immovable property and furniture and fixtures have been inseparably let out by the assessee with no specific reference, furniture and fixtures cannot be separated for the basic charge of rent for the purpose of claiming depreciation by the assessee. When it is nowhere case of the assessee that it is to exploit movable property furniture and fixtures as a business as is also apparent from the lease agreement, the Ld. Lower Authorities have rightly disallowed the depreciation claimed by the assessee under section 57 of the Act. Moreover, lease agreement (supra) speaks for itself that it is for immovable property only. So the question framed is answered in negative. Finding no illegality or perversity in the impugned order passed by the Ld. CIT(A), present appeal filed by the assessee is hereby dismissed.
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2022 (7) TMI 277
Deemed dividend addition u/s 2(22)(e) - substantial shareholding in the company - As submitted assessee has advanced the money on interest to the company and there is a running current account between the company and the assessee - HELD THAT:- We on perusal of the notes to accounts significant accounting policies of the Company find that at note 1 (F) disclosure required as per Accounting Standard -18 of ICAI on Related Party Disclosure the assessee is part of Key Management Personal, receives salary as Director of the Company, Interest on loan, and the Company has taken Loan and the company has repaid loan - The Tax Audit Report FORM NO 3CA u/sec44AB of the Act at S.no.31 32 column confirms the loan transactions. Prima facie, considering the evidences and disclosures in the financial statements, the assessee in wholly involved with the business operations of the company in the capacity as a director and drawing the salary. The assessee is making Loan transactions with the company in regular/ ordinary course of business, therefore the provisions of Sec. 2(22)(e) of the Act cannot be applied. The Assessing officer has overlooked the factual aspects of regular business transactions and the Audited financial statements. We do not find merits in the addition sustained by the CIT(A). Accordingly, we set aside the order of the CIT(A) and direct the Assessing officer to delete the addition and allow grounds of appeal in favour of the assessee.
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2022 (7) TMI 276
Income accrued in India - sale of software product - royalty receipts - India - USA DTAA - HELD THAT:- As decided in INFRASOFT LTD. [ 2013 (11) TMI 1382 - DELHI HIGH COURT] and ENGINEERING ANALYSIS CENTRE OF EXCELLENCE PRIVATE LIMITED [ 2021 (3) TMI 138 - SUPREME COURT] the sale of software product does not give rise to the royalty income. In the light of aforesaid, since there are no distinguishing facts with regard to present Assessment Year than the Assessment Year 2012-13 [ 2022 (4) TMI 966 - ITAT DELHI] , we allow the Ground No. 2 and its Sub Grounds of the assessee. Subscription to cloud base service as royalty - Functional aspect of cloud base service while holding - India - USA DTAA - HELD THAT:- The very same issue regarding the cloud service in assessee s own case for the AY 2012- 13 [ 2022 (4) TMI 966 - ITAT DELHI] , came up for consideration before the Co-ordinate Bench of the Tribunal wherein by following the ratio laid down in the case of M/s. Salesforce.com Singapore Pte. [ 2022 (4) TMI 327 - ITAT DELHI] and also the decision of Savvis Communication Corporation [ 2016 (5) TMI 635 - ITAT MUMBAI] and the Chennai Tribunal decision in the case of ACIT Vs/. Vishwak Solutions Pvt. Ltd. [ 2015 (4) TMI 794 - ITAT CHENNAI] held that the authorities fallen in error in considering the subscription received towards cloud serviced to be royalty income.
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2022 (7) TMI 275
Income accrued in India - sale of software product - royalty receipts - India - USA DTAA - HELD THAT:- As decided in INFRASOFT LTD. [ 2013 (11) TMI 1382 - DELHI HIGH COURT] and ENGINEERING ANALYSIS CENTRE OF EXCELLENCE PRIVATE LIMITED [ 2021 (3) TMI 138 - SUPREME COURT] the sale of software product does not give rise to the royalty income. In the light of aforesaid, since there are no distinguishing facts with regard to present Assessment Year than the Assessment Year 2012-13 [ 2022 (4) TMI 966 - ITAT DELHI] , we allow the Ground No. 2 and its Sub Grounds of the assessee. Subscription to cloud base service as royalty - Functional aspect of cloud base service while holding - India - USA DTAA - HELD THAT:- The very same issue regarding the cloud service in assessee s own case for the AY 2012- 13 [ 2022 (4) TMI 966 - ITAT DELHI] , came up for consideration before the Co-ordinate Bench of the Tribunal wherein by following the ratio laid down in the case of M/s. Salesforce.com Singapore Pte. [ 2022 (4) TMI 327 - ITAT DELHI] and also the decision of Savvis Communication Corporation [ 2016 (5) TMI 635 - ITAT MUMBAI] and the Chennai Tribunal decision in the case of ACIT Vs/. Vishwak Solutions Pvt. Ltd. [ 2015 (4) TMI 794 - ITAT CHENNAI] held that the authorities fallen in error in considering the subscription received towards cloud serviced to be royalty income.
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2022 (7) TMI 274
Addition u/s 56(2)(vii)(b) - differential amount between the value as determined by DVO and the purchase price - Mandation of referring matter to DVO for valuing the property - Whether AO has erred and acted illegally in adopting the circle value without invoking the provision of Section 52C(2)(sic.50C(2))? - DR submitted that he has no objection if the matter is restored to the file of A.O. for denovo adjudication of the issue on merits in accordance with law, after referring the matter to DVO, so that additions can be made under section 56(2)(vii)(b) read with Section 50C(2) - HELD THAT:- The Hon ble Allahabad High Court in the case of CIT, Allahabad Another v. Sh Chandra Narain Chaudhri ( 2013 (9) TMI 646 - ALLAHABAD HIGH COURT] has observed and held that it is incumbent on the A.O, in such a case where the assessee disputes the valuation, to refer the matter to DVO, before additions can be made by AO. CIT(A) has not decided appeal on merits, but, has dismissed the appeal in limine without discussing the issue on merits, which is an infringement of Section 250(6) and hence in any case the appellate order passed by CIT(A) is not sustainable in the eyes of law. The assessee is also equally responsible for its woes, as the assessee has not appeared before Learned CIT(A) despite as many as seven opportunity of hearings being granted to the assessee by CIT(A). Even before Learned A.O. there was no proper compliances made by the assessee. D.R. has fairly submitted before us that the matter can be restored to the file of A.O. for fresh adjudication on merits in accordance with law, after referring the matter by AO to DVO in set aside remand proceedings for valuing the property purchased by the assessee, so that correct and proper assessment can be made. We are of the considered view that the matter can be restored to the file of A.O. for fresh determination of the issue on merits in accordance with law, after referring the matter to DVO by AO in set aside remand proceedings, for submission of valuation report by DVO of the property purchased by the assessee, and accordingly based on the valuation report of DVO, the differential amount between the purchase price and value as determined by the DVO can be brought to tax by AO in set aside remand proceedings, under section 56(2)(vii)(b) - Appeal of the assessee is allowed for statistical purposes.
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2022 (7) TMI 273
Provision for interest on unutilized fund in its P L account - AO observed that provision of interest is not an allowable expenditure under the Income Tax Act as the assessee did not actually pay this amount of interest and yet debited it to its P L account - HELD THAT:- U.P. Government, vide G.O. No.B-1/564/10- 7/97, dated 02.03.1998, specifically mentioned that whatever interest income accrues on the advances from the bank, would be remitted to the Government by the assessee. The assessee is a Government Company. It has been declared as a construction agency for Government works. It gets advance for execution of construction projects on behalf of the U.P. State Government. These funds are used by the assessee company for meeting the construction cost of the projects. The unutilized funds deposited in banks generate interest income, which, as per the aforesaid Government Order, is to be treated as the income of the Government and is required to be deposited in the Government Treasury. The assessee, as such, is under legal obligation to pay interest on the unutilized funds, to the respective Government Departments, and not only this, the U.P. Government, vide order dated 12.12.2014, has classified the accounting head for the deposit of interest in the Government Treasury. Hon'ble Gujarat High Court, in the case of CIT vs. SAR Infracon (P) Ltd. [ 2014 (3) TMI 728 - GUJARAT HIGH COURT] while considering a similar stipulation of the Central Government, while sanctioning the grant in favour of that assessee, stipulated that interest earned on the Central Grant already utilized would form part of the Central Grant limit, held that the Tribunal was right in holding that the interest earned on the Central Grant already released could not be said to be the income of the assessee. This decision was followed by the ld. CIT(A) in the earlier years (supra) in the assessee s own case and it has been held by the Tribunal to have been rightly so followed. The fact-situation during the year has admittedly remained unchanged. Addition of bad debts - CIT-A deleted the addition - DR has contended that the ld. CIT(A) failed to consider that the bad debts were never included by the assessee in the debtors and that this is against the requirement of Section 36(2)(i) - HELD THAT:- As the amount out of the bad debts, was the service tax component. This became unrealizable because of the objection raised by the CAG. It was, therefore, that the same was reduced from the income of the assessee and was treated as bad debt. As such, we do not find any error in the action of ld. CIT(A) in deleting the addition. It has not been shown as to how the assessee, a Government Company, was not bound by the objections raised by the CAG, which rendered the amount in question, claimed as bad debts, as unrealizable service tax payable. It was due to the CAG s objection that no service tax was payable on Government contract, that the amount was treated as bad debts and reduced from the income of the assessee. Accordingly, Ground No.3 is also found to be shorn of merit and the same is rejected. Revenue recognition - assessee was deducting profit from work-in-progress and was crediting it to Retention Reserve; that the assessee was required to prepare its profit and loss account as per AS-7 (Revised); that the assessee was not following AS-7 (Revised) and Revenue recognition was not as per AS-7(Revised) - HELD THAT:- Issue decided in favour of assessee as relying on own case [ 2019 (3) TMI 560 - ITAT LUCKNOW]
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2022 (7) TMI 272
Rectification of mistake u/s 154 - addition on account of doubtful nature or non genuineness of the expenditure whether when the entire expenditure as claimed by the assesses on software development has been disallowed while framing the assessment under section 143(3), question of disallowance of any depreciation on the same would not arise? - HELD THAT:- We find that in the original order dated 31.12.2020 the AO had disallowed an expenditure for violation of provisions regarding tax deduction at source and the disallowance was made u/s. 40(a)(ia) of the Act. In the assessment completed u/s. 154, AO has made a further disallowance being the depreciation on such software development expenses. We find that since the disallowance of software development expenses in the original assessment was made on account of non deduction of TDS, which is a specific provision in the shape of a penal provision whereby the disallowance is made if the assessee fails to deduct TDS at source. AO did not make the addition on account of doubtful nature or non genuineness of the expenditure, therefore, the depreciation on such expenditure disallowed by passing u/s. 154 is not justified as there was no mistake apparent from record found in the original assessment order. Had it been a case of disallowing expenditure of software development due to the findings that such expenditure was not genuine then the issue of disallowance of depreciation would have become an issue of rectification u/s. 154 - Decided in favour of assessee.
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2022 (7) TMI 271
Reopening of assessment u/s 147 - Corporate Insolvency Resolution process accepted - HELD THAT:- Respectfully following the order of the Tribunal in assessee s own case [ 2022 (5) TMI 820 - ITAT HYDERABAD] , we hold that the Revenue is bound by the resolution plan as accepted by the NCLT and not entitled to anything more than what is provided therein. We find the amount provided under the resolution plan is only Rs.22 Lakhs as against the claim of the Revenue to the tune of Rs.189.91 Crores. Therefore, the assessee or Revenue cannot have any grievance in disposing of these appeals in tune with the orders of the NCLT. This appeal is disposed-of accordingly.
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2022 (7) TMI 270
GP estimation - incorrectness of books of accounts maintained by the assessee - whether CIT-A erred confirming Gross profit margin at a high rate calculated on the basis of subsequent year's figures - HELD THAT:- We are of the considered view that under these facts and circumstances, a reasonable estimation towards gross profit taking into account, the nature of business carried out by the assessee and risk involved in the said business is only a solution. Hence, the profit margin estimated by the AO is higher side and thus, direct the AO to estimate gross profit of 8% on total sales declared by the assessee for both the assessment years. Estimation of administrative expenses - AO has rejected books of accounts and estimated administrative expenses for whole year at Rs.30 lakhs which includes, remuneration, salaries and wages, depreciation, etc . - As taking into account, the nature of business of the assessee and also the reasons given by the AO to estimate administrative expenses, we are of the considered view that both have failed to justify their case with necessary reasons and thus, we direct the AO to allow 90% of total expenses claimed by the assessee in their financial statement filed for the relevant assessment year and recompute profit from the business taking into account gross profit @8% on total sales and allow 90% of expenses as claimed by the assessee.
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2022 (7) TMI 269
Additions u/s 30 - deduction of Lease Equalization Charges - type of lease undertaken- scope of accounting standards - AO noticed that, assessee has created Rent Equalization Reserve - HELD THAT:- The lease equalization charge is bifurcation of lease rentals in order to arrive at real income. The assessee has claimed the deduction of lease equalization charges as per Accounting Standard 19 issued by the ICAI, a recognized body vested with the authority to recommend accounting standards for ultimate prescription by the Central Government in consultation with the National Advisory Committee of Accounting Standards for the presentation of true and fair view of financial statements - the Accounting Standard expressly allows the claim of lease rent on straight line basis over the period of lease term. The deduction on the basis of average rent per year will not affect the tax revenue of the department because of the reason that when actual payment of lease rent is more than the average rent in subsequent years, then excess deduction claimed in the earlier years would net off the difference and consequently at the end, there would be no difference in actual payment and amount of deduction claimed. Besides, the deduction of lease equalization reserve has been allowed by the Hon'ble Supreme Court in its recent judgment in the case of CIT-VI Versus Virtual Soft Systems Ltd. [ 2018 (4) TMI 1472 - SUPREME COURT] allowed the claim of lease equalization charges relying on the Guidance Note issued by the ICAI Accounting for leases . Hon'ble Court has held that the taxpayer can take recourse of Guidance note issued by the ICAI, particularly when there is no express bar in the Act. The ICAI publication i.e. Guidance Note reflects the best practices adopted by the accountants throughout the world. Hon'ble Delhi High Court in their recent decision in case of CIT vs. MGF India Ltd. [ 2018 (2) TMI 1535 - DELHI HIGH COURT] has also held that Lease equalization charges can be deducted while computing book profit. As per provisions of Companies Act, Accounting Standard and Income Tax Act, we hereby direct that the assessee is eligible for the claim of lease equalization charges. In the result, the appeal of the assessee on this ground is allowed. Nature of expenditure - Logo Development Expenses - AO made the disallowance on the ground that payment to the advertising agency was to create a new brand and thus creating an intangible asset for the assessee company which will have enduring benefit whose benefit will be derived over several periods - HELD THAT:- In the instant case, the contract for new logo for existing business has been awarded, certain amounts were spent and the project has been shelved midway and abandoned. There was no creation of any asset and there is no existence of new business. The amounts have been spent in connection with the ongoing business operations. Hence, keeping in view the facts of the case and the judgments of the Hon ble High Courts in PRIYA VILLAGE ROADSHOWS LTD. [ 2009 (8) TMI 765 - DELHI HIGH COURT] , INDO RAMA SYNTHETICS INDIA LTD. [ 2009 (9) TMI 635 - DELHI HIGH COURT] , ACL WIRELESS LTD. [ 2013 (12) TMI 1160 - DELHI HIGH COURT ] we hereby allow the appeal of the assessee on this ground.
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2022 (7) TMI 268
Depreciation on goodwill - assessee company acquired the Hyderabad business of Beams Hospitals Private Limited as a going concern and on a slump sale basis by paying a consideration - HELD THAT:- As transfer is not between same group concerns or related concerns. Therefore, the decision relied by the ld.CIT-DR is not applicable to the facts of the present case. In view of the above discussion and respectfully following the decisions cited ZYDUS WELLNESS LTD. [ 2019 (2) TMI 1775 - SC ORDER] ,TRIUNE ENERGY SERVICES PRIVATE LIMITED [ 2015 (11) TMI 1218 - DELHI HIGH COURT] AND SMIFS SECURITIES LTD. [ 2012 (8) TMI 713 - SUPREME COURT] we hold that the ld.CIT(A) is not justified in denying the claim of depreciation on goodwill claimed by the assessee. We, therefore set aside the order of the ld.CIT(A) and allow the claim of depreciation on goodwill for the impugned assessment year. The grounds raised by the assessee on this issue are accordingly allowed.
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2022 (7) TMI 267
Revision u/s 263 - losses in future and set off against profit on sale of land - as per CIT AO should not have allowed losses in futures u/s. 73(4) because the main business of the assessee is sale of land and therefore losses in futures being speculative loss could not have been allowed - HELD THAT:- The argument of the ld. D/R regarding the amendment of section 73 does not apply in respect of transactions undertaken in derivatives on recognized Stock Exchange and these transactions are out of ambit of this amendment. Therefore, there is no force in the argument of ld. D/R on this point. Similar issue has been adjudicated in the case of M/s. Jeenec Solution Pvt. Ltd. [ 2020 (3) TMI 1411 - ITAT AHMEDABAD] wherein one of us was co-author, and following the earlier decision [ 2018 (11) TMI 551 - ITAT AHMEDABAD] decided the matter in favour of the assessee. Therefore, following the decisions discussed hereinabove and considering the totality of facts and circumstances of the case, the appeal of assessee is allowed.
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2022 (7) TMI 266
Belated payment of the employee s contribution to the respective ESI and EPF fund - HELD THAT:- No disallowance is called for belated payment of the employee s contribution to the respective ESI and EPF fund in the case of assessee who have deposited the same before the due date of filing of Income Tax Return. - Appeal of assessee allowed.
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2022 (7) TMI 265
Exemption u/s 11 - Registration u/s 12AA - CIT(E) in the order stated that imparting skill development training doesn't partake the meaning of public charity - HELD THAT:- Training means constitutes a basic concept in human resource development. It is concerned with developing a particular skill to a desired standard by instruction and practice. Training is a highly useful tool that can bring a person into a position where they can do their job correctly, effectively, and conscientiously. Training is the act of increasing the knowledge and skill of a person for doing a particular job. The assessee with the affiliation of Ministry of Skill Development Entrepreneurship (MSDE) under the scheme has provided training to youths of India and falls under the category of Education and/ or Advancement of any other objects of general public u/s 2(15) Since, imparting skill development is akin to providing education we hereby hold that the assessee is eligible for registration u/s 12AA.
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2022 (7) TMI 264
Disallowance of depreciation on buildings and expenditure on account of telephone and vehicle - HELD THAT:- The issue of ad hoc disallowance was also dealt with by the ITAT [ 2019 (3) TMI 1983 - ITAT DELHI] and finding that no cogent material was produced by the AO for the disallowance, the same was deleted. We find that the aforesaid decision of ITAT fully applies to the present case. It is not the case that the decision of ITAT was reversed by Hon'ble jurisdictional High Court [ 2010 (12) TMI 947 - DELHI HIGH COURT] , hence the grounds for disallowance of depreciation and ad hoc disallowance of expenditure on account of telephone and vehicle are directed to be deleted. Disallowance u/s. 40A(3) - assessee states that date on which payments were made were public holidays and hence the same falls under the exception clause and the same should be allowed - HELD THAT:- Since this is factual aspect we deem it appropriate to remit this issue to the file of AO. AO shall consider the issue afresh and decide the issue only for those payments, which were made on those days that the asses see claimed as bank holidays, is found to be correct and found to be falling under the exception clause. Other payment on the ground of only business exigency, we do not find any infirmity in the orders of the authorities below on this issue. Less credit of TDS, since the matter is going back to the AO, AO shall examine the same and decide as per law. Appeal of the assessee is partly allowed.
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2022 (7) TMI 263
Disallowance of interest expenses paid to depositor in excess of 18% - HELD THAT:- It was never disputed by the Revenue that the said loan facility was availed by the assessee for business purpose only. The day-to-day business activity requires cash flow regularly and to fill up the gap of cash flow and working capital requirement the assessee has taken the urgent loan. The loan advanced by the said financer/party is unsecured in nature and before advancing the said loan the said party has evaluated the credit risk, capacity, character, creditworthiness and market reputation of the assessee i.e. borrower. AO as well as the CIT(A) though admitted that this loan was taken for business purpose, the CIT(A) has restricted the interest expenditure to 18% and not that of actual 36%. CIT(A) has not taken cognisance of the exigencies of business and cash flow required for the business purpose by the assessee. Therefore, the CIT(A) was not right in holding that payment of interest at 18% is reasonable. Ground no.1 of the assessee s appeal is allowed. Addition on account of short booking of interest income - HELD THAT:- From the perusal of the records it can be seen that the ad-hoc expenses as stated by the Assessing Officer were actually incurred during the business of the assessee firm and there was no personal expenses involved in the same. Thus, the Assessing Officer was not right in making the addition on ad-hoc basis and has totally ignored the evidences put up by the assessee before the Revenue authorities. CIT(A) has simply confirmed addition and ignored the evidences filed before the Assessing Officer. Therefore, ground no.2 is allowed. Disallowance u/s 40(a)(ia) - AR submitted that Rs.15,000/- (i.e. 30% of Rs.50,000/-) as required under Section 40(a)(ia) of the Act is already disallowed in the computation of income filed for the subject A.Y. for non-deduction of TDS on professional fees having paid - HELD THAT:- From the ledger account along with copy of invoice which was submitted before the authorities, the Assessing Officer as well as the CIT(A) has not taken proper cognisance of the same. In fact, Form No.3CD has given the details of the TDS and, therefore, this addition does not sustain. Therefore, ground no.3 for A.Y. 2015-16 is allowed.
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2022 (7) TMI 262
Additions u/s 68 - Disallowance of short term capital loss aroused on the forfeiture of share warrant money - As per revenue entire transaction is nothing but a colourable device adopted for evasion of tax by the assessee company - HELD THAT:- It is not the case of the assessing officer that the legal claim of short-term capital loss arising out of forfeiture of share warrant money is not legally sustainable. Rather assessing officer in the beginning has questioned the wisdom of assessee is investing. For this he has referred to the share price movement of the investing company. Despite noting that prices were touching Rs. 28, he found Rs. 29 investment a wrong decision. His inference in this regard is not correct as the price movement by no stretch of imagination point out that investment was in a bogus or penny stock company As settled law that AO cannot sit in the shoes of businessman and decides the prudence of business decision. Thereafter AO has wondered why instead of getting the share warrants forfeited assessee did not sell these shares. As informed that as per the agreement there was no clause of selling the shares. As subsequent movement in prices have duly corroborated that the share prices fell and the assessee's decision not to pay the balance amount was not at all unjustified. The prime emphasis of the assessing officer at the end is that the exercise was meant to bring capital receipt in the hands of Indiabulls Power Pvt. Ltd. and thwart examination from the perspective of section 68. This line of reasoning is wholly unsustainable. Firstly assessing officer is not at all seized with the assessment of Indiabulls Power Pvt. Ltd. as to how the capital receipt in his hand is to be examined from the perspective of section 68. Even if assessee had contributed the balance amount that would still be a capital contribution. Moreover, even for exempt capital receipt, there is no law that such credits are outside purview of section 68. Hence, AO's surmise also is without any basis whatsoever. Moreover, the amendment in section 68 providing for examination of source of source for share application money, share capital, and share premium, or any such amount was brought in by Finance Act, 2012 w.e.f. 01.04.2013 is not applicable in this case. Hence the premise of the assessing officer the entire exercise was meant to provide capital receipt in the hands of the said company cannot at all be sustained. Even otherwise, since all the details of the flow of funds was before the assessing officer he has not been able to point out as to which stage and in what respect ingredients of section 68 are not cogently satisfied. There is no mention as to whether the identity is not available, or that the source of funds is not given, or that Assessing Officer has unearthed some other transactions. Hence the assessing officer's order is only based upon surmises and conjecture and hence it is not sustainable in law. Moreover, we note that in identical circumstances, this ITAT in the case of DCIT vs. Azalea Infrastructure Pvt. Ltd. [ 2021 (2) TMI 31 - ITAT DELHI] had allowed the claim of short term capital loss. Taxation in the hands of the assessee in this case is whether the forfeiture of the convertible warrant amount to a transfer within the meaning of section 2(47) held that AZALEA INFRASTRUCTURE PVT. LTD. [ 2021 (2) TMI 31 - ITAT DELHI] - Decided against revenue.
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2022 (7) TMI 261
Unexplained cash deposits - source of deposits - agriculture income - as per revenue explanation of the assessee is afterthought - HELD THAT:- The documentary evidence is self serving and consequently he confirmed the addition. In our humble understanding, the CIT(A) was very well entitled to raise objections in the submissions and rejoinder of the assessee, but, the remand report of the AO cannot be dismissed at the threshold which partly supports the explanation of the assessee regarding cash amount deposited to the bank account of the assessee. AO, after considering the entire facts and circumstances, relevant documentary evidence in the form of bank statements, accounts of family members in the ledger of the firm, concluded that the assessee could not produce any evidence for the balance amount. CIT(A) was duty-bound to consider the remand report of the AO wherein the AO has not raised any objection regarding the cash deposits to the bank account of the assessee after examination and verification of the relevant documentary evidence and statement of assessee's son Shri Mohit except alleging that the assessee has not produced any evidence on balance amount of Rs. 96,000/-. CIT(A) has given a sustainable finding for confirming the entire cash deposit to the bank account of the assessee. It cannot be ignored that the assessee and her family members jointly own 25 acres of fertile land in the State of Haryana and her husband also runs an enterprise related to the agricultural activities. The statement of the son of the assessee Shri Mohit clearly reveals that the amount of more than Rs. 15 lakh was received out of sale of one crop and household expenses were met from the other agricultural income and income from the firm. Thus the CIT(A) has gone wrong in dismissing the explanation of the assessee as well as remand report of the AO at the threshold by merely alleging the same as afterthought and self serving. Therefore, impugned first appellate order is set aside. As clear that before the AO, during remand proceedings, the assessee could not produce any sustainable evidence regarding part amount of Rs. 1,96,779/-. Except this, the AO found the explanation of the assessee and all relevant evidences in order and, therefore, safely presume that the assessee could not produce any evidence and sustainable explanation regarding cash deposit of Rs. 1,96,779/-. Therefore, the addition to this extent is sustainable and restrict the addition to Rs. 1,96,779/-. The AO is directed to delete remaining amount of addition
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2022 (7) TMI 260
TPA - Notional interest charged on receivables outstanding - Whether receivables constitute separate international transactions under section 92B read with section 92F of the Act and Rule 10B of the Rules? - delayed payments received by the assessee from its various AEs as unsecured loan advanced to the AEs and charged a rate of interest based Libor plus 300 bps i.e. 4.78% on receivables outstanding for more than 54 days - HELD THAT:- As Hon'ble Delhi High Court in the case of Kusum healthcare Pvt. Ltd. [ 2017 (4) TMI 1254 - DELHI HIGH COURT ] it is held that the appellant having already factored in the impact of the receivables on the working capital and thereby on its pricing/profitability vis-a-vis that of its comparables, any further adjustment only on the basis of the outstanding receivables would have distorted the picture and re-characterised the transaction. In view of the same the transfer pricing adjustment made by the AO/TPO is deleted. The ground of appeal is decided in favour of the assessee.
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2022 (7) TMI 259
Addition u/s 68 - amounts were stated to have been received by way of foreign inward remittance from the lender who claims to be British Nationals and persons of Indian origin - As per assessee amount was received in pursuance of collaboration agreement to pursue certain business interest in the form of 35% share in 'Harsha K3C Mall Cinema Karnal' - HELD THAT:- As the bona fides of the loan/deposits transaction in question with Shri Ashok Kumar Verma, in our view, is beyond any iota of doubt. The CIT(A) has grossly ignored these self explanatory documents to come to a conclusion adverse to the assessee. The action of the CIT(A) cannot be justified in view of formidable documentary evidences noted above. The confirmation of money lent is self evident from compromise carried out. The action of the CIT(A) is thus set aside and the Assessing Officer is directed to cancel the additions so made under Section 68 of the Act. Addition towards unexplained advance from customer - HELD THAT:- The assessee has submitted party-wise explanation towards advances received from different customers - the action of the CIT(A) for sustaining the addition to the extent of Rs. 4,89,744/- in respect of above noted customers is wholly unjustified and liable to be reversed. Addition on account of flat customers - HELD THAT:- The consideration for receipt of business advance stands proved. The action of the CIT(A) thus cannot be faulted. Addition on account of 'other liabilities' payable to banks as shown in the financial statement of the assessee on the ground that such liability was not confirmed from the respective banks - Assessee contends that the liability shown against the banks are not actual or real liabilities but on account of journal entry passed by increasing the book overdraft and reducing the corresponding creditors liability and has made additions in respect of above liability on the ground that respective banks have not confirmed the above stated liabilities owing to wrong appreciation of these facts - CIT-A deleted the addition - HELD THAT:- CIT(A) has failed to determine the bona fides of the liabilities and has hurriedly relied upon the narrative canvassed on behalf of the assessee and that too, without waiting for any verification report of the Assessing Officer. The bank reconciliation statement claimed to have been referred by the CIT(A) does not prove stand of the assessee towards discharge of liabilities or bona fide of outstanding liability in any manner. No justification in the reasoning of the CIT(A) which is contrary to the factual position on record. It is the admitted position that no documents were filed before the Assessing Officer. The documents filed before the CIT(A) neither supports the claim of assessee nor unverified by the Assessing Officer - CIT(A) himself has opted to make no independent inquiry and has mechanically accepted the explanation offered by the assessee which does not appear to be backed by any sound basis. Therefore, the action of the CIT(A) for reversal of addition in relation to Bank of Baroda and Punjab National Bank is bereft of any sound factual basis. The Assessee has failed to discharge the onus which lay upon it to offer satisfactory explanation on inflated Bank liability. Hence, the action of the Assessing Officer is restored. Addition on account of cessation of liability - HELD THAT:- As outstanding liability, however, is claimed to be disputed by the assessee and pending before the Court. As emerges from record, the assessee entered into agreement with Techsoft Global Pvt. Ltd. and received some amount against it. A civil suit was filed by M/s. Techsoft Global Pvt. Ltd. for recovery of advance paid as token money. Revenue could not provide any justification on nature of dispute to the extent of Rs. 2,46,880/- and how this figure has been determined by the Revenue. In the absence of any explanation from the Revenue and on examination of the findings recorded by the CIT(A), we do not see any reason to interfere with the order of the CIT(A). Ground No. 2 of the appeal of the Revenue is dismissed.
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2022 (7) TMI 258
Depreciation on intangible assets @ 25% - AO rejected the submissions of the assessee on the ground that the expenses are incurred by the assessee in obtaining support mostly by way of payment towards legal, technical and management fees for availing services, which cannot be termed as incurred for acquiring business or commercial rights falling under the definition of intangible assets - HELD THAT:- This issue in the instant case is similar to the facts and circumstances in AY 2010-11 [ 2016 (9) TMI 1435 - ITAT BANGALORE] . Therefore, respectfully following the aforesaid decision of the Tribunal for AY 2010-11, we uphold the disallowance of depreciation on intangible assets. This ground is held against the assessee. Disallowance of software expenses - AO rejected the submissions of the assessee on the ground that the software acquired provides firstly, the right, and secondly, enduring benefit to the assessee and is of the view that the assessee has the right to exploit the software as per the requirement which is the commercial right in the nature of intangible asset - additional evidence is admitted taken on record for adjudication - HELD THAT:- The description of the list of items submitted in the additional evidence shows that expenditure is incurred towards windows , Core call , and Auto cad which according to the ld AR have a very short span of life and requires periodic renewal and upgradation by payment of license fee. We notice that the jurisdictional High Court decision in the case of IBM India Ltd [ 2013 (10) TMI 1225 - KARNATAKA HIGH COURT] as held that even if the application has an enduring benefit, it does not result in acquisition of capital asset. The decision cannot be applied generally to state that any software having a shelf life of more than two years is capital in nature since the decision in Toyota Kirloskar Motor (P) Ltd. ( 2013 (2) TMI 108 - KARNATAKA HIGH COURT ) was with respect to a particular software and that the nature of software whether it is a system software or application software needs to be analysed to decide the treatment under the Act. We remit the issue back to the AO to verify the facts afresh after considering the breakup of the software expenses submitted as additional evidence filed by the assessee and decide the issue after taking into consideration the ratio laid down by the jurisdictional High Court in the case of IBM India Ltd. (supra) . Needless to say that assessee shall be given reasonable opportunity of being heard. This ground of the assessee is allowed for statistical purposes.
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2022 (7) TMI 257
Revision u/s 263 - Entitlement to exemption u/s 11 - accumulation of income made u/s.11(2) - HELD THAT:- Entire details of accumulation of income made u/s.11(2) of the Act together with utilization thereon for each of the years commencing from A.Yrs. 2006-07 to 2015-16 are enclosed as filed before us. While this is so, it could be safely concluded that all the requisite enquiries were duly carried out by the ld. AO in the assessment proceedings itself, before accepting the returned income of the assessee. CIT is not even conscious of the fact that form FC3 annual return has been changed to form FC4. This categorically goes to prove the complete non-application of mind on the part of the ld. PCIT before invoking his revision jurisdiction u/s.263 of the Act. We hold that the ld. AO had made requisite enquiries before concluding the assessment and hence, there could not be any revision proceeding on the ground that proper enquiries were not carried out by the ld. AO in the course of assessment proceedings. The law is very well settled that revision jurisdiction u/s.263 of the Act could be invoked only in the event of lack of enquiry and not for inadequate enquiry; even though, in the instant case, there is no inadequate enquiry. From the perusal of the order of the ld. PCIT, we find that the ld. PCIT nowhere points out as to how the order of the ld. AO is erroneous or prejudicial to the interest of the Revenue. On this ground also, the revision order passed by the ld. PCIT deserves to be quashed. Moreover the activities of the assessee Institution had not changed from earlier years and the ld. AO had the benefit of scrutiny assessment orders framed for A.Y. 2012-13 u/s.143(3) of the Act dated 03/02/2015 and for A.Y. 2013-14 framed u/s.143(3) of the Act dated 28/03/2016 before him, while framing the assessment for A.Y.2015-16 i.e. the year under consideration. In view of the above, we have no hesitation in quashing the revision order passed by the ld. PCIT u/s.263 of the Act as it is bad in law for more than one reason as detailed hereinabove. Accordingly, the grounds raised by the assessee are allowed.
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2022 (7) TMI 256
LTCG - land including factory building of the assessee was acquired by the State Govt. and the assessee had received compensation including interest - assessee claimed deduction of solatium while calculating Long Term Capital Gain - HELD THAT:- The impugned transaction is covered under RFCTLARR Act. Even the Assessing Officer has not disputed this position that the land for which compensation has been received had been acquired by the National Highway Authority of India (NHAI) and it is also a matter of record and it also remains undisputed that NHAI is one of the bodies covered u/s 106 of the RFCTLARR Act and all compensation given by them are exempt. As per Schedule 1 of the RFCTLARR Act, compensation includes additional compensation, solatium and any other receipt which implies that solatium and interest are part of compensation - CBDT Circular No. 36/2016 dated 25.10.2016 has extended the exemption by including compulsorily acquisition of land without any restriction on area as well as acquisition of land. As also settled law that the Income-tax authorities are bound by the guidelines laid down the CBDT Circulars. The position as it stands now with the passage of the RFCTLARR Act, is that all compensations received qua this Act are not taxable. It has been clarified by the CBDT Vide Circular No.36/2016 dated 21.10.2016 that even where there is no separate deduction allowable under the Income Tax Act, any compensation covered by sections 105 and 106 of the RFCTLARR Act is exempt from taxation. We note that the Ld. CIT(A) has also given a detailed findings on the issue in which the Ld. CIT(A) has also quoted and followed certain judicial precedents and we are in complete agreement with the findings so arrived at by the Ld. CIT(A) in this regard. Accordingly, we find no reason to interfere with the findings of the Ld. CIT(A) on the issue and we uphold his findings while dismissing the ground raised by the Department.
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2022 (7) TMI 255
Assessment u/s 153C v/s 143 - HELD THAT:- Considering the peculiar facts and circumstances, as the assessment year under consideration falls under six assessment years for the purpose of section 153C, therefore, the assessment order should have been passed as per provisions of section 153C and but not u/s. 143(3) of the Act. Consequently, the assessment order, being void ab initio, is liable to be quashed. Thus, the same stands quashed and impugned order is set aside.
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2022 (7) TMI 254
Characterization of income - Taxability of interest income - HELD THAT:- As decided in own case [ 2022 (1) TMI 653 - KARNATAKA HIGH COURT] interest income cannot be considered as income and has to be capitalized. Respectfully following the same, we hold that interest income in question brought to tax by the AO has to be held as not taxable and the addition made in this regard is directed to be deleted. For other income being tender fees and miscellaneous income is concerned, we find the Hon ble Madras High Court in the case of M/s. Indian Power Projects Ltd.[ 2015 (4) TMI 1181 - MADRAS HIGH COURT] dealt with identical issue arising in the case of an assessee which is a public sector undertaking such as the assessee to hold that the receipts are capital receipts which would go to reduce the cost of the project and inextricably linked with the setting up of the business of the assessee and not chargeable to tax as income from other sources. Appeal of assessee allowed.
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2022 (7) TMI 253
Reopening of assessment u/s 147 - Addition u/s 68 - Whether Assessee had discharged the primary onus to establish the genuineness of the transaction? - HELD THAT:- A.O. has mentioned that assessee has taken accommodation entries in the form of unsecured loans from the entry providing companies being controlled by Shri SK Jain group of companies. Whereas the addition made is on account of an entry in the shape of share capital. All the above prove that there is a complete non-application of mind by the A.O. and the reopening has been made on wrong set of facts and the approval/sanction granted under section 151 is in a very mechanical manner and without application of mind. As in the instant case, the assessment has been reopened on the basis of wrong facts and the approval has been given by the PCIT in a mechanical manner without due application of mind, therefore, such reopening of the assessment, in our opinion, is not in accordance with law and, therefore, has to be quashed. We, therefore, quash the reassessment proceedings. Since we have quashed the reassessment proceedings on account of wrong set of facts and mechanical approval under section 151 by the PCIT, the grounds challenging the validity of the assessment on account of jurisdiction by the A.O. and other plank of arguments challenging the validity of reassessment proceedings and the addition on merit are not being adjudicated being academic in nature. The grounds raised by the assessee are accordingly allowed.
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2022 (7) TMI 252
Addition on the bases of seized material procured from corporate office - HELD THAT:- As entire case of the department is based on the un-corroborated entries found in the computer server which were retrieved by using the forensic tools. These alleged documents collected by the department from the computers of M/s.RNS Infrastructure Ltd., cannot be described as evidence so as to fasten the tax liability on the present assessee. These are not maintained on day-to-day basis and not the part of the books of accounts maintained by M/s.RNS Infrastructure Ltd., there is no mention of the date on which the alleged payments were made. Even the AO not brought on record the dates of such payment, he presumed in wholesome manner that amount was the payment made to the present assessee during this assessment year. The payments are within the knowledge of the person, who written it. However, the said person denied the payment in the cross-examination and finally there is no evidence to suggest as to what they stand for and whom they referred to. Since the seized material is neither the regular books of account nor kept in the regular course of business of the assessee. They were not sufficient enough to fasten the liability on the present assessee, against whom they were sought to be used. The seized document collected by the department did not raise a reasonable ground to believe that there is a valid payment to the present assessee so as to award contract to the KNNL and the payment is relating to for awarding the contract of UBP. The seized material itself would not furnished evidences of the truth of their contents and that was not corroborated by any further evidence so as to hold that the assessee has actually received the said payment - we are of the opinion that the order of the earlier Bench in the cases of Shri D.S.Suresh Vs. ACIT [ 2021 (4) TMI 1 - ITAT BANGALORE] and Shri D.V.Sadananda Gowda [ 2021 (4) TMI 55 - ITAT BANGALORE] are squarely applicable to the present facts of the case and accordingly in view of the above discussion, we confirm the deletion of the addition made by the CIT(A). Hence, the grounds raised by the Revenue are dismissed.
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2022 (7) TMI 251
Correct head of income - income from house property or Addition as 'Business income being, notional rent on unsold flats held as stock-in-trade - whether the annual value of such units can be assessed in the hands of assessee? - Scope of amendment - HELD THAT:- A close scrutiny of the provision introduced by the Finance Act, 2017, transpires that where a property is held as stock-in-trade which is not let out during the year, its annual value for a period of one year, which was later enhanced by the Finance Act, 2019 to two years, from the end of the financial year in which the completion certificate is received, shall be taken as Nil. Obviously, it is a prospective amendment. The effect of this amendment is that stock-in-trade of buildings etc. shall be considered for computation of annual value under the head 'Income from house property' after one/two years from the end of the financial year in which the certificate of completion of construction of the property is obtained on and from the A.Y. 2018-19. Instantly, with the assessment year 2013-14. As such, the amendment cannot apply to the year under consideration. In the absence of the applicability of such an amendment, no rental income can be said to have accrued to the assessee from unsold flats available as stock-in-trade under the head `Income from House property . In that view of the matter, the view point of the AO on this score is vacated. Taxing the amount as Business income - In the hue of the fact that the Finance Act, 2017 has covered this aspect of the matter u/s 23(5) of the Act, obviously, it becomes manifest that the intention of the Legislature has been to treat such income as falling under the head Income from house property and not as the Business income . Be that as it may, arguendo, we go with the standpoint of CIT(A) that income in question is chargeable to tax as business income , there is no provision under the Chapter IV-D of the Act which can envelope the above amount within its fold. Admittedly, the assessee did not earn any actual rental income from the letting out of the 11 units. Ex conseqeunti, taxing hypothetical income of rent, which is otherwise not covered under any provision of Chapter IV-D of the Act, cannot be allowed. The ld. DR also failed to point out any specific provision under Chapter IV-D of the Act for taxing such hypothetical income. In view of the foregoing discussion, it is held that the ld. CIT(A) was not justified in taxing as Business income . The impugned order is set aside and the addition is directed to be deleted. Appeal of assessee allowed.
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2022 (7) TMI 250
Disallowance on account of prior period expenses - assessee contended that the said commission actually became payable only when the proceeds in respect of the corresponding sales were actually realized in the year under consideration - HELD THAT:- As rightly contended by the learned Sr. DR, when the assessee was following the mercantile system of accounting, the commission payable on the corresponding sales made in the earlier year at an agreed rate could have been and should have been provided by the assessee-company in that year itself as the liability for the same was ascertainable with greater certainty. Moreover, when the corresponding sales were duly accounted for in the earlier year and recognized as income, the commission payable in respect of the said sales at an agreed rate should have been claimed as deduction by the assessee in that year itself going by matching principle. There is also nothing brought on record to establish that the liability for the said commission pertaining to the earlier year had arisen and crystallized in the year under consideration - sale promotion and sale commission expenses pertaining to the earlier were not allowable in the year under consideration being prior period expenses and the deduction claimed by the assessee for the same is not allowable either in law or even in the facts of the case. We accordingly restrict the disallowance made by the AO and confirmed by the CIT(A) on account of prior period expenses. Unutilized CENVAT and Service Tax credit written off - HELD THAT:- Amounts in question representing the unutilized CENVAT and Service Tax credit cannot be considered as trade debts of the assessee and deduction for the same on being written off cannot be allowed under Section 36(1)(vii) r.w. Section 36(2) - Even the learned Counsel for the assessee has not been able to dispute this position. She, however, has contended that these two amounts having become irrecoverable, the same should be allowed as deduction under Section 37 of the Act being the business loss. She, however, has not been able to bring anything on record to establish that the unutilized CENVAT and Service Tax credit amount in question had become irrecoverable during the year under consideration so that the same can be allowed as business loss in that year. We, therefore, find no infirmity in the impugned order of the learned CIT(A) confirming the disallowance made by the Assessing Officer on this issue and upholding the same. We dismiss Ground No.2 of the assessee s appeal.
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Customs
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2022 (7) TMI 249
Affidavit was filed without disclosing the name of the officer who has filed the affidavit - Confiscation - redemption fine - penalty - Commissioner of Customs (Appeal) allowed the appeal only to the limited extent that instead of re-exporting the goods, permitted labeling on the basis of the license that petitioner had to fulfill the conditions of BIS provisions - HELD THAT:- Of course, it is found that rubber stamp of one D.S.Garbyal, Commissioner of Customs NS-V. Though this affidavit was sought to be rejected initially, since the affidavit has not been affirmed properly, purely by way of indulgence, the affidavit filed is considered. Page 107 is also missing. It is also notice that in page 109, it is stated solemnly affirmed on this 30 day of June 2022 whereas in the verification it is mentioned that solemnly affirmed on this 24 day of June 2022. Therefore, whoever is the person who has affirmed the affidavit has not even bothered to read the affidavit. This is not a trivial technicality. Such improper affirmations are seriously impeaching the integrity of the records and proceedings. It indicates how much seriousness an officer of the level of Commissioner of Customs pays attention to an affidavit they filed in a Court of law - thus, the said D.S.Garbyal or whoever the person who has affirmed the said affidavit to present himself or herself before the Court Master tomorrow are directed to re-affirm the affidavit. Petition disposed.
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2022 (7) TMI 248
Smuggling - Betel Nuts - foreign origin goods or not - notified goods or not - owner/driver could not produce the documents in support of the goods - Mizoram has no or very less production of Betel nut - burden to prove - HELD THAT:- The Revenue has not adduced any evidence to prove the allegation. Betel nut is not notified under Section 123 of the Customs Act, 1962 and therefore, the burden of proof lies with the department to prove the same. It is not just enough to prove by negative inference. Allegation requires to be proved by cogent and positive evidence. There are no such positive evidence has been put forth by the department. There is not even a reference or narration as to how and where from the impugned goods are smuggled. The Tribunal in the case of SMT. LALTANPUII VERSUS COMMISSIONER OF CUSTOMS (PREVENTIVE) , NER, SHILLONG [ 2020 (12) TMI 377 - CESTAT KOLKATA] and in the case of DHARMENDRA KR. JHA VERSUS COMMISSIONER OF CUSTOMS (P) , PATNA [ 2015 (11) TMI 1639 - CESTAT KOLKATA] held that betel nut being a non-notified commodity under Section 123 of the Customs Act, 1962 and the onus is on the department that seized goods were in fact smuggled into India, but the department has not discharged its burden. The same ratio applies to the case in hand. The betel nut being non-notified goods; burden to prove the fact of smuggling lies on the department and the same has not been discharged - seizure of impugned betel nut is not justified and needs to be set aside - appeal allowed - decided in favor of appellant.
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2022 (7) TMI 247
Confiscation of imported detained goods - Cold Rolled Grain Oriented (CRGO) Electrical Steel Sheet/Coils - want of the proper BIS certificate - forged/fake BIS certificates - HELD THAT:- The BIS certificate being a Bureau of India Standards certificate is issued by the respective Ministry in the favour of the manufacturer who further issues same to its buyers. Since the goods herein are CRGO Electrical Steel Sheet/Coils Section 17 of BIS Act, 2016 prohibit the import of goods without requisite BIS license and fulfillment of the conditions that the products should made the prescribed quality parameters/technical requirements of the relevant Indian standards and also should bear the standard mark - In the present case, it has come on record that the certificate on the impugned goods was the one bearing no. IS 3024:2006, whereas, as per Indian standards specification for CRGO the ISI marka at the relevant time, stood revised as IS 3024:2015 by the competent Authorities. It is observed that the employee of the appellant who was admittedly responsible for preparing the import documents including BIS certificate i.e. Mr. Manoj Kumar, Accountant of the appellant in his statement dated 7th March, 2019, admitted the recovered laptop to belong to him. He also admitted the documents retrieved there from to have been prepared by him including the excel work book named as BIS certificate saved in local disk of said laptop. Not only this, he also admitted for those excel sheets to be received in soft editable form of BIS/Mill Test certificates. It is opined that the documents on record do not support the defence taken by the appellant. The admission of Mr. Manoj Kumar, appellant s accountant, about preparing BIS certificates on their own on the editable formats procured rather stands corroborated from the e-mail sent by the exporter about impugned certificate to be fake which otherwise does not bear signature of any competent authority - appeal dismissed.
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2022 (7) TMI 246
Classification of imported goods - Magnetic Iron Centre Copper/Centre Core Assembly - to be classifiable under 85119000 or not - eligible for benefit of concessional rate of duty under Sl. No. 1319 of Notification No. 46/2011-CUS - prohibited goods or not - self-assessment of bill of entry by the appellant is an appealable order or not - recovery of the basic customs duty along with social welfare surcharge and IGST - levy of penalty u/s 112(a) (ii) and Section 117 of the Customs Act, 1962. Was Revenue correct in issuing a show cause notice under Section 28 demanding differential duty without first appealing against the Bills of Entry which were self assessed? - HELD THAT:- As far as the cases where duty was short levied or short paid or not levied or not paid or erroneously refunded is concerned, unlike the provisions of refund under Section 27 (which is a mere mechanical process), a quasi-judicial process has been laid down in Section 28 of the Act. The question which arises is if the assessment is complete and there is a procedure for appeal against all assessments, including self-assessment, what is the nature of this power under Section 28. This has been clarified by the Supreme Court in COMMISSIONER OF CUSTOMS VERSUS SAYED ALI [ 2011 (2) TMI 5 - SUPREME COURT] and M/S CANON INDIA PRIVATE LIMITED VERSUS COMMISSIONER OF CUSTOMS [ 2021 (3) TMI 384 - SUPREME COURT ] has a power to reopen an assessment already made. Such a power is not inherent in any officer and is available only when it is specifically conferred by law. It is for this reason that Section 28 has a system of issuing notice and passing of adjudication orders. There is no force in the argument of the learned Consultant of the appellant that the demand under Section 28 cannot be issued without challenging the self-assessment by the appellant before Commissioner (Appeals). Reliance on the judgment of Supreme Court in ITC LIMITED VERSUS COMMISSIONER OF CENTRAL EXCISE, KOLKATA -IV [ 2019 (9) TMI 802 - SUPREME COURT] by the appellant is completely mis-conceived as this is not a case of refund, but is a case of demand of duty under Section 28, which is fully permissible. Learned Consultant also submitted that the Commissioner (Audit) of the Customs Audit Commissionerate is not the proper officer to issue show cause notice under Section 28 of the Customs Act, 1962. There are no force in this submission - The vires of this sub-section was under challenge before the High Court of Delhi in the case of Mangali Impex Ltd. versus Union of India [ 2016 (5) TMI 225 - DELHI HIGH COURT ] The High Court upheld its validity except to the extent of its retrospective application. The present case pertains to the period after the introduction of this sub-section and therefore, the Commissioner (Audit) is the proper officer to issue a notice under section 28. Is the Commissioner of Customs, Audit Commissionerate, New Customs House, IGI Airport, New Delhi competent to issue the show cause notice? - HELD THAT:- It has been laid down by the Supreme Court in M/S CANON INDIA PRIVATE LIMITED VERSUS COMMISSIONER OF CUSTOMS [ 2021 (3) TMI 384 - SUPREME COURT] that a notice under section 28 can be issued by not any proper officer but the proper officer , i.e., the one who has assessed the Bill of Entry in the first place. The processes before the issue of show cause notice are consultative processes to resolve the issues which are akin to the discussions which the assessing officer or others assisting him such as the examining officers have during assessment by the officer under section 17(5). If the issues do not get resolved at that stage, the assessment is under section 17(5) by the proper officer and a speaking order is issued which will be the first quasi-judicial process. In such a case, if a show cause notice under section 28 is subsequently to be issued, it can be issued only by the proper officer who has done the assessment. In the present case and in similar cases of clearances based on self assessment, the audit, preventive or other officers who look into the assessment post clearance and who issues the show cause notice under Section 28 will be the proper officer and there is no the proper officer before that. Hence, the Commissioner (Audit) was fully competent to issue the show cause notice in this case. If the goods are liable to be classified under 85059000 as held by the Revenue, is the appellant entitled to the benefit of under Sl. No. 1335 of Notification No. 46/2011-CUS dated 01.06.2011? - HELD THAT:- Electro-magnets are classifiable under 8505 11 and therefore, the disputed goods being their parts, should be classified under 8505 90 00. There are no Chapter Notes relevant to the dispute but Section note 2(a) of the relevant section states that parts which are goods included in any of the headings of Chapter 84 or 85 (other than headings 8409, 8431, 8448, 8466, 8473, 8487, 8503, 8522, 8529, 8538 and 8548) are in all cases to be classified in their respective headings - In this case, the disputed goods magnetic core are not goods in themselves under any of the headings. In fact, both the appellant and the Revenue classify them as parts only but under different headings. Section note 2(b) states that other parts, if suitable for use solely or principally with a particular kind of machine, or with a number of machines of the same heading (including a machine of heading 8479 or 8543) are to be classified with the machines of that kind or in heading 8409, 8431, 8448, 8466, 8473, 8503, 8522, 8529 or 8538 as appropriate. In this case, the disputed goods are child parts of the spark plugs and in our considered view, applying this rule, they should be correctly classified along with the spark plugs under 8511 which has a sub-heading for parts, viz., 85119000. Although it is found that Rule 1 of Interpretation read with Section Note 2 itself resolves the classification dispute, also some other Rules of interpretation are examined to see if they would require a different view to be taken. Rule 2(a) is not relevant to this case as the imported goods are not an unfinished article but only a part. Rule 2(b) is also not relevant because the disputed goods are not mixture - Rule 3(a) states that specific entry should be preferred over a more general entry. Rule 3(b) deals with mixtures or composite articles which is not relevant to this case. Rule 3(c) states that if the classification cannot be done using either Rule 3(a) or 3(b), then the last entry in the tariff is the correct entry. Applying Rule 3 (a), it is found that the disputed goods, being child part of spark plugs are a more specific description of part of electro-magnets. Further, applying Rule 3(c), the last of the competing entries would be the correct entry. Thus, viewing from any angle, it is found that the disputed goods have been correctly classified in the impugned order under 8511 90 00 as parts of spark plugs. Applicability of alternative exemption under Notification No. 46/2011- Cus dated 1 June 2011 as amended by notification 82/2018-Cus dated 31 December 2018 (entry number 1335) - HELD THAT:- The exemption notification no. 46/2011 to goods imported from ASEAN has been amended from time to time. It needs to be examined with respect to each Bill of Entry if the exemption under this or any other entry was available to the disputed goods falling under 85119000. This exercise can be carried out best by the original authority and for this limited purpose, it is deemed necessary to remand the matter to the original authority. The appeal is partly rejected by upholding the classification of the imported goods and partly allowed by allowing the benefit of notification no. 46/2011-cus (S.No. 1335) - The impugned order is modified accordingly and matter is remanded to the original authority for re-determining the duty liability accordingly.
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Corporate Laws
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2022 (7) TMI 245
Wilful Defaulters - Validity of action of the respondent No.2-Bank classifying the petitioners as willful defaulters and publishing their names in the CIBIL list of Willful Defaulters - violation of Section 2(60) of Companies Act, 2013 contrary to the terms of RBI Circular 2015-16/100/DBR No.CID.bc.22/ 20.16.003/2015-16 dt.1.7.2015 - HELD THAT:- Admittedly, no show cause notice was served on the petitioners. The Respondent No. 2 was acknowledging the fact that the notices were undelivered though he was contending that he issued notices to the addresses available with them and throwing the blame on the petitioners that it was the petitioners who were required to update their communication address with respondent No.2 from time to time. The learned counsel for the petitioners contended that the respondent banks were regularly in touch with the petitioners and they had the petitioners contact numbers and email addresses but they chose not to resort to any other option in serving the notices and trying to shift the blame on to the petitioners for their non compliance - In order to comply principles of Natural Justice, it was proposed to provide a final opportunity to submit their further representation, if any on the classification as Willful Defaulter and asked them to send their further submission/representation in writing, if any, for consideration by the Review Committee on Willful Defaulters within the 15 days from the date of the letter. Thus it was a notice of information that the matter was sent to the Review Committee but not an opportunity for personal hearing before the Identification Committee. The Hon ble Apex Court in State Bank of India Vs. M/s Jah Developers Private Limited and others [2019 (5) TMI 862 - SUPREME COURT] stated the necessity to follow the procedure mandatorily as per the Master Circular dated 1-7-2013 which was revised by the Circular dated 1-7-2015 and that the order of the first Committee after para 3(b) of the revised circular 1-7-2015 must be given to the borrower as soon as it was made so that the borrower could then represent against such order within a period of 15 days to the Review Committee and the Review Committee must then pass a reasoned order on such representation and it should be served on the borrower. The above procedure as mandated under the RBI guidelines as well as the Hon ble Apex Court in Jah Developers case was not followed by the respondent No.2. As per the respondent No.2, the petitioners shared their updated communication address during the lenders meeting held on 7-2-2020. But subsequent to that day also, the previous communications were not shared with the petitioners and the respondent No.2 had not sought any reply/action on the previous actions. Instead of choosing to do so, the respondent No.2 directly jumped on to declare the petitioners as Willful Defaulters without there being any reply from the petitioners - Hence it is considered fit to set aside the action of respondent No. 2 in classifying the petitioners as Willful Defaulters and publishing their names in CIBIL dated 30-9-2020 as violative of Section 2(60) of Companies Act, 2013, contrary to the terms of RBI Circular dated 1-7-2015 and against the law laid down by the Hon ble Apex in State Bank of India Vs. M/s Jah Developers Private Limited and others, and in violation of Principles of Natural Justice and directed to follow the Circular instructions afresh from the beginning. Writ petition disposed off.
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2022 (7) TMI 244
Approval of the Scheme of Amalgamation - Section 230 to 232 and other applicable provisions of the Companies Act, 2013 read with Companies (Compromises, Arrangements and Amalgamations) Rules, 2016 - HELD THAT:- After analysing the Scheme in detail, this Tribunal is of the considered view that the scheme as contemplated amongst the petitioner companies seems to be prima fade beneficial to the Company and will not be in any way detrimental to the interest of the shareholders of the Company. In view of the absence of any other objections having been placed on record before this Tribunal and since all the requisite statutory compliances having been fulfilled, this Tribunal sanctions the Scheme of Amalgamation as well as the prayer made therein. The scheme is approved - application allowed.
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Insolvency & Bankruptcy
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2022 (7) TMI 243
Validity of assessment orders which is part of the resolution plan sanctioned by NCLT - Recovery of demand - it is submitted that that if the State respondents were aggrieved with the order of NCLT, they could have challenged it in appeal before Appellate Tribunal but they cannot be allowed to raise any objection against the sanctioned Scheme in writ petition filed by the petitioners herein praying to quash the impugned assessment orders and notices - HELD THAT:- It is undisputed that a resolution plan was prepared after following due procedure as provided under the IBC, 2016 which was submitted to the Committee of Creditors on 3.2.20218 and was approved by the Committee of Creditors under the IBC, 2016 on 23.3.2018. The NCLT approved the resolution plan with some modification on 15.5.2018. The demand created under the impugned assessment orders which is part of the resolution plan sanctioned by NCLT, therefore in view of the law settled by the Hon'ble Supreme Court in the case of Ghanshyam Mishra [ 2021 (4) TMI 613 - SUPREME COURT] , it cannot be recovered from the petitioners. It was held in the case of Ghanshyam Mishra [ 2021 (4) TMI 613 - SUPREME COURT] that Consequently all the dues including the statutory dues owed to the Central Government, any State Government or any local authority, if not part of the resolution plan, shall stand extinguished and no proceedings in respect of such dues for the period prior to the date on which the Adjudicating Authority grants its approval under Section 31 could be continued. The controversy involved in the present writ petitions is squarely covered by the judgement of the Hon'ble Supreme Court in the case of Ghanshyam Mishra and therefore these writ petitions deserve to be partly allowed - all these writ petitions are partly allowed to the extent that the demands created under the impugned assessment orders and the demands as may be created or have been created pursuant to the impugned notices, shall not be recovered from the petitioners as the dues would stand extinguished. Petition allowed in part.
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2022 (7) TMI 242
Validity of CIRP initiated - impleadment of IRP as 2nd Respondent - existence of debt and disputes between parties or not - Operational creditors - HELD THAT:- The Corporate Debtor has made out a case that there were pre-existing disputes between the parties. Without going in detail, it can be held that the documents reflect regarding pre-existence of dispute between the parties. As claimed by the Operational Creditor outstanding was lying since the year 2019 and vide letter dated 06.02.2020 issued by the Respondent No.1 addressed to the Appellant, it appears that Respondent No.1 admitted that he had received payment of Rs.35 lakhs till 1st August, 2019. In the said letter the Respondent has given detail regarding outstanding dues. The Appellant s letter dated 20th February, 2020 which was addressed to Respondent No.1 reflects regarding pre-existing dispute. In its letter dated 20th February, 2020 while referring to letters of Respondent No.1 dated 2nd August, 3rd August, 2019, 20th August, 2019, 4th September, 2019 30th September, 2019 and 6th February, 2020, the Appellant in categorical term had denied regarding demand raised by Respondent No.1. Besides other documents letter dated 11th March, 2020 addressed to the Corporate Debtor issued on behalf of the Operational Creditor makes it clear that for reconciliation of account date was fixed to 14th March, 2020. However, record shows that thereafter no reconciliation of accounts had taken place in between the parties. It goes without saying that in accounting, reconciliation is the process of ensuring that two sets of records are in agreement. Accordingly it can be inferred that in absence of reconciliation of accounts there was pre-existing dispute between the parties. it is evident that date for reconciliation of account was fixed by the Operational Creditor to 14th March, 2020. It goes without saying that since there was no settlement of account in between the parties and there were some disputes, the Respondent No.1 had agreed for fixing a date for reconciliation of the account. This fact is itself enough to infer that demand raised by the Operational Creditor/Respondent No.1 was not undisputed rather there was some dispute. Once under the provisions of Section 9 of the IBC, a Corporate Debtor is in a position to satisfy that there was pre-existing dispute, there is no requirement for initiation of CIRP - Admittedly before the Adjudicating Authority, Application under Section 9 of the IBC was filed on 28.07.2020 whereas there are materials on record which we have discussed hereinabove suggests that dispute was continuing in between the parties regarding outstanding claim and this was the reason that the Respondent No.1 had fixed the date as 14.03.2020 for reconciliation of the account and reconciliation had never been done. Thus, the Learned Adjudicating Authority has incorrectly allowed the application filed under Section 9 of the IBC on behalf of the Operational Creditor/Respondent No.1 which requires interference - appeal allowed.
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2022 (7) TMI 241
Operational Debt or not - claim of the Licensor for payment of License Fee for use and occupation of immovable premises for commercial purposes - Whether the Judgment of this Tribunal in M. RAVINDRANATH REDDY VERSUS G. KISHAN [ 2020 (2) TMI 56 - NATIONAL COMPANY LAW APPELLATE TRIBUNAL, NEW DELHI ] lays down the correct law? - it was held in the case that Any debt arising without nexus to the direct input to the output produced or supplied by the corporate debtor, cannot, in the context of Code, be considered as an operational debt, even though it is a claim amounting to debt. HELD THAT:- The operating cost as defined, is an expense incurred in the conduct of the principal activities of the enterprise. The operational debt is also a debt which is incurred in the conduct of principal activities of the enterprise. In the present case, the Corporate Debtor has taken a licensed premises for running an Educational Institution. All cost incurred by the Corporate Debtor and cost which remained unpaid shall become a debt on the part of Operational Creditor. The payment of License Fee is an obligation on the Corporate Debtor under the Agreement dated 15.04.2017. In a judgment relied by learned Counsel for the Appellant is Sanjeev Kumar vs. Aithent Technologies Private limited and another [ 2021 (2) TMI 443 - NATIONAL COMPANY LAW APPELLATE TRIBUNAL, NEW DELHI ], where the Corporate Debtor has taken on lease the basement and the ground floor of the premises and Lease Deed was executed for renting out the premises. Demand Notice was sent and then Section 9 Application was filed. One of the questions which arose for consideration in the case was as to whether a landlord by providing lease, will be treated as providing services to the Corporate Debtor, and hence, an Operational Creditor within the meaning of Section 5(2) read with Section 5(21) of the Insolvency and Bankruptcy Code, 2016? In the above context, the Adjudicating Authority had admitted the Application, which order was upheld by this Tribunal holding that Operational Creditor had provided different type of services to the Corporate Debtor. Section 14, sub-section (2) deals with supply of essential goods or services to the Corporate Debtor. The said provision has nothing to do with the extent and expense of operational debt within the meaning of Section 5(21). The observation that any debt arising without nexus to the direct input or output produced or supplied by the Corporate Debtor, cannot be considered to be operational debt is conclusion drawn by this Tribunal contrary to the scheme of the Code. The operational debt as defined in Section 5(21) has meaning much wider than the essential goods and services. Essential goods and services are entirely different concept and the protection under Section 14(2) as provided for is an entirely different context. Thus, the observations made that there has to be nexus to the direct input or output produced or supplied by the Corporate Debtor, is a much wider observation not supported by scheme of the Code. The observation of this Tribunal in the above case in respect of definition of service under Consumer Protection Act, 2019 and Central Goods and Services Tax Act, 2017 are not covered by Section 3(37) of the Code, with regard to which observation, no exception can be taken. However, in the facts of the present case, where Agreement itself contemplate payment of GST for the services under the Agreement, on which GST is payable, the definition of service under Central Goods and Services Tax Act, 2017 cannot be said to be irrelevant - in the present case, debt pertaining to unpaid license fee was fully covered within the meaning of operation debt under Section 5(21) and the Adjudicating Authority committed error in holding that the debt claimed by the Operational Creditor is not an operational debt . The Application filed by the Operational Creditor (Appellant herein) deserves admission under Section 9 of the Code - application allowed.
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2022 (7) TMI 240
Seeking dissolution of the Corporate Debtor - Section 54 of the IBC, 2016 - HELD THAT:- The facts and circumstances of the case, has established that due process of Liquidation, as per extant provisions, was followed by the Liquidator to liquidate the assets of Company and the realized amounts were also distributed to the respective claimants. Therefore, the liquidation process is deemed to have been completed under Chapter III of Part II of Code, and thus it would be just and proper for the Adjudicating Authority to dissolve the Company. No party is going to be affected by dissolving the company. M/s Bookawheel Technologies Private Limited, the Corporate Debtor, is hereby dissolved with immediate effect - Application allowed.
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2022 (7) TMI 239
Seeking voluntary dissolution of the company - Section 59 of the Insolvency and Bankruptcy Code, 2016 - HELD THAT:- From the perusal of the record of the case, it is seen that the Liquidator, after his appointment has duly performed his duties and completed necessary formalities to complete the liquidation process of the applicant company, which has been averred in the present petition and, thus, the liquidator has prayed for an order from this Tribunal to dissolve the applicant company. Since there is no objection received from any angle opposing the proposed voluntary liquidation/dissolution of the company either from the side of the shareholders or from creditors, nor any adverse comment have been received from the public at large against such liquidation/dissolution, despite there being a public announcement by the liquidator and also updation of the same in the website of the Insolvency and Bankruptcy Board of India (IBBI). It is also evident from the record that the proposed liquidation was duly communicated to the Registrar of Companies, Punjab and Chandigarh as per Form MGT-14 and Form GNL-2 and the same is also reported to have been approved. Apart, as per record of the present case, it is seen that the company is not found involved in such kind of business activities, which are detrimental to the interest of the public at large. Further, it is not the case that the proposed liquidation may affect adversely to its shareholders/members or is contrary to the provisions of law. The present application deserves to be allowed for the proposed Liquidation/Dissolution of the Corporate Person - this Adjudicating Authority in exercise of power conferred to it under Section 59 (8) of the Insolvency and Bankruptcy Code, 2016, orders that the Corporate Person (Applicant Company) M/s Dunwell Enterprises Private Limited shall stand dissolved with effect from the date of this order i.e. 04.07.2022. Petition allowed.
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2022 (7) TMI 238
Maintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its dues - Financial Creditors - existence of debt and dispute or not - whether the Petition under section 7 of the Code is barred by limitation or not? - HELD THAT:- Upon perusal of the record it is apparent that transaction between the parties was purely financial in nature and there is an existence of Financial Debt. From the records it is apparent that the Corporate Debtor continued its operation but failed to service its interest on 31-01-2013, 28-02-2013 and 31-03-2013 - The Corporate Debtor also made the last part payments of the sanctioned loan amount with the Financial Creditor Bank on 04 mat, 2014. However, thereafter the Corporate Debtor has not made arrangements to pay the dues owed to the Financial Creditor. As per the Auditors Report of the Corporate Debtor for financial year ending 31 March, 2018, it states that the Corporate Debtor has defaulted in the repayment of loans or borrowings to financial institutions, banks. (Page 187 of the Supplementary Affidavit to section 7 application). Corporate Debtors own admission that part payments made towards the loan account was with a bona-fide intention of making payment of amounts which were legally due and payable to the Financial Creditor bank. There has been continuous acknowledgement in the Balance Sheet of the Corporate Debtor for the Financial Balance sheet for year ending 2011, 2012, 2013 2018 of the Corporate Debtor, which would extend the limitation period from time to time. The present petition filed by the Financial Creditor is complete in all respects as required by law. The Petition establishes that the Corporate Debtor is in default of a debt due and payable and that the default is more than the minimum amount stipulated under section 4 (1) of the Code, stipulated at the relevant point of time. Application admitted - moratorium declared.
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2022 (7) TMI 237
Seeking voluntary liquidation of the Petitioner/Corporate person - section 59 of the Insolvency and Bankruptcy Code, 2016 - HELD THAT:- On examining the submissions made by the counsel appearing for the Petitioner/Corporate Person and the documents annexed to the petition, it appears that the affairs of the Petitioner/Corporate Person have been completely wound up and its assets have been completely liquidated. It is also satisfying from the documents on record that the voluntary liquidation is not with intent to defraud any person. The bank account for the purpose of Liquidation has been closed. The Petitioner/Corporate Person deserves to be dissolved and it is ordered accordingly - Application allowed.
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2022 (7) TMI 236
Maintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its dues - Operational Creditors - existence of debt and dispute or not - time limitation - HELD THAT:- The invoice Nos. 0401, 0441 and 0460 were raised on 31.10.2019, 30.11.2019 and 31.12.2019, if the payment terms agreed in the above invoices are considered, full payment of invoice amount should be paid by the Corporate Debtor on or before the 90th day of the invoice date i.e., 31.01.2020, 29.02.2020 and 31.03.2020, which clarifies that the date of default of the invoice Nos. 0401, 0441 would not be after 25.03.2020, it makes clear that the application was not hit by Section 10A of IBC, 2016 - It is also seen that the total amount mentioned in the invoice Nos. 0401, 0441 itself exceeds the threshold limit of 1 Crore specified in Section 4 of IBC, 2016. Pre-existing dispute or not - HELD THAT:- It is found that the Corporate Debtor has admitted it is liable to pay around Rs. 1,38,00,000/- to the Operational Creditor and there is no word expressed about the existence of a dispute with the Corporate Debtor. The Petition, as filed by the Operational Creditor, is required to be admitted under Section 9(5) of the IBC, 2016 - Petition admitted - moratorium declared.
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2022 (7) TMI 235
Maintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its dues - Operational Creditors - existence of debt and dispute or not - HELD THAT:- In the present matter, the Corporate Debtor in his reply has admitted the fact that till mid-2019, all the transactions between the Applicant and the Corporate Debtor were conducted without any disputes or disagreement. And the Corporate Debtor had withheld payments towards the Applicant due to the conditions beyond their control - the dispute raised by the Corporate Debtor herein is only feeble and it is relevant to note that the admission with respect to no dispute or disagreement and also toward the debt of USD 60,000/- pose a reasonable inference that it is an admitted fact that 'debt' and 'default' exists. The Corporate Debtor was in a bad financial position and has failed to pay the debts due towards them. This Tribunal is of the affirm view that there was default on the part of the respondent in pursuance of invoices raised on behalf of the applicant, accordingly, the present application stands admitted in terms of Section 9(5) of the Code and CIRP is hereby ordered to be initiated against the respondent Corporate Debtor, forthwith. Application admitted - moratorium declared.
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2022 (7) TMI 234
CIRP - Preferential Transactions or not - related transaction or not - Transaction within look bak period - such transactions are carried with intent to defraud creditors or not - Section 25(2)(J), 43, 45, 66 and Section 235A of the Insolvency and Bankruptcy Code, 2016 - HELD THAT:- Admittedly, except Respondent No. 6 and the respondent no. 6 in its reply has placed reliance on the judgment passed by the Hon'ble Supreme Court of India in the matter of Anuj Jain Vs. Axis Bank Limited [ 2020 (2) TMI 1259 - SUPREME COURT ] in which it was held that the transactions deemed to be preferential can be excluded if they are considered to be done in the ordinary course of business or financial affairs of the corporate debtor. The respondent No. 6 has placed on record copies of Purchase Orders, Statement of bank accounts and ledger accounts to show that the alleged transactions were done during the ordinary course of business. There is nothing on record to show that the respondent no. 6 is a related party to the corporate debtor. Therefore, since there is nothing on record to suggest that the respondent no. 6 is a related party then the relevant time period would be one year prior to commencement of CIRP and thus, the alleged transactions are outside the purview of Section 43 of the Code in respect to the Respondent No. 6. On going through the each and every transaction submitted by the Resolution Professional, and after elaborate examination it is seen that the impugned transactions are preferential transactions, except in respect of respondent no. 6 as defined in the sub-section 2(a) of Section 43 of the IBC as these transactions have been executed within the look back period of two years before the commencement of Insolvency proceeding and are therefore covered under section 43(4)(a). Further the transaction mentioned in para 6 above are therefore held to be undervalued transactions in terms of Section 45 of the Code and Transaction as explained in para 7 are held to be fraudulent transactions as defined under Section 66 of the Code. The Respondents, except respondent no. 6, are hereby directed to pay the amounts as explained in para 5, 6 and 7 to the corporate debtor within 30 days from the date of the pronouncement of this order - appliaction allowed.
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Service Tax
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2022 (7) TMI 233
Sabka Vishwas (Legacy Dispute Resolution) Scheme 2019 (SVLDRS) - Petitioner has averred in the petition that petitioner was logged out / was unable to access the portal and that even any email / sms / intimation was not received by petitioner - HELD THAT:- According to the affiant, designated committee has no role to play in issuance of email / sms since it is system generated in an automated manner with minimal human intervention. The affiant has also suggested what petitioner could have done and that the designated committee has not taken any steps to block any account. What is important to note is the fact that petitioner had a serious problem in accessing the portal has not been denied. Petitioner has also annexed screen shots of the portal when petitioner made attempts to find out status of the declaration - In fact, petitioner has strangely even received a message that no taxpayer was found in the credentials or the PAN number mentioned therein. It is found that there was serious problem in the portal otherwise if such taxpayer was not found, petitioner should not have even received a show-cause-notice in the first place. The interest of justice requires that a limited interference is made - Form No. SVLDRS-3 dated 13.03.2020 that has been issued is now set aside - Petitioner is permitted to respond to Form No. SVLDRS-2 that it has received and file Form No. SVLDRS-2A afresh - petition disposed off.
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2022 (7) TMI 232
Maintainability of petition - availability of alternative remedy of appeal - opportunity of personal hearing - Violation of principles of natural justice - HELD THAT:- There is no dispute to the proposition that when the statute provides for a remedy, ordinarily a writ court would be reluctant to entertain a writ petition. However, there are well recognized exceptions to the above rule of self-imposed limitation. One such well recognized exception is violation of the principles of natural justice. If there is violation of the principles of natural justice, the writ court may still entertain a petition under Article 226 of the Constitution of India notwithstanding availability of alternative remedy. The personal hearing was in connection with the show cause notice issued to the petitioner on 19.12.2016. Three dates of personal hearings were mentioned and it was stated in paragraph 3 that petitioner could appear on any one of the dates mentioned either in person or through counsel. Beyond the three dates mentioned above, no further extension of time would be given. The stand taken by the respondents that mentioning of the third date of hearing i.e., 03.03.2017 is a typographical error does not appeal to us. It is clear as day light that the intention of the respondent No.1 was to provide personal hearing on either of the three dates. If the respondents had provided three dates with the option to the petitioner to avail any one of the dates for personal hearing, then respondents ought to have waited for the last date so mentioned in the notice dated 17.02.2017 which is 03.03.2017. Abrupt passing of the order-in-original on 28.02.2017 without waiting for the petitioner to avail personal hearing on 03.03.2017 and proceeding ex parte on 28.02.2017 has vitiated the impugned order-in-original. Petition allowed.
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2022 (7) TMI 231
PAN India Jurisdiction - Appointment of officers of Directorate General of Central Excise Intelligence as Central Excise Officers to exercise the power pan India - Validity of Notification No.22/2014- ST, dated 16.09.2014 issued by the Central Board of Excise and Customs under power conferred by clause (b) of section 2 of the Central Excise Act, 1944 (1 of 1944), read with Clause (55) of Section 65B of the Finance Act, 1994 (32 of 1994), Rule 3 of the Central Excise Rules, 2002 and Rule 3 of the Service Tax Rules, 1994 - Jurisdiction - competence of officer to issue SCN - HELD THAT:- Initially, when service tax was introduced, the power to issue Show Cause Notice under Section 73 of the Chapter V of the Finance Act, 1994 was vested only with the Assistant Commissioner of Central Excise / Deputy Commissioner of Central Excise. Later Section 73 was amended and the expression Assistant Commissioner of Central Excise/Deputy Commissioner of Central Excise were substituted with Central Excise Officers - Reason why Officers form the Central Excise Department were given the task for implementing the provision relating to levy of service tax by the Parliament is because the Board did contemplate creation of a separate cadre of officers employees for implementing the provision of Chapter V of the Finance Act, 1994. The definition of Central Excise Officer in Section 2(b) of Central Excise Act, 1944 is expansive. It is clear that apart from officers specified therein from the Central Excise Department, any other officer including an officer of the State Government) invested with any of the powers of a Central Excise Officer this Act by the Central Board of Excise and Customs constituted under the Central Boards of Revenue Act, 1963 - by default all the officer of Central Excise Department are Central Excise Officers . Apart from them such other officers including an officers of the State Government invested by the Board constituted under the Central Boards of Revenue Act, 1963 with any of the power of a Central Excise Officer under the Act are Central Excise Officers . By virtue of Notification No.38/2001-C.E. (N.T), dated 26.06.2001 issued under Section 2(b) of the Central Excise Act, 1944 read with Rule 3(1) of the Central Excise (No.2) Rules, 2001, the Board appointed several persons as Central Excise Officers and invested them with all powers of an officer of Central Excise of the rank specified in the corresponding entry in column (3) of the Table to the Notification and that such powers being the powers of a Central Excise Officer conferred under the Act, to be exercised by them throughout the territory of India. Therefore, without doubt, the officers from the Directorate are Central Excise Officers as they have been vested with the powers of central exercise officers. The officers of the Directorate of Central Excise Intelligence are empowered to act as Central Excise Officer - As per Rule 3 of the Service Tax Rules, 1944, the Board can appoint Central Excise Officers for exercising powers under Chapter V of the Finance Act, 1994 to act within such local limits as it may assign to them. The expression such local limit has not been specified. The Directorate of Central Excise Intelligence (presently The Directorate of GST Intelligence) is one of the Directorate of the Board - Since the Board can invests the powers of a Central Excise Officer on any persons including an officer of the State Government the officers of the Directorate of Central Excise Intelligence (presently The Directorate of GST Intelligence) are Central Taxes Officers for the purpose of Finance Act, 1994. Thus, officers of Directorate General of Central Excise Intelligence are Central Excise Officers for the purpose of Section 2(b) of the Central Excise Act, 1994. They are empowered to exercise power pan India under Notification No.38/2001-C.E. (N.T), dated 26.06.2001 - the other ground of challenge to the impugned Notification No.22/2015-ST dated 16.9.2014 that pan India powers have been vested with the officers from the Directorate of Central Excise Intelligence (DGCEI) [presently The Directorate of GST Intelligence] and contrary to the restriction under Rule 3 of the Service Tax Rules, 1944 also fails. The definition of Central Excise Officer in Section 2(b) of the Central Excise Act, 1944 was made applicable for Section 73 of Chapter V of the Finance Act, 1994 which prescribes a machinery for recovery of service tax not levied or paid or short-levied or short-paid or erroneously refunded - under Rule 3 of the Service Tax Rules, 1994, the Board can appoint any other officer to exercise power within the local limits . However, that would not mean that the officers of Directorate of Central Excise Intelligence (DGCEI) [presently The Directorate of GST Intelligence] who are already Central Excise Officers under Notification No.38/2001-C.E. (N.T), dated 26.06.2001 for whole of India cannot exercise power pan India. Notification No.22/2014-ST dated 6.09.2014 is to be read in conjunction with Notification No.38/2001- C.E. (N.T), dated 26.06.2001. It cannot be said that the officers who has been vested with the powers under the impugned Notification No.22/2014-S.T., dated 06.09.2014, are not the Central Excise Officers . The challenge to the proceedings which have been impugned in W.P.No.24960 of 2021 and W.P.No.17941 of 2020 (Category-2) on the ground of limitation etc, involves disputed questions of fact. Therefore these issues are best left to be adjudicated by the namely Central Excise Officer such a Central Excise Officer could be a different person from the person issued show cause notice as a Central Excise Officer under Section 73 of the Finance Act, 1994. As long as the show cause notices have been issued a competent officer under the Finance Act, 1994 read with relevant notification, challenge to the proceeding based on the alleged failure to follow the circular cannot be countenanced. Therefore, the petitioners who have been issued with show cause notices and those who have been suffered Orders in Original have to be meet out the allegations on merits before the adjudicating authority or the appellate authority as the case may be Therefore, there is no merits in these present writ petitions. Issues touching on the merits are best left to be decided by the adjudicating authorities and appellate authorities in the hierarchy of the authorities under the Act. Petition disposed off.
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Central Excise
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2022 (7) TMI 230
Recovery of sums due to Government from the owner of property - default made by the lessee under Leave Licence Agreement - Cancellation of registration of petitioner - HELD THAT:- The undertaking given at the time of cancellation of Central Excise registration (which says that in case M/s Roma Industries, sachin does not pay the central excise dues due to any reason whatsoever, the directors /partners of M/s Shaniyal Dying and Printing Mill, Sachin will be responsible and pay the government dues), does not ipso facto bind the appellant with the liability which is otherwise not present. The Hon ble Supreme Court in the case of M/S. TATA CHEMICALS LTD. VERSUS COMMISSIONER OF CUSTOMS (PREVENTIVE) JAMNAGAR [ 2015 (5) TMI 557 - SUPREME COURT ] held that something illegal cannot convert itself into something legal by act of a third person. It is clear that the said undertaking was given by the Appellant in respect of dues of M/s Shaniyal Dying and Printing mills only. The last para 5 of undertaking was wrongly interpreted by the department in the present matter. The actual meaning of said para is that if the dues related to Appellant i.e. arise after the surrender of registration certificate was not paid by M/s Roma Industries, than the same will be paid by the Directors /Partners of M/s Shaniyal Dying and Printing Mills. The said undertaking nowhere state that dues related to M/s Roma Industries will be paid by the Appellant or for the dues of M/s Roma Industries appellant will be responsible. Clearly, in the present matter entire undertaking has been misinterpreted by the department. In the present matter section 11 of the Act can have no application in the facts of the case. In the present disputed matter appellant have not succeeded or acquired the business or trade of the arrears holder (M/s Roma Industries) and even have not purchased any property of the arrears holder (M/s Roma Industries). M/s. Roma Industries cannot treated as predecessor and the appellant cannot be treated as successor in the business of M/s Roma Industries. Between both of them there is relationship of lessor and lessee - Further as per the said agreement, M/s Roma Industries was absolutely liable for all the government dues for the period during which they were having possession of the said plot. On the identical facts and issue, this tribunal also considered the matter in the case of M/S SAHIL TEXTILES VERSUS COMMISSIONER OF C. EX. S. TAX, SURAT-I [ 2017 (1) TMI 704 - CESTAT, AHMEDABAD] has held that recovery cannot be made from the Lessor by attachment of the property. Thus, it is settled that the government dues against the assessee cannot be recovered from the owner of the property which was leased out to the assessee against whom the dues are pending accordingly, the revenue has wrongly collected the amount of dues pertaining to M/s. Roma Industries consequently, the said amount is required to be refunded to the appellant along with interest as per law. Appeal allowed - decided in favor of appellant.
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2022 (7) TMI 229
Clandestine manufacture and removal - Dillagi Supari - reliance placed upon the statements of various persons - retraction of statements - corroborative evidences or not - Confiscation of seized goods - penalty - HELD THAT:- The demand against M/s Mahadev and Shri Anmol Mishra has been computed on the basis of number of machines found to be installed in respective factory premises. Also the demand of duty against M/s MSS on Gutka Mix/ Masala has been computed on the basis of quantity of goods sold in cash sales by M/s Shiv Udyog, and as shown in their VAT return. Similarly the finished goods and packing material found from different premises and vehicles has been confiscated and penalties has been imposed upon M/s Mahadev, M/s MSS and Shri Anmol Mishra and other Appellants holding that the goods belong to M/s MSS - It is found that Mr. Omprakash Talreja, Prop. of M/s Mahadev has challenged the impugned order on the ground that factory was rented out to Shri Abdul Salam, and hence the demand of duty from him is wrong, since the Gutka was manufactured by Shri Abdul Salam and hence Mr. Salam is the manufacturer. That the statements relied upon by the adjudicating authority are not reliable and that the duty demand itself is not sustainable, as on merits also there cannot be any duty demand. Ownership of factory premises of M/s Mahadev as on 18.02.2011 i.e on the day of the visit of the officers and demand of duty and penalty - HELD THAT:- After considering the facts we find that first it ought to be seen as to whether the Agreement was signed with the consent of both the parties and the fact to be taken into account is whether the contracting parties intended to make it effective from 11.02.2011, and whether it was signed after 11.02.2011, which was not verified or doubted. The Adjudicating Authority failed to consider that the said contract was for transferring the unit making sweet supari. There is no scrutiny on point of the intention of Shri Abdul Salam to enter into contract for taking factory on rent, so as to determine that whether he was allured to enter into such contract, whether he received any consideration to enter into such contract and if so then what was the consideration/payment; whether the agreement was colourable device of M/s Mahadev or M/s MSS to start manufacturing Gutkha from 11.02.2011 keeping Abdul Salam in front. It had to be determined as to whether any alleged blank entry on any other date would be a conclusive proof that subject agreement was entered against blank entry, and when was the stamp paper for the agreement purchased and in whose name. We find that the impugned order is absolutely silent on these material issues and thus highly erroneous. The Agreement is a documentary evidence for the purpose of Rule 17 of PMPM Rules 2008, and when the contracting parties accept the agreement, it cannot be doubted. No evidence in the form of salary or his name appearing as an employee of M/s Mahadev, in the records of M/s Mahadev or with any statutory authority or his Income tax return or bank accounts shows that he has received any salary from M/s Mahadev. No consideration in any form has been received by Shri Anmol Mishra towards his alleged employment with M/s Mahadev. Further all persons connected with Mahadev i.e., Supervisor Shri Ramesh Dammani and workers, during cross-examination has retracted their statements and have clearly stated that the statements were given without knowledge and as per dictation of officers. Even otherwise also we find that statements of workers are not corroborated with any evidence. From the above facts we are of the view that Shri Omprakash Talreja cannot be considered as manufacturer of Gutka pouches and no duty demand can be made from M/s Mahadev. Consequentially it is also held that there is no ground to impose penalty on the co-appellants and the penalty is required to be set aside. Though we have held that no duty demand can be made from M/s Mahadev as they cannot be held to be operating the factory, but even otherwise also we find on merits, there is no reason to demand duty for the period 01.04.2010 to 18.02.2011 and the duty at the utmost could have been demanded for 18 days of February 2011 only, if we go by the reasoning of the adjudicating authority given by him for setting aside of duty demand till 01.04.2010 - Further as per adjudicating authority s own findings, no evidence of procurement of gutka mix, manufacture of Gutka pouches and clearance of Gutka pouches before 18.02.2011 by M/s Mahadev is on record, in that case no demand before February, 2011 can be made from M/s Mahadev. Demand and penalty made against M/s MSS - Corroboration of statements - HELD THAT:- There is no evidence of receipt of manufactured tobacco from M/s Shiv Udyog or procurement of other raw material such as supari, kattha and lime which are required to manufacture Zarda masala by M/s MSS. The show cause notice and the impugned order has relied upon the retracted statement of Shri Anmol Mishra, terming him as Manager of M/s Mahadev and owner of Bhourasala premises, as well as by Supervisor of M/s Mahadev - Shri Ramesh Dammani, that Zarda masala was received from M/s MSS. Though such statements has been retracted, but we find that even there is no corroboration of such statements with even a single evidence. Only on the basis of retracted statements and coupled with fact that there is no procurement of raw material/ packing material, manufacture, clearance and transportation and receipt of consideration or identification of buyers, no duty demand can be made against M/s MSS. No discrepancy in stock was noticed on 19.02.2011, when the factory of M/s MSS was visited by the officers. The alleged quantity of Zarda Masala cleared i.e., 1082,479 Kgs. has been calculated on the basis of VAT returns of M/s Shiv Udyog, without any corroborative evidence at the end of M/s MSS. Hence the allegation of clearance of Zarda Masala by M/s MSS is not sustainable. There is no acceptance on the part of the Appellants that the goods were owned by them. The revenue did not cause any enquiry with the supplier regarding purchaser/ recipient of said goods nor tried to ascertain the same. Only for the reason that the vehicle had some quantity of Gutka Mix and lamination roll, outer packing and gutka pouches bearing name of M/s MSS, it cannot be said that the seized goods had ownership of M/s Mahadev or M/s MSS. None of the persons from M/s Mahadev or M/s MSS have owned the goods or accepted the transportation. In case of lamination and outer packing or acetate, neither M/s Mahadev or M/s MSS were in manufacturing of said goods and hence the same cannot be held to be non duty paid. No enquiry has been caused from the regular supplier of M/s MSS to ascertain as to whether the lamination and outer pouches were consigned by them. In such case we find that no case is made out to impose penalty on M/s Mahadev or M/s MSS. Hence the penalty imposed upon them is required to be set aside in case of both the show cause notices. From perusal of photographs and above facts, we are of the view that the machines cannot be said to be packing machines. We find that if the machines are being made basis of demanding duty liability under PMPM Rules, in that case the first and foremost primary requirement is presence of a packing machine. In absence of feeding hoppers, and given the fact as recorded by the adjudicating authority that some parts were missing, we are of the view that seized equipments do not fit into the definition of Packing Machines as provided in Rule 2(c) of PMPM Rules 2008. The levy is on installed packing machines and it cannot be on dismantled and/or incomplete equipment. Hence on this ground alone the proceedings against the appellants are liable to be set aside, as PMPM Rules for the purposes of fictional and deemed manufacture and levy requires strict interpretation of term packing machine and the intendments arrived in impugned order are thus void and baseless. The show cause notice and the impugned order has not brought any evidence that Shri Anmol Mishra has earned any amount from alleged manufacture and removal. In such case there is no reason to implicate him as manufacturer. Not a single supplier of raw material or buyer of finished goods has been identified. Only on the basis of call records and assumption, he cannot be burdened with duty demand. Consequentially no duty can be demanded or penalty can be imposed upon him. Also there is no reason to impose penalty on Shri Sunil Sadhwani or Shri Amarchand Upadhyay. The impugned order has held that Shri Sadhwani was instrumental in storing the seized goods being partner in a firm producing gutkha and pan masala. We find that no physical/ material evidence in relation to procurement, storage, transportation, unloading, godownkeepers etc in relation to seized goods by Shri Sunil sadhwani or M/s MSS is on record. The Appellant and its partners were regularly complaining that duplicate products of their brands are being sold in the market. Even then no attempts were made for any forensic test or visual comparision or chemical analysis of the seized / abandoned materials with the goods of the appellants. In absence of such preliminary and vital investigations, the nexus of the seized goods is zapped with the appellants. Such nexus can not be presumed on the basis of retracted statements or reverse mathematical calulations. The impugned order confirming duty and imposing various penalties on appellants is thus not sustainable on the basis of such zapped nexus. Penalty under rule 26 of the CER, 2002 can be imposed on a person only when it is proved beyond doubt that the person dealing with excisable goods knew or had reason to believe that such excisable goods were liable to confiscation. There is no evidence on record to prove that Appellant has acted in a way to attract the penalty provisions of rule 26 of the CER, 2002. In view of above findings it is held that no penalty can be imposed upon M/s MSS or Shri Sunil Sadhwani. There are no justification to sustain the demands raised in the impugned order - appeal allowed - decided in favor of appellant.
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CST, VAT & Sales Tax
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2022 (7) TMI 228
Maintainability of petition - requirement of pre-deposit - Validity of assessment order - interstate purchase of timber - grant of sufficient time before passing an order - Circular No.7 dated 03.02.2014 - violation of principles of natural justice - HELD THAT:- The requirement under the Circular has been fully satisfied in this case, since, even while receiving letter dated 27.03.2019, there is an endorsement made by the officer in the delivery book of the petitioner restricting the time sought till 05.04.2019. Thus, it is not open to the petitioner to contend that he was unaware of whether the time sought was granted or not. Principles of natural justice - HELD THAT:- The petitioner has no case as sufficient opportunity has been granted to the petitioner and there has been no effective compliance to any of the notices that had been issued. However, there is one point that survives on merits, since the petitioner would contend that since the entirety of the project has been undertaken by the contractor who has remitted the tax liability, nothing survives in its hands. While the construction of the 47 Villas had been entrusted to the sub-contractor, the scope of work that remained in the hands of the petitioner was the construction of its own offices and the restaurants and various amenities that would be shared by them with the Villas as well. In such an event, some portion of the contract value would be attributable to the petitioner also - there being neither violation of the principles of natural justice nor infirmity in the procedure followed by the authority and since the question that survives is a mixed question of law and fact that can only be answered by the authority, the petitioner is relegated to statutory appeal. Pre-deposit - HELD THAT:- The preliminary question of whether any tax liability survives in the hands of the petitioner must be determined by the respondent at the first instance. Such a determination will be made by the respondent within three weeks from date of institution of the appeal, after hearing the petitioner. Petition disposed off.
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